Check, act, and review – pertinent advice from HMRC on the importance of supply chain due diligence

On 13 May 2021, HMRC issued yet more guidance for businesses on how to mitigate risk in the labour supply chain.

This latest guidance document “Advice on applying supply chain due diligence principles to assure your labour supply chains. (Updated 13 May 2021)” re-emphasises to businesses such as recruitment agencies and employers of temporary workers the “significant legal, financial and reputational risks” that a business could face should they fail to undertake proper due diligence on the integrity of their supply chain.

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HMRC offers best practice examples of what a business can do to minimise risk in their supply chain by adhering to the principles of Check, Act, and Review:

  • Check: Know your own risk – legal, financial, tax and social obligations, and those of your suppliers.
  • Act: Carry out robust due diligence on your suppliers. If risks are identified do not ignore them, act to mitigate or remove the risk completely.
  • Review: Effective due diligence needs continuous monitoring and review.

And, in line with HMRCs warning about the significant consequences of failing to conduct proper supply chain due diligence, this publication goes on to provide examples of financial penalties that HMRC can impose on businesses in the event of being found to be non-compliant, or in the worst-case scenario, legal action that can be taken against them.

Commenting on the significance and importance of HMRCs guidance document, FCSA Chief Executive, Phil Pluck said: “The FCSA very much welcomes this guidance document being published by HMRC; it re-enforces some of the key messages that we as an organisation and our member firms have been conveying to the labour supply chain for many, many years.

“Labour supply chain due diligence is vital, now more than ever as we see increasing numbers of contractors moving into the umbrella model following IR35, and the rise we are seeing in unscrupulous payment intermediary providers and scams that they promote.”

“Whilst independent due diligence checks remain important, we would like to remind our supply chain partners that all FCSA Accredited Member firms are subject to rigorous checks and reviews by independent and regulated assessors.

“What’s more, these checks and reviews have not only been done at no cost to an agencies or employers business, but have been undertaken by specialists in taxation, employment law, and the temporary workforce sector; skillsets that are not always readily available within businesses or without significant cost.

“We often say ‘we’ve done the checks for you’ and we really have, so when coupled with agencies or employers own due diligence checks, engaging the services of an FCSA Accredited Member will provide peace of mind that their supply chain is as robust as it can be” added Phil.

 

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