A long-standing recruitment firm has issued a stark warning to both workers and businesses about the growing threat posed by unscrupulous umbrella companies and tax avoidance schemes.
Supertemps, a recruitment agency based in Colwyn Bay and Bangor, is urging people to be vigilant, highlighting the risks of non-compliant companies offering tax avoidance schemes that can leave workers and employers exposed to financial penalties and reputational damage. The agency, which is nearing its 45th year in business, has raised concerns over the increasing number of agencies promoting such schemes.
HM Revenue and Customs (HMRC) has also raised its alarm, cautioning that many workers may unknowingly be enrolled in these tax avoidance schemes, which often target temporary employees and contractors. The schemes typically promise significant economic incentives above industry standards but are often linked to practices such as inconsistent payslips, payments to third parties, and the use of offshore addresses.
Sarah Ellwood, Managing Director of Supertemps, stressed the importance of transparency in recruitment practices. She explained that all of the agency’s workers are paid via PAYE (Pay As You Earn) and are internally payrolled, ensuring full compliance. She added: “We’ve heard a lot of horror stories from other companies, and this issue is very topical right now. These umbrella companies can cause significant damage, not just to the recruitment agency but to the reputation of the end employers too.”
Ellwood urged recruitment agencies to be cautious and carry out thorough due diligence when selecting umbrella companies. She warned that failing to do so could result in severe financial consequences and legal issues. “Not all umbrella companies are dodgy, but unfortunately many are, and a lot of workers don’t even know they’re being paid through them, so it’s important to be transparent,” she said.
HMRC has been given new powers since 2022 to publish information on tax avoidance schemes and to expose enablers involved in promoting or facilitating these schemes. The UK Government is also considering additional measures, including penalties for agencies that fail to perform adequate due diligence.
Ellwood encouraged businesses to take a number of protective measures, including checking the HMRC’s list of named tax avoidance schemes, promoters, enablers, and suppliers. “It’s essential to scrutinise your supply chain and ensure that any agencies you engage with are operating within the law. If they’re not, it could have far-reaching consequences for both your agency and your clients,” she added.
Supertemps concluded by reiterating that recruitment agencies have a duty of care to both their clients and workers. By adhering to HMRC guidelines and maintaining ethical business practices, agencies can protect their reputation and avoid costly repercussions.