Criminal Finance Act – Is Your Recruitment Business at Risk?

Criminal Finance Act – Is Your Recruitment Business at Risk?

Jun 06, 2022

Tim Hunt, Strategic Planning and Sales Director, explains the risks you face under the Criminal Finance Act.






The Criminal Finances Act 2017 was introduced to tackle tax evasion, money laundering and terrorist financing, and to recover the proceeds of crime.

Whilst broad in scope, it is highly relevant to our recruitment agency partners (and their clients) and worth a reminder in the current climate. We fear that today’s shortage of labour could push some to relax their usual risk averse stance when faced with skills shortages and a loss of labour to less scrupulous competitors.

The risks faced by the temporary labour supply chain are not insignificant. The legislation covers the businesses and individuals involved in the payment of temporary workers, notably the inappropriate use of self-employment, PSCs, contracting gangs and aggressive employment models that seek to circumnavigate VAT and National Insurance.

Compliance is and always will be our highest priority. With Crest Plus as your contractor payments partner, you can rest assured knowing that your business is not compromised. Furthermore, we can help you and your teams understand the broader complexities and put in place the right measures throughout your supply chain to support your clients and protect your business.

What are the risks?





The Criminal Finance Act means an offence is now committed where a company fails to prevent the facilitation of tax evasion by a person associated with it.

It’s worth noting that this means your recruitment businesses and your clients are at risk and highlights the increasing need for a robust supply chain where all parties are ‘on the same page’ with strict adherence to compliance.

The most common areas of risk for recruitment businesses include:

  • The correct determination of self-employment.
  • The correct administration of business expenses for Umbrella employees.
  • The use of complex models such as “deemed employment” or those designed to avoid VAT or inappropriately benefit from National Insurance allowances.

Correct determination of self-employment

Before a worker can register with Crest Plus they undergo detailed assessments to ensure they are offered a working option appropriate to their circumstances. Our specialism is Umbrella employment and the Construction Industry Scheme (CIS)/self-employment. Through our parent company, Workwell Group, we are able to offer a range of other fully-compliant working options such as limited company (PSC) contracting, PEO and international solutions.

The correct administration of business expenses for Umbrella employees

There are strict rules governing the administration of business expenses for Umbrella employees. At Crest Plus, we carefully review requests for Umbrella expenses and will advise your recruitment business on compliance.

The use of complex models such as “deemed employment” or those designed to avoid VAT or inappropriately benefit from National Insurance allowances.

Unfortunately, there always have been and always will be organisations that are prepared to take risks to make it look as if they can legitimately offer commercial advantages to workers and recruitment businesses by doing some fancy footwork with the standard deductions. Our view is that the rules are the rules, there should be no difference in take-home pay offered by us or the other good contractor payment companies – our competitive difference is our superior service.

Consequences of non-compliance

Directors are now criminally liable so should take an active interest in tax evasion prevention procedures. This may involve identifying the possible opportunities for tax evasion within the business; identifying which employees are most at risk of facilitating tax evasion; and ensuring individuals are given appropriate internal training and fully understand the seriousness of the new offences. It may also require the imposition of additional administrative processes in high-risk areas of the business to mitigate risk.

It should be noted that this risk could extend to your clients if it can be shown there were inadequate measures in place within their businesses to prevent tax evasion within their supply chain, especially where there would be an expectation of the hirer knowing something did not look right.

If found guilty, your company would face an unlimited fine (as a minimum this would be 100% of the tax evaded with aggravated or mitigating circumstances taken into account); company directors could face a criminal conviction and there could be ancillary orders such as confiscation orders. In addition, your company is likely to suffer long-term reputational damage.
In a nutshell, the consequences are severe. The good news is, compliance is a competitive advantage.

How are offences assessed?

There are three stages to assessing whether an offence has been committed:

  • Stage 1 : A criminal tax evasion by a taxpayer (either by an individual or legal entity) under existing law.
  • Stage 2: The criminal facilitation of this offence by a person associated with the company or partnership with a view to aiding, abetting, counselling or procuring the evasion of tax by the taxpayer.
  • Stage 3: If stages 1 and 2 are satisfied, the company/partnership will have committed an offence unless it shows that:
    • it has put in place reasonable measures and procedures to prevent the criminal facilitation of tax evasion
    • it was not reasonable in all the circumstances to expect it to have prevention procedures in place.

HMRC Guidance

HMRC has issued guidance to help businesses understand the types of processes and procedures which they might put in place to prevent associated persons from criminally facilitating tax evasion.

HMRC stresses that its guidance is intended to be of general application and applied in a proportionate way; it is not prescriptive or a one-size fits all document and what is classed as “reasonable” may evolve over time, and may differ from one company to another depending upon the nature of the work performed and the level of associated risk.


The HMRC guidance mirrors the 6 guiding principles in the Bribery Act 2010 and focuses on:

  • Risk Assessment – companies should undertake a risk assessment to determine the nature and extent of its exposure to the risk that its employees/agents may engage in the facilitation of tax evasion. The assessment should focus on the opportunities and means by which employees/agents may engage in criminal activity and consider what prevention measures may mitigate such risks.
  • Proportionality – prevention measures should be proportionate to the risk the relevant body faces and reflect the nature, scale and complexity of its activities.
  • Top-level commitment – senior management of the company/partnership should be committed to developing and implementing the prevention procedures.
  • Due diligence – companies should apply due diligence procedures to identify and respond to risks.
  • Communication – prevention procedures should be adequately communicated, understood and embedded throughout the company.
  • Monitoring and review – prevention procedures should be monitored and reviewed regularly, and necessary improvements made.
  • HMRC has made it clear that even strict compliance with its guidance will not necessarily be “reasonable” where a business faces particular risks that it fails to address.

It’s clear that temporary labour supply chains need enhanced measures due to the nature of their work and the increased opportunities which may arise to facilitate tax evasion, whether facilitation has been deliberate or has occurred due to slack prevention policies.

Read HMRC’s document: Failing to prevent criminal facilitation of tax evasion – government guidance on the criminal offences.

How we can help

It is essential that you have a documented assessment of the above risks including well-communicated policies and regular audits which are adequate to meet the expectations of HMRC.
At Crest Plus we have already assisted many recruitment businesses and some end hirers in addressing the above risks. If you would like to benefit from a free consultation in this area, please contact your Account Manager team on 01244 684700.

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