In a major escalation of its crackdown on non-compliant payroll models, HM Revenue and Customs (HMRC) has explicitly named a recruitment agency for facilitating tax avoidance for the first time.
This development marks a significant turning point in HMRC’s enforcement strategy. Previously, the tax authority primarily focused on the scheme promoters or the “umbrella” companies themselves. However, by naming an employment agency, HMRC sends a clear warning to the entire supply chain: ignorance is no longer a defense.
The Details: Remedy Recruitment Group Named
HMRC has officially added Remedy Recruitment Group to its public list of named tax avoidance schemes, promoters, enablers, and suppliers.
This action is unprecedented. Historically, this list has consisted of boutique payroll firms or shell companies. By listing a mainstream recruitment agency, HMRC highlights a critical failure in the supply chain. Specifically, HMRC stated that Remedy Recruitment Group failed to conduct effective due diligence on the umbrella companies they recommended to workers.
How the Scheme Worked
The avoidance model identified by HMRC operated using a “split payment” structure, which is a common tactic in the non-compliant market. The arrangement functioned as follows:
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The “Salary”: Workers received a portion of their pay at or around the National Minimum Wage. The payroll provider taxed this portion correctly via PAYE.
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The “Top-up”: The provider paid the remainder of the income as a separate “additional payment.” Crucially, they deducted no Income Tax or National Insurance contributions from this second payment.
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The Consequence: This artificially inflated the contractor’s take-home pay immediately. However, it left them personally liable for the unpaid taxes later.
HMRC’s Director of Counter Avoidance, Jonathan Smith, emphasized the gravity of this step. He stated: “This is the first time we’ve named an employment agency as being involved in making avoidance arrangements available… Our message is clear; businesses like this must carry out proper due diligence on their supply chains and not get involved in tax avoidance”.
Why This Matters for Agencies and Contractors
1. The “Due Diligence” Wake-Up Call
Remedy Recruitment Group allegedly failed to verify the compliance of the umbrella companies in their supply chain. For years, industry experts have warned that “preferred supplier lists” (PSLs) require rigorous vetting. Consequently, this enforcement action confirms that agencies must actively police their partners rather than accepting their marketing claims at face value.
2. Looming Legislation (April 2026)
Furthermore, this action acts as a prelude to tighter regulations. Starting April 2026, new government rules will make employment agencies legally responsible for accounting for PAYE and National Insurance contributions if they use non-compliant umbrella companies. Therefore, agencies currently operating loose PSLs are running out of time to clean up their lists.
3. The Risk to Contractors
Although HMRC has named the agency, the financial risk frequently falls back on the worker. Contractors caught in these schemes often face:
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Demands for the unpaid tax (Income Tax and NICs) on the “untaxed” portion of their pay.
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Significant interest charges on the unpaid amounts.
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Potential penalties for late payment.
How to Protect Yourself
If you are a contractor, you must remain vigilant. The naming of a recruitment agency proves that you cannot simply trust a recommendation just because it comes from a well-known recruitment consultant.
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Check your payslip: Verify that all your income is subject to PAYE deductions. You should never receive separate payments labeled as “loans,” “grants,” “capital advances,” or “annuities”.
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Avoid “Split Payments”: If you receive two payments—one taxed and one untaxed—this is a major red flag.
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Verify the reference: Always cross-reference any umbrella company or agency recommendation against HMRC’s published list of named tax avoidance schemes.
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Use compliant providers: Stick to umbrella companies that hold accreditation from recognized industry bodies, like FCSA, and who deduct tax on the full value of your assignment income.
Summary of Key Facts from HMRC:
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Agency Named: Remedy Recruitment Group.
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Reason: Failed due diligence; workers paid via schemes with untaxed top-ups.
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HMRC Warning: Agencies must police their supply chains or face public naming and future liability.
What to do next
Audit your current payroll setup immediately. If your take-home pay appears higher than roughly 70-75% of your gross day rate, or if you receive non-taxed payments, pause your arrangement and seek independent advice.
Check out our Top 10 Umbrella Companies.
For a deeper look into how these schemes impact workers and the recruitment sector, this investigation highlights the severity of the issue: … Sky News investigation into recruitment firms and tax avoidance
