Check for signs of outsourced labour payroll fraud

Outsourced

How outsourced labour payroll fraud (formerlyworks

Outsourced labour payroll companyfraud fraud)(sometimes iscalled the‘payslip movementfraud’ ofor workers‘payroll andcompany payrollfraud’) responsibilitiesis fromwhen a legitimate business,business totransfers anothertheir business.

Itworkers isand partpayroll ofto aanother fraudulentbusiness supply chain, which does not declare or pay the correct taxes to HMRC.

Legitimate businessesThe arelegitimate business is often unawarenot aware of any fraud.

YouYou’re needmore likely to be awareaffected ofby outsourced labour payroll fraud if you:  you:

• work for an agency 

• work for one company but get paid by another 

• are outsourcing your workforce or payroll 

• are a recruitment or employment agency agency

How outsourced labour payroll fraud can affect you

As a worker

This means you may not be able to get:

• benefits like Universal Credit

• maternity or paternity pay

• your full State Pension

As a businesses

If HMRC find that your business knew (or should have known) about fraud in the supply chain, we may:

• deny your business the right to recover VAT input tax

• hold your business responsible for unpaid Income Tax or National Insurance contributions, including any interest

• charge VAT penalties to your business and people in charge — for example, directors or managers

What to check if you’re a worker 

You should check for signs of outsourced labour payroll fraud if you get paid through an agency, umbrella or payroll company. For example — you work as a delivery driver for onea companybusiness, but areget paid by another a different company.

Check your payslips

False payslips make it look like your employer has paid the correct tax and National Insurance on your behalf, when they have not.

Check with HMRC to make sure the tax and National Insurance on your payslip is correct.

You should also check that you’re on the correct tax code. Checking this can help you to avoid overpaying now or facing an unexpected tax bill later.

For help with this, you can:

• sign in to your personal tax account

• work

  use forthe anHMRC agency app

Other signs to look for

OutsourcedOther signs of outsourced labour payroll fraud iscould partbe ofif you:

• are told that you’ll get your full pay, without tax taken off (gross pay)

• can no longer see your payslips, or sign in to your employer’s payslip portal

• are asked to set up your own company (sometimes called a wider‘personal groupservice ofcompany’)

• are organisedsuddenly crimesmoved involvingto thea supplydifferent ofumbrella labour,or knownpayroll company

• struggle to get benefits a company offers, like voucher or pension schemes

Know your employment rights

Check what your employment rights are, if:

• you’re employed as organisedan labouragency fraud.worker

• your employment contract is transferred to another company

HowWhat itto workscheck andif howyou’re toan spotemployer itor agency

SignsGeneral signs of outsourced labour payroll fraud include: include:

• payroll companies requestingasking that an established business transfersto transfer staff to them them

• savings on payroll and labour costs that seem too good to be true true

• a payroll company with a similar name to the business business

• irregular

  unusual payment arrangements, suchlike aspayments requesting that you make a payment to a third party party

• offers to refund administrative costs, a service also known as ‘milestone kickbacks’

• no physical presence at the registered office address address

• no online presence or website website

If you’reyou’ve anoutsourced employerworkers or agency

If youyou’ve have outsourced your workforceworkers or payroll responsibilities from another business, you should: should:

• carry out dueout diligencechecks on checks on your supply chain supplier

• understand what service you’rethey’re being supplied supplying

• be

  make clearsure you know who pays your workers and how they’re paid paid

• question your supplier if you have concerns concerns

ThisYou ismay notneed ato definitivecarry list.out Theother checks youas needwell. toThis take will depend on what your business does, and how it operates. operates.

Check your supplier supplier

Fraudulent payroll companies may operate alongside several others, all providing connecting services, such as issuing invoices.

You should:

• check a company’s VAT registration with HMRC

• check who holds the contracts of employment for your staff

• ask for evidence of of Real Time Information (RTI returns) returns and the payments made to HMRC

Understand the supplyservice youyou’re receivegetting

You need to understand thewhat typeservice ofyou’re supplygetting youfrom receive. Ityour maysupplier. beIt amay supply of:be:

• labour only only

• labour with

  payroll services services only

• labour with payroll services only 

If you know thewhat typeyou’re ofgetting, you’ll supply you receive, you’ll be able to work out thehow correctmuch treatmentVAT foryou VATshould purposes. 

be paying. Fraudsters often lie about the supply of labour to make the VAT seem higher than it should be,be.

Transfer maximisingof illegalworker income.

contracts

WeOne aretype aware of a model of outsourced labour payroll fraud which involves the ‘assignment’assignment or ‘transfer’transfer of workers’ contracts of employment to fraudulent entities,companies, without any change in the terms and conditions of those contracts.conditions.

Our view is that this does not work. You may wish to seek independent legal advice on the arrangement.

If you’re involved in an arrangement like this, this:

• you may not be able to deduct VAT input tax for the cost and may behave asked to repay it to HMRC. HMRC

  Check if you’re an employment intermediary 

• If you supplyshould workersget toindependent alegal client,advice youon maythe be an employment intermediary. arrangement

IfReport you’re a worker 

You may be a victim of outsourced labour payroll fraud if your employer outsources their workforce.

Check your employment rights if: 

• you’re an agency worker 
• your employment contract is transferred to another company 

You may get a false payslip showing that Income Tax and National Insurance contributions have been deducted. However, this may be different to what HMRC has been told, and it is often not paid.

You mayshould alsoreport beoutsourced toldlabour thatpayroll youfraud will be paid gross or encouraged to set up your own company, sometimes called a personal service company. 

You can check what information is being reported to HMRC through your personal tax account. 

Criminal companiesif may also claim to offer benefits that you strugglehave to access, such as voucher schemes and pension schemes.

You can report concerns about your workplace pension scheme to the Pensions Regulator.about:

• If you’re an agencyemployer worker or contractor,agency andyou’re workworking through an umbrella company, you can:for

  • read more about how and what you’ll be paid
  • use

    a oursupplier toolof to worklabour out pay from an umbrella company

  Reporting potential fraud or taxpayroll avoidance

  You can report tax fraud online if you have concerns about:services

  • a supplier

  • unpaid Income Tax and National Insurance contributions

  • unpaid VAT

  How it can affect your business

  If we find that a business either knew or should have known about fraud in the supply chain, we may:

  • deny the businesses in the supply chain the right to recover VAT input tax
  • charge a penalty for transactions connected to fraud

  You maywill benot heldneed responsibleto forgive anyus unpaidyour Incomepersonal Taxdetails orwhen Nationalyou Insurancemake contributions, including interest.

  We may also transfer VAT penalties to individuals, such as a director or manager of the company.report.

  More information about outsourced labour payroll fraud

  Watch a video about outsourced labour payroll fraud.

  fraud

  Outsourced labour payroll fraud.

  YouYou’ll will learn about:

  • how fraudulent companies in the supply chain operate

  • the impact of National Insurance contributions not being paid to HMRC

  • your responsibility to understand who pays the workers and how they’re paid

  • the importance of completing regular checks and keeping detailed records