In addition, businesses can obtain status by way of completing the online CEST tool. HMRC state that they will stand by the results given by the tool providing the answers given have not been contrived. Results achieved through contrived arrangements, designed to get a particular outcome from the service however will not be stood by and this would be treated as evidence of deliberate non-compliance, which can attract higher associated penalties.
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HMRC warns of potential dangers to businesses of Mini Umbrella Company fraud 5 November 2020
Businesses that places or has use of temporary labour should be mindful of the possible dangers presented to their business by Mini Umbrella Company (MUC) fraud found within their supply chains.
MUC fraud also significantly reduces tax payments to HMRC including PAYE, National Insurance and VAT, but not only that, a fraudulent supply chain lead to reputational and financial damage to a business and workers may not receive all they’re entitled to. End users or providers of temporary labour have the responsibility to be clear about who ultimately pays the workers and how they are paid. Ensuring this, is the only way to protect a business from becoming ensnared in MUC or other supply chain frauds.
Most MUC arrangements are believed to be fraudulent, therefore, it would be prudent to ensure that the warning signs are noticed to protect businesses.
What is Mini Umbrella Company Fraud?
The MUC model is an employment intermediary model which presents an organised crime risk to the UK Exchequer. The fraud is principally based around the abuse of two Government incentives which are aimed at small businesses – the VAT Flat Rate Scheme and the Employment Allowance. However, this type of fraud can also result in the non- payment of other taxes such as PAYE, National Insurance and VAT, reducing vital funding for the public services that are relied heavy on. MUC fraud is not restricted to specific trade sectors and can be found in supply chains wherever temporary labour is used. In its plainest form, the MUC fraud model involves splitting up a workforce into hundreds or thousands of small, limited companies which are set up solely to enable the fraud. The workforce is mostly a temporary workforce who previously in the past, would have been paid by an employment agency or an umbrella company. The structuring of the MUCs is enabled by a promoter business, which is sometimes also known as an outsourcing business, that may have other linked businesses to aid the operation. The creation of the MUCs and the intricate layers of businesses within the supply chain, help to enable the fraud. For employees, who are often unaware to these arrangements, the use of this model can result in the loss of some employment rights. Workers in MUCs are usually unaware of who their employer actually is, and they can be moved frequently between MUCs to help maximise profits from the fraud.
How you can spot Mini Umbrella Company fraud and protect your business?
There is not a benchmark MUC fraud model and arrangements are continually evolving as organised criminals are attempting to hide their fraudulent activities from HMRC, however, there are some common characteristics which businesses might come across during regular due diligence checks. Information from sources such as the Companies House register might aid to spot warning signs when completing quarterly Employment Intermediary Reports or the Key Information Document for Workers.
Signs to look out for include: •
An unusual company name – Quite often, multiple companies are set up around the same time which tend to have a similar or unusual name. These companies will also often be registered at an address which does not seem appropriate for the types of business activities.
The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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