Contractors’ recruitment consultants are seeing the first signs of HMRC enforcing the Criminal Finances Act of 2017 as they begin to receive demands from the tax body. These consultants work for staffing agencies to negotiate contracts, screen candidates and draw up shortlists of candidates for their clients to interview.

The Freelancer and Contractor Services Association (FCSA) said that the consultants received incentive payments from several suppliers. There was no tax paid on this income.

According to the FCSA, the failure to declare what the consultants received, which may include items such as vouchers and other benefits, could result in a breach of the tax evasion law which came into effect last September.

Senior managers of these staffing agencies should be concerned because, even if their members did not know about the incentive payments or were not directly involved in receiving them, the agencies could still be liable for tax.

More worryingly, the FCSA said that the agencies targeted by HMRC may only be the tip of the iceberg, as it appears that some could also be receiving incentive payments from accountants.

The association warned agencies that if their members receive money, vouchers or any benefits-in-kind from an accountancy provider or umbrella company, then they must treat it as taxable income.

The FCSA added: “In order to protect the supply chain partners from an unexpected tax bill…appropriate tax [must be] paid on any incentives paid to recruitment businesses or their staff.”