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HMRC published guidance on 30 November 2023 addressing employment businesses' responsibilities when working with umbrella companies in their supply chains.

The guidance explores the employment and tax laws that employment businesses must comply with when they use umbrella companies to employ workers that are supplied to their clients. It points out that workers can find being employed by an umbrella company confusing and working for a non-compliant umbrella company can cause them problems. HMRC states that supporting workers can mean that employment businesses will receive fewer queries, improve compliance in their supply chain and help protect their business's reputation.

The guidance details the penalties employment businesses may face if they are found to be involved in a non-compliant supply chain, as well as the steps that employment businesses can take to protect themselves by understanding their supply chains and the action they should take if they discover non-compliance. It recommends that employment businesses should take (and record) regular, reasonable and proportionate due diligence on the umbrella companies they use, maintain easy-to-understand supply chains and ensure staff are trained to identify and report non-compliance under clear procedures.