If you pay into a paye umbrella scheme, you should be aware of the potential risks. Paye Umbrella Scheme fraud is becoming increasingly common within the UK and understanding what it is, how to spot it and how to protect yourself from it can help avoid any financial losses.
What is Paye Umbrella Scheme Fraud?
This type of fraud involves individuals being employed through paye umbrella companies but actually carrying out work for another organisation without that organisation’s knowledge or approval. The employee will then receive income from their paye umbrella company instead of their employer, meaning that the employer does not pay national insurance contributions (NIC) for them nor are they taxed on the income – resulting in significant losses in terms of tax payments for the employer and employee alike.
This type of fraud is on the rise due to paye umbrella companies providing individuals with a ‘tax efficient’ way to pay themselves, as well as offering flexibility around hours worked and pay received. This has led to many employers turning to paye umbrella companies in order to reduce payroll costs and administrative tasks associated with hiring an employee. However, this can open up opportunities for employees who may be tempted by paye umbrella scheme fraud.
How Can You Spot Paye Umbrella Scheme Fraud?
The most common signs that paye umbrella scheme fraud is taking place are:
– An employee receiving income from both their employer and paye umbrella company for the same work.
– An employee claiming paye umbrella pay that appears to be higher than what they should be earning.
– An employee working hours that are more than their contractual hours with the paye umbrella company but not relying on any additional pay from the employer.
– A drop in national insurance contributions (NIC) that would normally be paid by an employer for an employee’s pay.
It is important to be aware of these signs as it can help you identify whether or not paye umbrella scheme fraud has taken place and take action before any further losses occur.
How Can You Protect Yourself From Paye Umbrella Scheme Fraud?
The best way to protect yourself from paye umbrella scheme fraud is to be vigilant and pay close attention to any paye umbrella pay received by your employees. It is also important to ensure that all paye umbrella pay is recorded on the employee’s payslip and reported to HMRC, as failure to do this can result in hefty fines.
Furthermore, you should regularly review the income being provided by paye umbrella companies and check that it matches up with the hours worked and pay agreed with your actual employer. If there are any discrepancies or if an employee is claiming pay from a paye umbrella company without permission, then it is best to take action as soon as possible.
Additionally, it is important to ensure that all relevant documentation has been signed by both parties (the employer and the paye umbrella company) in order to fully protect your business from any paye umbrella scheme fraud.
In conclusion, paye umbrella scheme fraud is on the rise within the UK and can cause significant losses for employers and employees alike. It is important to be aware of the signs of paye umbrella scheme fraud, pay close attention to pay received by paye umbrella companies and ensure all relevant documentation has been signed to guard against it. By following these steps, you can help protect yourself from paye umbrella scheme fraud. To find out more check out Richardson Lissack.