• Unrelated business activity description – Compare the nature of the business activities described in Companies House to the services provided by the workers – are they compatible?
• Directors being foreign nationals – Frequently foreign nationals are appointed as directors when an MUC is formed or they can replace a temporary UK resident director after a short period of time. Usually the directors will have no previous experience in the UK labour supply industry.
• An unusually high movement of workers – Take note of how often workers are moved between different employers who meet the above criteria for being MUCs. Is this on a frequent basis?
• Very short-lived businesses - The individual MUCs have a relatively short lifespan (often less than 18 months) before being allowed to be disbanded by Companies House because of their failure to meet their filing obligations. New MUCs will then take their place in the supply chain. This would be noticed as you may find that you need to issue a new Key Information Document to workers on a regular basis.
As the MUCs sit low down in the supply chain it may be tricky to spot them. HMRCs advice to businesses is to remain watchful, especially where the employer of the worker is not the Umbrella Company that they may have a contract with.
It is important for businesses to consider the integrity of the supply, payment arrangements and other surrounding circumstances to help safeguard themselves from financial, operational, and reputational risks. Guidance on undertaking robust due diligence can be found here. MUC fraud creates an unequal playing field for those employment agencies and businesses who do follow the rules. HMRC’s Fraud Investigation Service is using both its civil and criminal powers to confront those who are involved and who are facilitating this type of fraud. HMRC has recently made a number of arrests in relation to MUC fraud and has also taken steps to deny the right to recover input tax in cases where it has proven that a business in the supply chain knew, or should have known, that there was fraud. HMRC is working with trade bodies and other Government Departments to increase awareness of the MUC fraud model and its risks more extensively. HMRC is also currently undertaking a programme of activity to establish the levels of due diligence that are being carried out by employment agencies and end users who use temporary labour. As part of this programme HMRC plans to issue advice on the levels of due diligence expected by a business to help them to avoid becoming a victim of the fraud.
If you have concerns about a supplier or engager of labour, or associated activities, please contact the HMRC hotline on 0800 788 887 (open 8am to 8pm every day). For more information, please see how to report fraud to HMRC.
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Education tools: Off-payroll working 9 November 2020
HMRC has published a useful guide to the various help resources it offers on the topic of off-payroll working, ahead of the changes coming into effect from 6 April 2021.
The main guidance available is as follows:
• Off-payroll working (IR35): detailed information • Check Employment Status for Tax (CEST) tool – this can be used to establish whether a worker on a specific engagement should be classed as employed or self-employed for the purposes of tax • Employment Status Manual – this provides detailed guidance and explanations of how the rules should be applied
The help available is tailored dependent on whether someone is a client or fee-payer, a contractor or a tax agent.
Clients and fee-payers
HMRC recommends webinars, workshops and tailored educational calls for clients and fee-payers. Between October 2020 and April 2021, HMRC is offering a variety of off-payroll webinars, which will provide an overview of the reforms and additional information in certain topic areas.
The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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