UK Spring Statement 2025: Criminal Tax Rules and Staffing

Criminal Tax Anti-Avoidance: The New Frontier for Staffing Supply Chains

The UK government is sharpening its focus on tax compliance within staffing supply chains. In her March Spring Statement, Chancellor Rachel Reeves announced rigorous anti-avoidance measures with an ambition to close the tax gap and raise an additional £1 billion. The new restrictions specifically tighten the net around users and suppliers of contingent workers, especially those operating through umbrella companies and managed intermediaries.

Summary: A More Aggressive HMRC Approach

Contingent worker users and suppliers must prepare for:

• The criminalisation of promoting unreported tax avoidance arrangements
• Enhanced HMRC investigative powers
• Introduction of universal stop notices and Promoter Action Notices (PANs)
• Potential unlimited fines and custodial sentences for non-compliance

This marks a significant departure from previous regimes, where civil liabilities were the primary deterrent.

Main Developments

A Shift from Civil to Criminal Liabilities

Historically, schemes escaping the Disclosure of Tax Avoidance Schemes (DOTAS) regime only incurred civil penalties. The government's new intent is clear: those who promote or facilitate tax avoidance schemes—including hirers, staffing agencies, umbrella companies, and tax advisers—now risk criminal prosecution if they fail to comply with DOTAS.

Key points:

• Criminal liability will extend to anyone responsible for designing, organizing, or marketing such schemes.
• The proposals directly reference arrangements that artificially reduce Income Tax and National Insurance liabilities, such as loan schemes or payments bypassing PAYE.
• Innocent errors and good-faith contracting generally remain outside the scope, but structured or marketed avoidance arrangements trigger liability.

Enhanced HMRC Powers

Two pivotal consultations underpin the new approach: 1. Closing in on promoters of marketed tax avoidance 2. Strengthening HMRC’s powers to tackle tax advisers who facilitate non-compliance

Proposals include:

• Criminalisation of DOTAS non-compliance with unlimited fines and up to two years’ imprisonment.
• Universal stop notices: enable HMRC to halt schemes quickly.
• Promoter Action Notices (PANs): compel businesses to stop providing services linked to avoidance promotion.
• Expanded information request powers to identify individuals behind disguised arrangements, including connected parties in the supply chain.

Who Is a ‘Promoter’ Under the New Measures?

The net is wide. A ‘promoter’ can include:
• Tax advisory firms
• Personnel or hirers assisting in scheme design or promotion
• Intermediaries signing workers up to tax-effective models
• Insurers or indemnity providers attaching conditions linked to avoidance structures

Relevant individuals and companies must reassess their practices, documentation, and contractual relationships. Any participation in marketed avoidance models increases exposure.

Spotlight on Stop Notices and Information Powers

Stop notices and PANs are designed to disrupt avoidance scheme proliferation. Failure to comply will be a criminal matter. HMRC is also seeking the ability to demand information from those associated—or merely suspected to be associated—with such schemes, excluding legally privileged material.

Tackling Staffing Supply Chains with AI

HMRC will leverage artificial intelligence to analyse large data sets, improving detection speed and efficacy against avoidance promoters. This signals a step-change in enforcement reach.

A US-Style Whistleblower Scheme

A new whistleblower programme, built on US and Canadian templates, will reward informants reporting substantial non-compliance in large organisations. Success depends on HMRC’s resourcing, but the intent to act is clear and should not be underestimated.

More Prosecutions Expected

Enforcement will be robust. The Criminal Finances Act 2017 (CFA) is referenced in the government’s direction, and the first corporate prosecutions for failure to prevent tax evasion may appear soon. Larger staffing businesses, banks, and umbrella companies tied to supply chains should ensure defensible procedures are in place.

Insights from Osborne Clarke

“Compliant staffing and umbrella companies have long suffered from unfair competition with non-compliant suppliers. The new measures—especially the criminalisation of DOTAS non-compliance—will level the playing field and deter aggressive avoidance.”

– Jack Prytherch, Partner, Head of Tax Disputes, UK

“The breadth of what constitutes a ‘promoter’ will require a fundamental review by all participants in contingent worker supply chains. No one should assume they are outside HMRC’s scope.”

– Frances Lewis, Head of Contingent Workforce, UK

What Should Businesses Do?

• Review current recruitment, payroll, and contracting models for hidden tax avoidance risk
• Seek specialist legal advice for any off-payroll arrangements
• Ensure robust compliance procedures to defend against criminal liability under DOTAS and CFA
• Stay alert to HMRC updates and upcoming umbrella company regulation in April 2026

Looking Ahead: Unresolved Issues and the Path Forward

While the new regime targets mischief in staffing supply chains, the absence of a clear legal definition of self-employment means some exploitation opportunities remain. The government’s intention, however, is unmistakable: aggressive pursuit and elimination of abuse in the contingent labour market.

Next Steps

• Audit your supply chain for exposure to new rules
• Train staff to recognise and report avoidance arrangements
• Sign up for HMRC and industry updates to remain compliant

For tailored legal assistance, connecting with an expert in tax disputes or employment law is strongly advised.