HM Revenue and Customs has issued a warning to workers who could inadvertently be involved in a tax avoidance scheme.

The government department has warned workers, especially agency workers and contractors who are moved between umbrella companies, that it is their responsibility to check how much tax and National Insurance they should be paying. An umbrella company is a business often used by recruitment agencies to pay temporary workers and in most cases, workers will have their wages paid through PAYE by the umbrella company they are employed by. But HMRC has warned that some umbrella companies promote tax avoidance schemes by moving workers between companies that operate fraudulent schemes that don't follow UK tax rules.

According to the government, non-compliant companies will often claim that these tax avoidance schemes will allow agency workers and contractors to keep more of their earnings, but this isn't the case.

It can result in the company not deducting and paying the correct amount of tax and National Insurance contributions for workers, which means workers can then end up owing HMRC money or not receiving benefits they are entitled to.

In a post on X (formerly Twitter), HMRC warned: "Umbrella company warning!! If they say "we have too many people on our payroll" it means we're hot on their heels and they're moving their customers to a new company. Don't get caught out."

But HMRC says it is up to workers to check their employment contract and payslips for signs of tax avoidance, adding that workers should know exactly how much tax and National Insurance they should be paying.

HMRC said: "It's your responsibility to make sure that you know how much tax and National Insurance you should be paying. You may already be using an umbrella company that is operating tax avoidance or a fraudulent scheme, without knowing it.

"We use taxpayer data to identify and warn anyone who may be using an avoidance scheme. If we send a letter telling you that you might be involved in tax avoidance, you should check your employment details to make sure you are not.

"There are a number of signs to look out for to help identify whether you might be involved in tax avoidance. These can include (but are not limited to) your:

• employment contract
• payslip information
• salary payments
• schemes or promoters being known for tax avoidance."

If workers recognise any of the signs of tax avoidance they should contact HMRC to avoid building up a huge tax bill.

It adds: "It is always best to cooperate with us so that we can help you deal with your tax affairs. We offer a range of support to get you back on track and can help you avoid being caught out in the first place."