The reason that “John” was employed in this manner relates to the way in which recruitment 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 exploit 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. Th e 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 t hen 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.
*Real names not used.
HMRC has issued some guidance on the topic of MUC fraud which confirms:
What MUC fraud is The impact of MUC fraud Warning signs – what to look out for when completing due diligence checks What HMRC is doing about MUC fraud Checks that can be applied to protect supply chains How to report potential fraud or tax evasion
The CIPP's Policy team would like to investigate potential fraud within Mini Umbrella Companies, and fraud more generally. If you have any feedback on this topic, please contact us at Policy@cipp.org.uk. All correspondence will be treated in the strictest confidence.
To ensure that you are protected from fraudulent practice, it is important to always check your payslip in detail and to question anything that does not look correct.
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Queen’s Speech delivered in the House of Lords in scaled -back ceremony 12 May 2021
On 11 May 2021, the Queen officially reopened Parliament, and provided an overview of what the Government’s priorities will be for the year ahead.
The Chartered Institute of Payroll Professionals
Payroll: need to know
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