Under the Criminal Finances Act 2017, corporations and
partnerships can be held criminally liable if they fail to prevent
their employees, agents, or others who provide services on their
behalf from criminally facilitating tax evasion.
The only defence available to an end user is that it had
"reasonable prevention procedures" in place to attempt to prevent
any such facilitation from taking place; for example, through staff
training and a robust written policy.
Having spent 17 years of my career in Recruitment, the last
ten as Managing Director of Baxter Personnel I have witnessed
an amazing amount of changes over the years but the impact of IR35
being rolled out to the private sector coupled with the above
statement is going to have a real bearing on you as an end
In a nutshell: if you use agency staff anywhere in your
organisation and the recruitment agency or the Umbrellas or mini
Umbrellas behind them are not TAX compliant then without
"reasonable prevention procedures" i.e. an audit trail you may have
a very big problem in regards to the above finance act. This is our
Some end users I speak with are not aware of or even care about
some of the payroll "schemes" their agency temporary workers are
working under and in a lot of cases assume the temporary workers
work directly for the agency and are paid directly via PAYE and
therefore sit outside IR35. This is a very dangerous and incorrect
On many occasions recruitment agencies outsource their payroll
to Umbrella companies. This is where the problems
start. Now don't get me wrong not all Umbrellas are
non-compliant - in fact they provide a vital service to the
industry and their services are widely utilised.
However there are many other "umbrellas" that are not.
There are many Umbrellas based offshore for tax relief purposes and
there are umbrella companies that appear to be legitimate only to
have hundreds of mini Umbrellas sat behind them again often
Some agencies use these type of Umbrella / payroll schemes to
gain a competitive advantage as they are able to reduce charge
rates and increase wages. This is usually achieved through
non-compliant NIC deductions, reducing the cost of processing
workers and enabling them to increase the percentage of pay a
worker takes home from around 65% to 85-90%. And so, back to the
Criminal Finance Act. If the use of these umbrellas or any other
non-compliant payroll scheme exist in your labour supply chain
failure to have taken reasonable action can lead to significant
legal, financial and reputational risks to your business. It could
even stop your business from operating entirely.
At Baxter Personnel we have operated an in-house PAYE payroll
system for the last 29 years. We have never outsourced or
paid anyone outside the PAYE model. As such we know a thing or two
about how to be PAYE compliant and we know where to look and what
to look for in payroll processes that are not.
To assist our clients both current and prospective safely
navigate the above acts and Legislation we would like to offer the
many years of experience of our IR35 team for free to help you look
at your current labour supply chains to ensure that all the
suppliers and schemes are running in a tax compliant way to satisfy
your legal requirements.
Our aim is to help educate end users that are not aware of the
impending IR35 legislation and more importantly the missed Criminal
Finance Act consequences that can go with it if due diligence isn't
If you would like some more information or you would like to
speak with our IR35 team to book your free labour supply chain
consultation please call us on 0330 133 3597
Written by Andrew Harrow
Speak to our IR35 team today
for your free check up.