Why an act from 1882 applies to recruitment agencies in 2026

To the dismay of those playing by the rules such as Clipper Contracting, we are sad to report that payroll pirates are at it again; bad actors within the temporary work supply chain are continuing to push tax avoidance schemes to unsuspecting contractors.

HMRC has declared a briefing alert setting out their position o the latest one; that HMRC does not accept Bills of Exchange as payment of tax liabilities.

Just over a month since the implementation of JSL on April 6th, tax-avoidance promoters are marketing a new type of scheme known as a ‘Bill of Exchange’. A bill of exchange refers to a rather outdated method of money transfer originally created in the Bill of Exchange Act of 1882, by which the Drawer (the party who created the bill) submits a payment order to a seller, by which the Drawee (party directed to pay) is required to either accept the bill to make it valid, or reject it. You might be thinking to yourself, how exactly does a Victorian era act impact tax liabilities today? The following article aims to provide a clear understanding of what this scheme entails and the wider implications that follow should you use it.

Historically speaking, bills of exchange have been used in the past between individuals for either immediate payments or payments at a set time, with a proportional discount applied if paid before the designated time. The way it has been reframed by promoters as follows: An umbrella worker is proposed to join a scheme that allows for bills of exchange to be used to reduce or remove entirely their obligation to pay tax liabilities; by using the bill, they are bypassing the debt to HMRC by using the promise or IOU to remove the liability. It is possible promoters could market this as an effective way to permanently wipe the debt, going further than just deferring it, thus creating a situation where tax and NI remain unpaid. Additionally, promoters are reported to be charging extraordinary amounts for the process of the bills of exchange, whereby the promoter, say for example an unaccredited uncompliant umbrella, will process the bills of exchange for you in exchange for the administration. The cost of the fees would be substantial, but less than that of liabilities that would be due to HMRC. Some will even go as far as to say that the scheme is government backed, due to the Act of 1882 previously mentioned. This couldn’t be further from the truth, as HMRC have declared as of the 13th May that they will not and have never accepted these bills of exchange instead of owed liabilities for tax and NI.

The consequences will remain the same; an agency that chooses to use these schemes will expose themselves to any unpaid PAYE through the powers HMRC now has with Joint Several Liability.

HMRC is recommending that anyone who is aware or suspects that they are involved with this scheme, report it as soon as possible to HMRC here. This reinforces the notion that significant due diligence must be completed within your supply chain and should remind everyone the importance of tax compliance. In essence, if you think there is a way to reduce or remove tax liability, there isn’t, and HMRC will find out. This is all the more reason why you should trust in companies that have an established track record, the relevant accreditations and are willing to supply you with any and all information relating to your due diligence checks.