Umbrella Companies Under Fire: HMRC Tribunal Issues £1.6m Penalty in Landmark Enforcement
In August 2024, we wrote about HMRC Spotlight 64, a targeted warning aimed at employment agencies and the risks associated with umbrella companies operating outside of tax and employment regulations.
That article outlined how tempting offers from third-party payroll providers – promising increased take-home pay and streamlined admin – can mask serious tax avoidance concerns.
Now, in a case that confirms HMRC’s words were more than just guidance, the First-Tier Tribunal has issued a £1.6 million penalty to umbrella firm Moir Management Services Ltd, marking one of the most high-profile enforcement decisions in recent years.
This ruling should be considered a critical alert to agencies, contractors, and umbrella companies alike: HMRC is no longer just issuing warnings – it is acting.
What happened: Moir Management Services and the tribunal decision
In November 2025, HMRC secured a penalty of £1,596,800 against Moir Management Services Ltd following a First-Tier Tribunal decision (HMRC v Moir Management Services Ltd, TC09681).
The case centred on the company’s failure to disclose a notifiable arrangement involving an alternative payment model and its relationship with an offshore entity, Jarvis International Ltd, based in Mauritius.
According to the tribunal, Moir operated two types of payment solutions:
- A standard PAYE model
- And a second, referred to as the “annuity-based payment model” – also described as the “Jarvis Solution.”
HMRC argued, and the tribunal agreed, that the annuity-based model qualified as a notifiable arrangement under sections 306–307 of the Finance Act 2004.
Moir failed to disclose the scheme to HMRC and did not respond adequately to pre-disclosure enquiries issued in 2020 and 2023. Tribunal Judge Bailey concluded that Moir “did not have a reasonable excuse” for its non-compliance and had failed to cooperate over several years.
The judge determined that the penalty should be set at the maximum level due to the prolonged failure, lack of cooperation, and the need to deter similar conduct.
Moir has been granted 56 days to appeal the decision.
What this means for employment agencies and payroll providers
This case is significant not just for the financial penalty, but for the broader implications it carries for those involved with umbrella company arrangements.
HMRC’s Spotlight 64 was clear: the agency intends to pursue not only the direct operators of tax avoidance schemes, but also those who promote, enable, or facilitate such arrangements.
In the Moir case, the tribunal specifically addressed the question of whether the company had played a promotive role in a notifiable arrangement. Its conclusion? Yes.
This is particularly important for employment agencies that may refer workers to umbrella companies without always understanding how those companies operate.
As demonstrated here, a lack of direct involvement or intent does not shield you from liability if you are considered to have enabled a scheme.
Understanding notifiable arrangements: Why Moir’s model raised flags
Under the Finance Act 2004, “notifiable arrangements” refer to tax structures that are designed or marketed to produce a tax advantage, and which meet certain hallmarks requiring disclosure to HMRC. Moir’s “annuity model” was judged to fall into this category.
In the tribunal’s assessment, the scheme enabled workers to receive a take-home pay of up to 83% of gross income – a significant increase over standard PAYE arrangements, even after accounting for expenses.
The scheme used two entities: Moir, based in the UK, and Jarvis International Ltd, based in Mauritius. While individuals were onboarded by Moir, they entered employment contracts with Jarvis.
The tribunal found that Moir had explicitly advised individuals that payments made via the annuity structure “were not income” and therefore not subject to tax.
Evidence used at the tribunal
In one cited example, Moir advised a worker via email that funds from Jarvis “are not to be declared” and “hence you not being taxed on it.”
The tribunal considered this language to be significant. It concluded that the payments formed part of the individual’s overall remuneration for work performed and that presenting them as outside the scope of income tax and National Insurance mischaracterised their true nature.
This treatment was central to the tribunal’s finding that the arrangement was notifiable and should have been disclosed to HMRC.
Offshore entities and payment complexity: A familiar pattern
The use of an offshore company (Jarvis International Ltd in this scenario) was another significant factor in the ruling.
Offshore umbrellas or intermediaries have long been on HMRC’s radar, and their involvement often raises immediate compliance concerns due to transparency, jurisdictional limitations, and the complexity of tracing payments.
In this case, individuals were led to believe they were working under a UK-based umbrella model. However, the real engagement, and the majority of payments, came from a Mauritian company with no direct UK reporting obligations.
This lack of transparency, coupled with unusually high net income claims, is a common trait in what HMRC now refers to as “disguised remuneration schemes.”
Key risks for agencies using umbrella firms
This case should prompt every employment agency to re-examine how it engages with umbrella companies.
Risks are no longer limited to contractors or directors of the umbrella firms – referrers and facilitators may now be exposed. Some of the potential consequences include:
- Financial penalties: if found to have enabled a notifiable scheme.
- Reputational damage: especially where worker relationships are harmed.
- Commercial consequences: such as termination of client contracts or exclusion from preferred supplier lists.
Even if your agency is not directly handling payroll, referring workers to high-risk umbrellas – particularly those offering uncommonly high take-home pay or complex payment structures – could expose you to regulatory scrutiny.
How to stay compliant: Action steps for agencies and contractors
With enforcement now in full flow, it is crucial to take preventative action, not just react to enquiries. Here are some practical steps:
- Audit all current umbrella company relationships. Scrutinise payment models for transparency and compliance.
- Avoid “solutions” involving annuities, loans, grants, or capital advances. These are often red flags.
- Request complete payslip breakdowns and confirm PAYE compliance. There should be no difference between what an agency sees and what a contractor receives.
- Steer clear of offshore arrangements. If an umbrella has connections outside the UK and cannot clearly explain their structure, consider alternatives.
- Maintain due diligence records. Document any checks you make on the umbrella companies you refer to workers.
- Educate your workforce. Contractors should be made aware of tax risks associated with complex pay models – many participants in such schemes report being unaware of the implications.
Conclusion: Spotlight 64 was the warning – this is the proof
The Moir Management Services case marks a turning point; what was once speculative risk is now the first high-profile enforcement following Spotlight 64. For employment agencies and umbrella companies alike, the message from HMRC is clear: non-compliance is no longer tolerated, and ignorance is no defence.
If you are unsure about your current umbrella relationships or concerned about past referrals, now is the time to act. Proactive compliance is far less costly than reactive investigation.
Do you need support?
If you’re concerned about the risks of working with umbrella companies or need assistance reviewing your agency’s tax compliance, get in touch. At Wilkins Southworth, we help clients stay ahead of changes like these – and navigate the future of tax, whatever form it takes.