HMRC & Umbrella Fraud

Yet again, the recruitment industry is in the headlines for the wrong reasons; alleged systematic tax avoidance on a massive scale. This is how HMRC has responded to a major investigation from the BBC and in-depth reports in The Guardian and Private Eye.

What mini umbrella company fraud is

There is no standard mini umbrella company fraud model and arrangements are constantly evolving as organised criminals try to hide their fraudulent activities from HMRC.

These criminals create multiple limited companies and only a small number of temporary workers are employed by each one. These are set up to enable fraud.

The structuring of the mini umbrella companies is facilitated by a promoter business (sometimes also known as an outsourcing business) which may have other linked businesses to support the operation. The creation of the mini umbrella companies and the complex layers of businesses within the supply chain help to facilitate the fraud.

If you are a business that uses temporary labour, you should be aware of the potential dangers of mini umbrella company fraud in your labour supply chain.

If you do not take reasonable care a fraudulent supply chain can lead to reputational and financial damage to your business, and your workers may not receive all they are entitled to. Mini umbrella company fraud also significantly reduces tax payments to HMRC including PAYE, National Insurance and VAT.

See the BBC report here

Extraman has campaigned against recruitment industry tax abuse for many years. All organisations that use agency staff should look very closely at how agency staff are paid. Knowingly or unknowingly, having "organised criminals" within a supply chain is a chilling thought. The reputational and financial consequences, as detailed above, could be catastrophic.

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