HMRC warns umbrella workers over ‘Bills of Exchange’ tax schemes

HMRC has issued a warning to umbrella employees and recruiters over the growing emergence of so-called “Bills of Exchange” schemes, which are being marketed as a way to avoid or settle tax liabilities.

Even if individuals were promised that the arrangements were compliant, they remain fully liable for any unpaid tax, interest and penalties.

This warning comes at a volatile time for the umbrella sector, following the introduction of new joint and several liability (JSL) rules in April 2026, which can leave agencies and, in some cases, end clients liable for unpaid PAYE and NICs.

The tax authority also warned that promoters are particularly active “in the recruitment and temporary labour sector”, while organised crime groups are also involved.

You can read the full HMRC release here.

What is a Bill of Exchange?

A Bill of Exchange is a genuine financial instrument defined under the Bills of Exchange Act 1882.

However, HMRC says promoters are falsely claiming these documents can be used to legally discharge tax liabilities without making an actual payment to HMRC.

In its warning, HMRC stated:

While Bills of Exchange or promissory notes may be accepted elsewhere, HMRC does not accept Bills of Exchange or similar private instruments as payment of tax liabilities.

HMRC also made it clear that Bills of Exchange cannot be used to settle a tax debt and that liabilities must be settled using its normal payment methods.

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How the schemes are marketed

Promoters of these schemes typically claim that workers can use Bills of Exchange to:

• avoid PAYE deductions
• settle tax debts without paying money
• sidestep other tax obligations
• legally reduce tax liabilities through “alternative” payment methods

Workers are often reassured that the arrangements are legitimate or compliant with UK law.

HMRC says these schemes frequently involve substantial fees charged by promoters, even though the arrangements ultimately fail.

The warning will be particularly relevant to contractors and umbrella workers, as disguised remuneration and tax avoidance schemes have historically targeted the flexible labour market. Read more about the Loan Charge.

HMRC also warned that some promoters are falsely claiming that Bills of Exchange can avoid the new umbrella company tax rules introduced in April 2026.

Promoters may also claim that using Bills of Exchange can avoid the new umbrella company legislation which was introduced from April 2026. This is not true.

Increased risks for recruiters and agencies

The warning also lands shortly after major reforms to umbrella company compliance rules.

From April 2026, HMRC gained stronger powers to pursue unpaid PAYE and NICs elsewhere in the labour supply chain when umbrella companies fail to meet their tax obligations.

Under the new JSL framework, agencies engaging non-compliant umbrella companies can potentially become liable for tax shortfalls.

That has significantly increased concern among recruiters about supply chain due diligence and fraudulent umbrella arrangements.

While Bills of Exchange schemes may seem unusual compared to more traditional disguised remuneration structures (which have been promoted within the contracting industry for almost two decades), the concern is the same.

Umbrella market under growing scrutiny

The umbrella sector has faced mounting regulatory and political pressure in recent years.

Alongside the new JSL rules, the government has also confirmed plans to regulate umbrella companies directly via future employment legislation, possibly as early as 2027.

At the same time, HMRC continues to issue warnings about tax avoidance schemes targeting contractors, agency workers and temporary staff.

Many such schemes promise unusually high take-home pay percentages or claim workers can legally avoid standard PAYE deductions.

HMRC’s position remains that workers are unlikely to escape liability simply because they relied on assurances from promoters.

The department has consistently argued that individuals should understand how they are being paid and question arrangements that appear overly complex or unrealistic.

Warning signs of unscrupulous umbrella schemes

Commenting on the release, Seb Maley, CEO of Qdos, told us today:

This is almost unbelievable, but sadly, true. Over the years, tax avoidance schemes have been known to use complex, convoluted arrangements to pull the wool over workers’ eyes – and effectively convince them that their tax is being paid. This instance, however, is certainly one of those where it sounds good to be true, which it most certainly is. As ever, individuals need to steer clear of these schemes

HMRC has reiterated its general advice on dodgy arrangements and says workers and agencies should be cautious if a scheme:

• promises unusually high take-home pay
• claims tax can be legally avoided through alternative payment mechanisms
• uses complicated structures that are difficult to explain
• pressures individuals to join quickly
• claims HMRC approval or endorsement without evidence