I’ve written many articles recently about my views on the Off-payroll working reforms introduced into the private sector in April 2021.
Many have focused on remaining compliant and ensuring that you minimise your risk as an engager or supplier of contingent labour.
I’ve followed the actions of HMRC closely since the introduction and have given regular updates based on actual meetings and interviews between engagers and HMRC.
All of which can be found on our blog page at: https://workrgroup.com/resources/blog/
However, the most concerning thing for me is the idea that the reforms may just be a distraction, rolled out by the government in the manner of a trojan horse.
I’ve alluded to this already in previous articles (Legislation, legislation, legislation). Still, the reality that HMRC may use the reforms to exercise other legislation appears one step closer.
Senior HMRC representative confirms Criminal Finances Act focus and investigations
According to a recent article by Osborne Clark, legal experts in the UK workforce solutions sector, HMRC is already conducting risk reviews with some of the UK’s largest businesses.
With HMRC continually touting the umbrella sector as a high-risk area for tax evasion, its focus appears to be on the UK’s temporary labour supply chain.
Under the Criminal Finances Act 2017 (CFA), law enforcement agencies such as HMRC can investigate and, where applicable, prosecute businesses that fail to prevent those who act for or on their behalf from criminally facilitating tax evasion.
The article highlights two key points:
- HMRC is now visiting large businesses (the top 2,000 in the UK) to check, as part of the normal pattern of HMRC risk reviews, what prevention procedures they have in place to police their supply chains.
- HMRC has 14 live investigations under the CFA and is looking at 40 “opportunities” to use the legislation.
Having already supported clients with enquiries following the introduction of the Off-payroll working reforms, I know that the original requests for information (RFI’s) included a demand for details of suppliers, including umbrella companies.
Herein lies the basis of my theory.
Now fully armed with the information gathered from the Off-payroll working reforms RFI, will HMRC forego its opportunity to challenge individual IR35 status determinations?
Instead, will HMRC use the CFA to address potential tax evasion in the umbrella sector?
Blanket statements play into the hands of HMRC
Market analysis has indicated a significant migration of contractors to umbrella companies post-Off-payroll working reforms. This was mainly due to engagers making blanket decisions to avoid IR35.
However, this swell to an already significant population of temporary workers under umbrella models has only served to coral more contractors under HMRC’s microscope.
With investigations already underway, the threat of the CFA is now genuine for those businesses that engage contractors via a supply chain.
I urge anyone concerned about their temporary labour supply chain compliance to get in touch. Andy Webster, Founder and Director, Workr Compliance, on 07827 810851 or at firstname.lastname@example.org.