Safe to say if you’re running a construction business, you know the pressure to keep overheads low is constant.
But lately, a dangerous trend has been making the rounds, marketed as a “shortcut” to managing your tax liabilities.
In essence, it’s being pitched as an easy way to use “Bills of Exchange” to settle debts with HMRC. But on 13 May 2026, HMRC issued a formal tax fraud warning regarding this type of arrangement.
We’ll explain everything you need to know about this here. But in a nutshell our strong advice is:
If any payroll or umbrella company suggests this to you, run a mile.
To be crystal clear: HMRC does not accept Bills of Exchange, promissory notes or similar private instruments as a valid form of payment for tax liabilities. Ever.
So WTF are “Bills of Exchange” Anyway?
If you’ve always felt your life is too short to worry about what Bills of Exchange are anyway, let’s give you the brief no bullshit rundown and then explain what this scam actually is.
A Bill of Exchange is basically just a private, written order used in business to demand payment from someone at a future date. Historically, they acted like a kind of “IOU” or a substitute for cash in large trade transactions.
But legally, they are classed as strictly private contracts between two parties. This means because they lack the guarantee of a bank, they have no legal standing. They cannot be used as “legal tender” for settling tax debts with HMRC. Think of them as a personal promise to pay, which HMRC, surprise, surprise, HMRC isn’t a fan of.
In other words, it cannot and will not accept a Bill of Exchange in place of actual cash.
The Magic Isn’t Real
Promoters of these schemes might use fancy language about “sovereign citizens,” “public trusts,” or “merchant law” to convince you that they’ve found a legal loophole to wipe out your tax debt.
They may even falsely claim that their methods have been approved by King’s Counsel or that they’ve successfully dodged our old friend, the new umbrella company legislation introduced in April 2026.
Don’t buy it. These schemes are nothing more than a ruse designed to extract fees from you while leaving you with the original tax bill. Plus the interest and heavy penalties HMRC is going to wallop you with.
Why This Is Your Problem
Cue people saying: “But I’m just the agency or the contractor. It’s the umbrella company who’s the one handling the payment.”
Unfortunately, that’s not how HMRC sees it. If an umbrella company uses these “bills” instead of real money, your tax liability remains unpaid.
When the inevitable happens and HMRC comes knocking, they aren’t going to just chase the shell company that’s already disappeared. They look for the most solvent party in the supply chain. Which (we hope) is you: the agency or the main contractor.
By getting involved in these schemes, you’re essentially handing your financial security to a third party who is playing a very dangerous game with your business’s future.
Stay Safe
So what should you do to make sure you don’t get caught up in this scam?
- Trust the standard channels: HMRC only accepts payment through its official, established methods.
- Do your due diligence: If a payroll provider offers a way to “avoid” standard PAYE or reduce liabilities through “alternative payment mechanisms,” it is almost certainly a scam. So treat it as such.
- Seek independent advice: Never rely solely on the “guarantees” provided by the scheme promoters themselves. If you’re in any doubt, ask us.
If you suspect you’re already caught up in one of these arrangements, don’t wait for an audit. Contact HMRC to make a disclosure as this is the only way to get back on the right track before enforcement action begins.
Anything unclear?
Give us a call and we’ll do our best to clear it up for you. We’ve always got your back.