HMRC Warns Workers on Umbrella Company Payslip Fraud

HMRC has pulled its guidance on labour supply chain tax fraud into a single Organised labour fraud collection, published on 10 June 2026. It is urging temporary and agency workers to check their payslips for signs of a disguised remuneration scheme, as new PAYE rules take effect for money paid through umbrella companies from 6 April 2026.

The key points on umbrella company payslip fraud:

• The collection went live on 10 June 2026, gathering umbrella, mini umbrella and outsourced payroll fraud guidance in one place.
• New PAYE rules apply to money paid to workers on or after 6 April 2026, making the agency or end client responsible for PAYE being operated correctly.
• HMRC’s payslip guidance, last updated on 3 December 2025, treats extra untaxed money reaching a bank account as a clear warning sign.
• Anyone caught up in a scheme can end up owing the tax themselves, even without knowing they were in one.
• Temporary workers, agency workers and contractors paid through umbrella, payroll or mini umbrella companies are the most exposed.

Why HMRC has pulled the guidance together

Organised labour fraud, as HMRC defines it, happens when criminals build labour supply chains to sidestep VAT, Income Tax and National Insurance contributions. Outsourcing part of an employment arrangement is ordinary practice, and the fraud works by hiding inside it.

The collection’s opening warning is aimed at workers, not the businesses hiring them.

Where fraudsters take PAYE tax and National Insurance owed on a worker’s behalf, HMRC says employment rights and access to state benefits can suffer. Guidance on labour fraud in construction was added on 6 August 2026.

What changed on 6 April 2026

The guidance on PAYE rules for labour supply chains that include umbrella companies was first published on 17 September 2025 and rewritten on 19 June 2026, once the legislation was in force. It covers money paid to workers on or after 6 April 2026.

What moves is responsibility. Where an umbrella company employs an agency’s workers, the agency — or the end client, where there is no agency — has to make sure PAYE is operated correctly. HMRC can recover any underpayment from them.

The tax risk still sits with the worker. HMRC’s position is unchanged: it “does not approve or endorse any umbrella companies or tax avoidance schemes”, and the individual is responsible for paying the right amount of tax and National Insurance.

An umbrella company claiming that part of someone’s employment income is not taxable is itself a sign of avoidance.

Spotting umbrella company payslip fraud

HMRC’s payslip guidance starts with the arithmetic on the page: hourly rate, hours worked, gross and net pay, and deductions.

Those figures can look ordinary, which is why workers are also sent to their reconciliation and pay statements.

The warning signs it sets out include:

• extra payments arriving in a bank account
• text messages announcing a separate sum of money
• payments that have not been processed through PAYE
• a high umbrella company fee, or margin, compared with other providers
• deductions bundled together on the payslip, which can obscure how much tax and National Insurance is really being paid
• more money landing in the bank than the net pay figure shown on the payslip

Those extra payments are rarely called wages. HMRC lists the labels they travel under: loans, annuities, bonuses, profit shares, fiduciary receipts, credit facilities, capital payments and pay advances. Such payments may be legitimate where they are taxed.

A margin close in size to the tax or National Insurance that should have been deducted, or much larger than other companies charge, is treated as a possible sign of avoidance.

What a disguised remuneration payslip looks like

HMRC’s worked example makes the pattern concrete. The payslip is built on the National Living Wage rate of £12.21 an hour and, on paper, it behaves: tax and National Insurance are calculated correctly on the gross pay shown.

What is missing is a further £204.29, which reaches the worker’s bank account with nothing deducted and no trace on the payslip.

The real assignment rate was £25 an hour, so pinning the payslip to the legal minimum shrinks the taxable figure and sends the balance outside PAYE. Tax and National Insurance may still be owed on it.

The cost to a worker who did not know

The bill can arrive years later. Someone found to have used an avoidance scheme may face the tax and National Insurance legally due, interest on it, and a penalty, with fees paid to the scheme’s sellers already gone.

Pension is the quieter loss. Because the gross figure on the payslip is artificially low, the worker’s and the employer’s contributions may both be smaller than they should be, leaving less pension at retirement.

Access to state benefits and some employment rights may also be reduced, often without the worker knowing until much later.

Mini umbrella companies, a related pattern

A second pattern works on company structure rather than payslip presentation. HMRC describes organised crime groups breaking a single umbrella company into many small limited companies, each employing only a handful of workers.

That structure lets each claim incentives meant for small businesses, among them the Employment Allowance and the VAT Flat Rate Scheme.

The warning signs sit mainly in company records: clusters of companies incorporated around the same time under similar or unusual names, and registered addresses unsuited to the business.

Foreign national directors with no background in UK labour supply are another marker. Workers are often moved between these companies without being told, so an unfamiliar employer name on a payslip is worth questioning.

HMRC warns the pattern may affect eligibility for sick pay, maternity or paternity pay, State Pension and other benefits.

What to do if your payslip does not look right

None of this means an umbrella company is dishonest. Many follow the rules, few agency workers choose which one pays them, and raising a concern early tends to reduce penalties rather than add to them.

1. Compare the payslip against the paperwork. Line up the hourly rate, hours, gross pay, deductions and net pay with your reconciliation statement, pay statement and bank account. HMRC’s guidance on checking your payslip if you work through an umbrella company includes examples of a correct payslip and one where avoidance is in play.
2. Check your record with HMRC. Sign in to your Personal Tax Account or use the HMRC app to confirm the tax and National Insurance on your payslip have reached HMRC. Check your National Insurance record and tax code too.
3. Estimate what your pay should be. HMRC’s free ‘work out pay from an umbrella company’ tool was updated on 6 April 2026 for the 2026 to 2027 tax year. It is anonymous, and you need the assignment rate for the role.
4. Ask for a breakdown. Request a written breakdown of your deductions, or a Key Information Document if an agency placed you. That should show the fees applied and how they affect your gross and net pay.
5. Get help if something looks wrong. Independent professional tax advice is worth taking. HMRC’s Get Help Out of Tax Avoidance team can be reached at CAGetHelpOutOfTaxAvoidance@hmrc.gov.uk, and arrangements can be reported through GOV.UK’s report tax fraud service using the reference ‘TAC’. You do not need to pay a claims firm.
6. Verify any claim of approval. Some schemes are marketed as HMRC-approved. The list of named tax avoidance schemes, promoters, enablers and suppliers was last updated on 20 August 2026, though absence from it does not mean a scheme is approved. Use contact details from GOV.UK, not ones the company supplies.

If you want to see how a compliant payslip should read before you start comparing, our guide to checking the tax deductions on your payslip sets out what each line should show. Tax Rebate Services can also help you check whether the tax deducted across a full year looks right.