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Mini umbrella firms – fraudulent practice adopted by some that is costing the UK millions 11 May 2021 BBC Radio 4’s File on 4 has revealed that it has identified over 48,000 Mini Umbrella companies that have been set up over the past five years, which have been opened and operated at a cost of hundreds of million pounds in lost taxes within the UK. Staff working at NHS Covid test centres run by G4S have been impacted by this practice, where they have been employed by subcontractors under this type of scheme. G4S notified HMRC as soon as the issue was identified and is currently reviewing procedures to ensure that all agency workers are employed directly and not through a subcontractor. The report looks at the case of “John” *, who was searching for a job. He noticed an advert for vacancies at his local Covid testing site, which was run by G4S and opened in response to the outbreak of coronavirus. He contacted HR GO, an employment agency, and was successful in securing the job. Upon receipt of his payslip, he identified that something was not quite right, as he was not being paid by G4S or HR GO, but by a company he had not heard of. Upon researching the name on Companies House, he discovered that the company had only been set up a month prior to him starting the job, and that the director was from the Philippines. “John” began to think that something untoward was going on. The reason that “John” was employed in this manner relates to the way in which recrui tment agencies operate where they are attempting to fraudulently reduce their National Insurance (NI) bill. Ordinarily, employers pay 13.8% in NI on employees’ NIable earnings once they earn more than £737 per month. However, recruitment agencies can explo it the Employment Allowance (EA) of £4,000 by employing temporary workers via several Mini Umbrella Companies (MUCs) and claiming the NI relief available from the EA through all of them. G4S has confirmed that payments it makes to agencies include all relevant insurance contributions, and that the individuals working on G4S contracts pay their NI contributions correctly. HR GO also stated that they had managed their supply chain in line with guidance on supply chain management provided by HMRC Threat Response Unit. The 48,000 MUCs created in the UK appear to follow a specific pattern – they are incorporated with a British director, who has been recruited using private groups on social media (e.g. Facebook). They then resign as directors after a brief period and a Filipino director is subsequently selected to take their place. The report also refers to “Emma”*. She signed up to a scheme four times, receiving £150 each time for “fronting” six companies. Her sole task was to upload letters received by post from HMRC and Companies House to an online portal and would, not long after, be required to resign as director of the six businesses and then start all over again. As “Emma” resigned, a Filipino director would instead be appointed. This is because it can be more complex for HMRC to investigate companies with directors outside of the UK. The research carried out by File on 4 highlighted the fact that thousands of Filipinos ae being recruited into these positions via Facebook and word of mouth. If they have an internet connection, mobile phone number, email address and ID document then they are eligible for the roles. They are required to review and sign the British company’s documents through an online portal. The report claims there are thousands of companies that operate in this way, and employ workers in the UK, including supply teachers and Covid testers. The practice, unfortunately, appears to have become more prevalent throughout the course of the pandemic.
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