Bills of Exchange Tax Payment Scam UK 2026/27

HMRC does not accept Bills of Exchange, promissory notes or similar private instruments as payment of UK tax liabilities. HMRC published a warning after seeing promoters market these arrangements, particularly to recruitment and temporary-labour businesses.

The sales pitch may describe a Bill of Exchange as a lawful alternative to paying PAYE, National Insurance, VAT, Corporation Tax or another HMRC liability. It may also claim that the arrangement avoids the 2026 umbrella-company PAYE rules. HMRC's position is clear: using a private instrument does not settle the tax debt, and the business can still face the unpaid liability, interest and penalties.

What is the Bills of Exchange proposal?

HMRC describes Bills of Exchange schemes as arrangements promoted as an alternative way to pay tax liabilities. Other promotional labels may include money orders, promissory notes, Public Trusts, Merchant Law or negotiable instruments. The label is less important than the proposed outcome: the promoter asks the business to use a private document instead of making a recognised payment to HMRC.

A Bill of Exchange can have uses in other commercial or legal contexts. That does not make it an accepted method of settling a tax liability. The relevant question for a business is whether HMRC has received an approved payment against the correct reference by the deadline. HMRC says that it has not accepted these private instruments as payment of tax.

Why recruitment and temporary-labour businesses are targeted

The warning identifies recruitment and temporary-labour sectors as particular targets. These businesses can handle substantial PAYE, employer National Insurance and worker-payment flows, and a promoter may present the scheme as a way to reduce the cost or administrative burden of a labour supply chain.

Some promotions also claim that the arrangement avoids the umbrella-company legislation that applies to qualifying payments made from 6 April 2026. HMRC says that claim is not true. The 2026 rules concern PAYE responsibilities in labour supply chains that include an umbrella company or another third party supplying labour. Replacing an HMRC payment with a private instrument does not remove the underlying PAYE obligations or change who may be liable under the labour-supply-chain rules.

Warning signs in a proposal

Treat a proposal as high risk when it:

• promises that a tax debt can be discharged without an ordinary bank, card, Direct Debit or other official HMRC payment;
• cites the Bills of Exchange Act 1882 as if it automatically binds HMRC to accept the instrument;
• claims that HMRC has accepted or “not challenged” the arrangement for other customers;
• says a barrister, King’s Counsel or private adviser has approved the payment method;
• says an umbrella-company or agency PAYE liability disappears when the instrument is issued;
• asks for a fee, membership payment or commission before the tax liability is supposedly settled; or
• tells the business to ignore a payment demand, tax reference or HMRC compliance letter.

These signals do not require the business to decide whether the promoter has committed an offence before taking protective action. Stop the proposed payment arrangement, preserve the documents and obtain independent advice from a qualified tax professional who is not connected with the promoter.

What to do before signing or sending anything

If the business already used the scheme

Contact the business's tax adviser and HMRC promptly. Confirm the outstanding liability, the actual deadline, interest and any late-payment exposure. Do not wait for the promoter to reassure the business that HMRC is processing the instrument.

If bank details, Government Gateway credentials or personal information were shared, secure the accounts and contact the relevant bank or HMRC security channel through independently verified contact details. Keep the promoter's documents because they may be relevant to the tax correction, payment investigation or fraud report.

The business should also review whether workers, agencies or end clients were affected. From 6 April 2026, HMRC can recover certain PAYE underpayments from relevant parties in labour supply chains involving umbrella companies. A private payment proposal does not transfer or erase that exposure.

Valid payment methods and record keeping

The correct payment method depends on the tax type and HMRC service. GOV.UK payment guidance lists recognised options such as online banking, Direct Debit, debit or corporate credit card for the taxes and liabilities covered by the relevant service. Check the exact route, payment reference and processing time before the deadline.

Keep:

• the HMRC statement or demand showing the liability;
• the tax type, payment reference and due date;
• proof of any accepted payment and the date it was made;
• correspondence with the promoter and any intermediary;
• the advice received from an independent professional; and
• records of any correction, interest payment or HMRC contact.

Keep a dated copy of the final HMRC balance after each correction and payment. Store it with the underlying tax-period reconciliation. This supports later adviser review.

For wider scheme-risk context, read the HMRC named tax avoidance schemes guide. For a different kind of HMRC fraud signal, read the HMRC text-message verification guide. Those pages do not make a private instrument valid, and this guide does not determine whether a promoter or arrangement is legally classified as tax avoidance.

Reconcile the liability after a disputed payment

Start with the tax type, not the promoter's description. PAYE, employer National Insurance, VAT, Corporation Tax and Self Assessment each have their own statement, reference and deadline. Download or save the HMRC statement showing the amount due, compare it with the business ledger and identify any payments that HMRC has actually allocated. If the statement still shows a balance, treat that balance as unpaid until HMRC confirms otherwise. A promoter's invoice, certificate, screenshot or private receipt is evidence of what the promoter claims to have done, not evidence that HMRC has credited the tax.

Prepare a short incident schedule with the date the scheme was offered, the people involved, the tax period, the amount, the instrument number, any fee, the intended HMRC reference and the date of every contact. Mark each amount as paid to HMRC, paid to a promoter, returned, disputed or still outstanding. Give the schedule to the accountant and independent adviser. Do not destroy or alter the original correspondence, even if the proposal later appears obviously invalid; the sequence may be relevant to correcting a return, explaining late payment or reporting suspected fraud.

If the deadline has passed, ask HMRC about the outstanding amount and payment options immediately. A business that cannot pay in full may be able to discuss a Time to Pay arrangement or another route, but that is a direct HMRC process and depends on the tax and circumstances. Do not treat a request for more time, an appeal or a dispute about the amount as permission to substitute a private instrument. Ask HMRC what remains due, which reference to use and how interest or penalties will be handled.

Keep the labour-supply-chain question separate

A recruitment agency can face two different issues: whether workers were paid under the correct PAYE rules, and whether a payment made to HMRC was valid. The Bills of Exchange warning concerns the second issue, but fixing the payment does not by itself prove that the payroll treatment was correct. Review the worker contracts, agency chain, umbrella-company arrangements, payslips, PAYE submissions and responsibility clauses independently. The rules applying from 6 April 2026 can affect who must account for PAYE when an umbrella company is in the chain; a private instrument does not transfer that statutory analysis.

Do not backdate payroll entries or reclassify a tax payment as a fee merely to make the ledger balance. Correct the underlying return or payroll submission through the relevant HMRC process, and document any adviser recommendation. Where workers have been underpaid or tax has been deducted incorrectly, obtain employment and tax advice together because a tax correction may have payroll, worker-communication and client-contract consequences.

A safe response checklist

Pause before signing, paying a promoter or sending an instrument. Save the proposal in its original form, verify the claim against HMRC guidance, and ask whether the promoter is authorised to handle the relevant payment. Use the tax account to identify the real balance and the official reference. If fraud may be involved, report it through the appropriate official channel and tell the accountant exactly what was paid, when it was paid and to whom. This creates a factual record without accepting the promoter’s legal description.

Frequently Asked Questions

This page is a fraud and payment-safety guide, not a substitute for confirming a business's tax liability or obtaining professional legal advice. Use HMRC's current payment and labour-supply-chain guidance before acting.

Official sources

• HMRC: Tax fraud warning — attempts to use Bills of Exchange to pay HMRC
• GOV.UK: Pay your tax bill by debit or corporate credit card
• HMRC: PAYE rules for labour supply chains that include umbrella companies
• HMRC: Named tax avoidance schemes, promoters, enablers and suppliers