HMRC doubles down on tax avoidance schemes Flex Payroll, Rainbowpay and Universe Payroll

HMRC used March 2025 to further blackmark three firms offering avoidance schemes that it already said contractors should exit.

Flex Payroll, Rainbowpay, and Universe Payroll now feature on the HMRC list with “2 entries” that relate to schemes which they operate.

First ‘named and shamed’ in February 2024, Flex Payroll & Accounting this month had ‘Stops’ placed on both its promoter and arrangements.

First ‘named and shamed’ in December 2023, Rainbowpay also had its promoter subjected to a stop notice on the same date (March 6th 2025).

And Universe Payroll, which already had live ‘Stops’ in its name, joined the avoidance blacklist for the first time on March 13th 2025.

‘Entry 1 under Finance Act 2022, entry 2 under POTAS’

All three have “entry 1” published under Finance Act 2022, and “entry 2” published under the Promoters of Tax Avoidance Schemes regime.

Not everyone thinks the HMRC stop notices are having much effect.

Universe Payroll, for example, had its arrangement subjected to a ‘Stop’ in October 2024; and its promoter subjected to one, too, in Feb 2025.

‘A fat lot of use HMRC’s stop notices seem to be’

Despite both notices meaning Universe ‘could face prosecution if it carries on,’ HMRC last month ‘named and shamed’ it as a scheme (under FA 2022).

“They've…got [HMRC] stop notices against them [already],” wrote a ContractorUK Forum moderator. “A fat lot of use that seems to be.”

‘Fourteen avoidance firms HMRC has now doubled down on’

Nevertheless, the trend is HMRC increasingly using its ‘naughty list’ to add an additional entry, under different legislation, for an already blacklisted firm.

The Revenue has now done so 14 times (i.e. there are now 14 ‘payroll entities’ with two entries; one under FA 2022 and one under POTAS).

The upward trend in March 2025 was also HMRC in two instances (Flex Payroll and Rainbowpay) using ‘Stops’ to hit promoters.

‘Closing in on Promoters of Marketed Tax Avoidance’

Crawford Temple, CEO of compliance organisation Professional Passport, says promoters find themselves in another crosshair.

“The ‘name and shame’ list will certainly take on greater significance if the proposed changes in the consultation ‘Closing in on Promoters of Marketed Tax Avoidance’ are implemented,” Mr Temple said yesterday to ContractorUK.

“However, this should complement, not substitute, preventative measures.”

‘HMRC should shut schemes quicker’

Temple says HMRC should be identifying contractor tax avoidance schemes “quicker and shutting them down.”

The tax authority “already possesses… all the necessary intelligence to spot unusual patterns that indicate avoidance structures in their infancy.”

“The current reactive approach allows schemes to operate and thrive, damaging the Treasury coffers and unwitting participants before action is taken.”

Professional Passport’s CEO continued: “HMRC possesses real-time tax data, employment records, and company filings…a wealth of powerful data that remains underutilised.”

‘HMRC tax avoidance list will grow further’

An assessor of umbrella company compliance, Temple predicted HMRC’s blacklist ‘would keep growing until HMRC implements proactive enforcement.’

The ‘Current list of named tax avoidance schemes...’ contains more than 150 companies, says staffing group Gattaca’s former finance manager Alan Lowdell.

After HMRC named “Payroll Professors” and “PRC Recruitment” (in March 2025 as well) as additional schemes it says workers should “withdraw from”, Lowdell urged:

“Please don't use [any of these 154] non-compliant providers and end up with a large tax bill.

“It’s the same old advice from me – ‘If it's too good to be true, then it is.’

“Interestingly [though], one of the newly ‘named and shamed’ has ‘Recruitment’ in its name.”

‘Big-name recruitment agencies linked to avoidance arrangements’

Last month, Sky News reported that agencies including Hays, Petrofac and Capita were “linked” to avoidance schemes “when placing workers into jobs”.

The Freelancer & Contractor Services Association is disappointed at household recruitment names being linked to non-compliant arrangements.

‘Due diligence by contractor recruitment agencies is key’

“Recruiters must take responsibility,” began the FCSA in a social media post.

“If you’re recommending a payroll provider, you need to know they’re compliant.

“Simply adding them to your PSL isn’t enough. Due diligence is key.”

‘Unexpected tax demands’

The association added that “often,” it is workers who are “left footing the bill”, and “facing unexpected tax demands they had no idea were coming.”

“Workers need to be cautious,” added the accreditation body.

“If something sounds too good to be true, it probably is. If a payroll provider claims they can increase take-home pay while reducing tax, it’s worth [being very cautious].”

‘Recruiters find it challenging staying HMRC-compliant’ 

Ben Burrows of KUDO Back Office reflected in wake of HMRC taking to LinkedIn to identify Rainbowpay and Flex Payroll as avoiders under stop notices:

“Staying compliant with HMRC updates can be a challenge for recruitment agencies,” Burrows said.

“That’s why so many are turning to outsourced solutions for payroll and compliance. It ensures they stay on top of regulations without the admin headache.”

‘Versatile umbrella company’

However as a word, it’s not just “Recruitment” that stands out among the firms freshly blacklisted by HMRC for avoidance (in March - Flex Payroll; Payroll Professors, Rainbowpay, Universe Payroll and PRC Recruitment).

Last Thursday, alongside Expertise Solutions Ltd, HMRC updated its avoidance list with “K&B Umbrella Ltd.”

Unlike many of HMRC’s ‘named and shamed,’ K&B is actively trading and according to its website, is a “dynamic and versatile umbrella company.”

‘HMRC could harness analytics and AI, but isn’t’

Professional Passport’s Mr Temple told ContractorUK: “By harnessing data analytics and Artificial Intelligence, HMRC could shift from reactive enforcement to preventative protection.

“The technology exists. What's needed is the implementation, will and strategic oversight to deploy it effectively, protecting both the tax system and vulnerable taxpayers."

‘Review your payroll setup’

The FCSA says supply chain parties can take action themselves.

It appealed: “If you’re a contractor, freelancer, or recruitment agency, now is the time to review your payroll setup.

“Compliance isn’t just a tick-box exercise; it’s what protects workers, businesses, and the tax system as a whole.”

‘HMRC’s message that schemes are a problem isn’t getting across’

On LinkedIn, a user with the word “innovation” as part of their job title says it’s the tax authority that needs to act.

The user posted: “Somehow, I don't think the message is getting across to these ‘employees’ caught up [in these tax avoidance schemes] that there is a problem.  

“I've read about 20 of the [HMRC-provided] summaries of the products being pedalled, and all of them say [broadly the same thing]. HMRC; you should think about a Facebook ads campaign to try and get the message across…that these schemes don't work.”