HMRC adds contractor and agency advice into tax avoidance blacklist

The taxman is using his avoidance scheme blacklist to advise employees of the ‘umbrella companies’ that he’s ‘naming and shaming.’

Updating the entry for Miwsa Ltd (company number 14671026), HMRC advised its “employees” to “familiarise themselves” with “guidance” in Spotlight 60.

HMRC tells recruiters the same; notably, it would “advise…agencies and others contacted by…[or on behalf of Miwsa]” to read the August 2022 guidance.

‘Satisfy yourself that umbrella company tax deductions are correct’

The aim of reading “Warning for agency workers and contractors employed by umbrella companies,” is to grasp tax deductions, HMRC advised both parties.

Specifically, agencies should read the guidance to “satisfy themselves that the correct amount of tax is being deducted from any income paid” by the umbrella company.

‘Correct tax deducted from contractor income’

And “employees” (contractors) should read it to “satisfy themselves that the correct amount of tax is being deducted on their income,” HMRC says.

In the entry for Miwsa (now in liquidation following a court order to wind-up), HMRC says some umbrellas offer both compliant and non-compliant arrangements.

The subsequent advice -- to check umbrella companies’ tax deductions informed by Spotlight 60 -- now permeates the HMRC blacklist.

In fact, since being added to Miwsa’s entry on May 1st 2025, the HMRC advice now appears in relation to more than 60 of the blacklisted payroll entities.

‘Most recruitment agencies think about umbrella company compliance only once a year’

For agencies, the significance of the HMRC advice is linked to April 2026’s tax compliance plan, under which umbrella workers’ PAYE will shift to agencies.

Ciaran Woodcock, of SG Umbrella, believes that any move to help recruiters think more about compliance is a good thing.

“Most agencies I speak with worry about umbrella companies demonstrating compliance at the start. And don’t think about it again for a year”, he says.

“Or until an issue appears. [Agencies shouldn’t] wait for the letter from HMRC. Always partner with umbrellas that can demonstrate …ongoing… compliance.”

‘Transparent payroll practices’

Chartergates, a law firm, observes that HMRC guidance of April 8th 2025 makes for seminal reading for recruiters.

Referring to “Examples of good practice for umbrella companies in the temporary labour market,” the law firm says:

“While the guidance is primarily aimed at umbrella companies…from a recruitment business perspective…[it] signifies the importance of engaging with umbrella companies that demonstrate strong operating responsibility, ensuring legal compliance, financial stability, and transparent payroll practices.”

‘It isn’t just contractors who get hurt by tax, deduction or compliance mistakes’

SG Umbrella’s commercial director, Mr Woodcock, reiterated in a LinkedIn post aimed at agencies:

“When something goes wrong with tax, deductions, or compliance…it’s not just the contractor that gets hurt.”

Nevertheless, HMRC using its blacklist to advise them in relation to more than 60 blacklisted payroll entities holds significance for contractors.

‘New platform, same core HMRC message’

According to a former tax inspector, the significance is that the Revenue is using a new platform to issue contractors with a familiar message.

“Using its ‘naughty list’ to explicitly advise umbrella employees looks new, but the core message from HMRC is the same.

“And the message is broadly three-fold,” the former inspector, Carolyn Walsh, said in a statement to ContractorUK.

‘HMRC’s three-part message to steer clear of avoidance’

“First; a wage generated from providing your personal labour or skills is ‘earnings,’ or remuneration, which if paid via an umbrella company is FULLY taxable under PAYE. 

“Second; there has never been, and NEVER will be, a scheme that can legally disguise earnings or convert them into a non-taxable payment.

“Third; if take-home pay is better than usual, part of the earnings has NOT been subject to the deduction of PAYE, and one day HMRC will require that the PAYE due is paid back, by YOU -- the contractor.”

On April 10th 2025, HMRC added Back Office Assistance 1 Ltd (Company # 13353140) and Back Office Services 1 Ltd 9 (Company # 13278893) to its “Current list of named tax avoidance schemes”.

‘Untaxed, secondary element at Back Office Ltd group of companies’

HMRC says contractors employed by both companies received part of their remuneration as salary, which is taxed, plus a “secondary element,” which isn’t taxed.

On May 5th, the similarly named “Back Office Systems 1 Ltd” (Company # 13273320) was added to the avoidance blacklist, for using the same arrangement outlined by HMRC (and referred to above by Walsh).

‘A loan that isn’t going to be repaid isn’t a loan’

Another ex-Revenue officer, Jesminara Rahman, says: “One of the main features…[of] tax avoidance schemes…[is that they] often feature a loan.

“A tax tribunal will look at the intention behind the act. If you know that the loan is not going to be repaid, [then] it’s not a loan, is it?”

Managing director at Tax Resolute UK, Rahman says “the issue” for some workers is that scheme providers’ “guidance,” accompanied by a legal counsel’s opinion, saying the scheme is “valid,” takes them in.

‘Nobody on normal earnings takes remuneration as a loan’

However, “nobody on a normal level of earnings would ever take their remuneration in the form of a loan which they have to repay,” wrote Tax Policy Associates founder Dan Neidle, responding online.

Now of Oblako Ltd, following her departure from the Revenue, Ms Walsh reflected last night:

“One additional message from HMRC, often, is; ‘It doesn’t matter how professional the company or person that advises you to use an arrangement looks, it’s YOUR earnings -- and it’s YOUR responsibility to ensure the right amount of PAYE is paid.’”

‘Consequences for blacklisted avoidance are…’

Forensic accountant Juan Carlos Venegas implies that it is repercussions -- not mere messages -- that taxpayers want to see.

Just before it updated the avoidance blacklist on May 8th (to put another scheme promoter, Contractor Bureau, under a Stop notice) Mr Venegas replied to HMRC’s social media post naming the ‘Back Office’ group of companies:

“Thank you for this. And the consequences for these companies are…?”

The boss at FA Forensics Ltd, Mr Venegas ended his reply to HMRC with the ‘shrugged shoulders’ emoji.

‘HMRC has thrown its own guidance manuals under the bus’

The April-May avoidance blacklist update, with its 60-plus alerts for agencies and contractors to scrutinise umbrella company deductions using Spotlight 60, will likely making another tax expert shrug.

“Nobody ever relies upon HMRC 'guidance,'" opined the expert, Graham Webber, a director at WTT Group. “More than once, HMRC has chosen to throw its own manuals under the bus in pursuit of tax that nobody thought was due.”