These schemes are being marketed and sold by payroll providers, umbrella companies and back-office providers to employers and recruitment agencies. There is an immediate red flag as they claim to offer ‘cheaper payroll services involving tax credits to reduce liabilities for employers’, HMRC said, adding these arrangements were not legitimate schemes and were tax evasion in their view.

They reduce employment costs by using ‘tax credits’ offset from third party businesses they have acquired. HMRC considers these arrangements tax evasion.

HMRC warned: ‘These organisations falsely claim that they can acquire businesses that have tax credits on file with HMRC, which may include businesses in pre-administration.