Criminal Investigations In Labour Provision

The Corporate Criminal Finances Act was introduced in 2017 and was designed to bring criminal charges against any corporate organisation which fails to prevent its employees and other associates from facilitating tax evasion.  Put simply, businesses should have processes in place to prevent the criminal evasion of tax by anyone associated with or representing the business.

Ignorance is no defence and those found guilty will face a potentially unlimited fine, criminal record and untold reputational damage.

HMRC has published latest details of their investigations of firms potentially guilty of failing to prevent tax evasion:

  • 14 live investigations are already in progress
  • An additional 14 investigations are being considered
  • Investigations span 10 different business sectors, including financial services, oils, construction, labour provision and software development
  • A further 40 potential investigations have been considered and rejected.

So there are 28 potential cases underway currently.  This might not seem like a large number, but consider the last point – that HMRC have considered and rejected a further 40 potential investigations.  This illustrates that they are clearly actively enforcing the Criminal Finances Act and actively investigating potential criminal activity.

This matters because HMRC specifically mention sectors that are relevant to independent workers:

  • labour provision, i.e. recruitment agencies;
  • construction, i.e. where there is a high volume of self-employed people; and
  • financial services, i.e. potentially payroll and accountancy providers that support independent workers.

So although as independent workers you are unlikely to be investigated or guilty (unless you are using your limited company for tax evasion purposes), it is useful to be aware of HMRC’s activity in this area because your recruitment agency, accountant, payroll company or umbrella company could be found guilty.

In order to protect themselves, many recruitment agencies will undertake due diligence on the businesses they work with in the supply chain, including your payroll or umbrella company.

Many agencies will have a preferred supplier list (PSL) for you to choose from, and you should ask them what due diligence has been undertaken on their PSL.  Be aware that some recruitment firms receive financial kickbacks from firms in payment for being on their PSL, and don’t actually do any due diligence.  This could put YOU AT SEVERE FINANCIAL RISK if the PSL consists of disguised remuneration schemes, so please be cautious when choosing your umbrella and do your own research.


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