Non compliant employment and payroll schemes are detrimental to every compliant worker, agency and end hirer in the UK.

There are a multitude of schemes that are renamed and used time and time again, under the auspice of being legal with one particular piece of legislation. What they fail to tell you is there are a dozen pieces of legislation governing the recruitment industry and their ‘legal’ scheme is likely to be in breach of at least one of these.

They claim to reduce employment costs for end hirers, increase margins for agencies and some increasing nett pay for workers.

The reality is the majority of these schemes are taking money directly from the worker, and all are placing workers, agencies and end hirers at risk of HMRC fines.

Pleading ignorance will not save you, far from it. The minute you advertise, advise, pass on a leaflet or suggest a worker uses a non compliant scheme, HMRC will determine you are a ‘Promoter’ of the scheme and as such, you are among those responsible.

With 100% transparency and visible compliance, you really are removing your risks, protecting your workers and helping your clients.

• A promoter of tax avoidance has entered the supply chain;
• Any other party or other similar contrived situation has entered the supply chain with the intention to avoid paying the correct tax or national insurance liabilities;
• Where an end hirer or Agency 1 requires workers to provide their services by contracting through a particular party that is likely to have been chosen due to its non-compliance with the off payroll working rules;
• Where the liquidation of a business was to avoid payment of the income tax and national insurance liability;
• Where an end hirer or Agency 1 knew, should have known or had reasonable grounds to suspect that the labour being supplied to them was supplied through a party or parties in the labour supply chain that did not comply or had no intention of complying with the rules.

HMRC's guidance says that end hirers and MSPs must carry out checks on their supply chain in order to prevent the IR35 liability passing up to the end hirers and MSPs. HMRC expects them to establish the credibility and legitimacy of their supply chain.

1. What is the agency/labour supplier’s history?
2. Is the agreed contract price for the supply of contractors lower than market value, without a clear explanation for why?
3. Have normal commercial practices been adopted in negotiating prices? This might include unusual "referral fees" received by an agency or sharing of tax savings with end users.
4. Is a newly established intermediary with minimal trading history offering to supply contractors cheaper than a long-established intermediary? Is this the same agency/labour supplier as previous, but operating under a different name? If so, why?
5. Is a supplier insisting that they can further subcontract the labour supply? If so, why?
6. HMRC says that suitable checks to secure the supply chain will vary depending on the circumstances and length of supply chains. Each organisation should consider what checks are suitable in their individual circumstances.

Gaining competitive advantage via non compliant schemes is short lived, proven every year by the number of agencies and payroll companies that go bust and start again. With UK Government naming and shaming companies who breach National Minimum Wage regulations, it will not be long before HMRC do the same.

With Ship Shape, you get a visibly transparent and auditable supply chain, removing your risks and protecting your reputation.