The UK taxpayer is paying millions of pounds to mini umbrella firms
More than 40,000 Filipinos have been hired to work as fronts for British firms in schemes that have cost the UK “hundreds of millions of pounds” in lost revenue. Over 48,000 of these businesses have been established in the last five years, according to BBC Radio 4’s File on four. Subcontractors have hired some employees at G4S-run NHS Covid test centers as part of this program.
G4S stated that HMRC was informed when this was brought to their attention. The firm noted that it was taking steps to ensure that all agency employees were hired directly rather than through a subcontractor. “John” – not his real name – was searching for work at the onset of the pandemic. He saw an advertisement for workers at his local Covid testing site operated by G4S as the pandemic spread.
He called an employment agency called HR GO, got the job, and began working as the second wave of infections struck. He says the work was hard, but the pay was decent – £10 an hour. It wasn’t until he received his pays lip that he realized something was wrong. G4S and HR GO, the organization that hired him, did not pay him.
He was instead billed by an organization he had never heard of before. He looked it up on Companies House and discovered that it had only been founded a month before starting work and that its director was from the Philippines. Something “sketchy” was happening, and he began to believe. So, why was John used in such a complicated manner? Employers must contribute 13.8 percent of their workers’ wages in National Contributions if they receive more than £170 a week.
However, File on 4 discovered that recruiting companies use John’s employment to reduce their National Insurance bill. It operates by taking advantage of the government’s Employment Allowance, which provides a £4,000 annual discount on National Insurance premiums per organization. The bonus was intended to entice businesses to hire more employees.
On the other hand, recruitment agencies take advantage of the allowance by recruiting temporary workers through a network of mini umbrella companies, or “MUCs.” Since each MUC has a small number of workers, it is eligible for tax relief. Arrangements like this will cost taxpayers hundreds of millions of dollars in missed tax revenue per year.
HMRC warned against them in 2015, saying that schemes to take advantage of the Employment Allowance were “too good to be true” and “simply did not work.” G4S claims that all insurance premiums are included in their payments to agencies and that all employees operating on G4S contracts pay their insurance contributions correctly.
HR GO stated that they are confident that the way they have handled their supply chain is “legal and following HMRC Threat Response Unit guidelines on supply chain management.” Over 48,000 “mini umbrellas” were made in the UK in the last five years, each following a specific design, according to File on 4.
After a short period, they resign as directors and are replaced by a Filipino director. “Emma,” who did not want to be identified by her real name, lives in the southeast of England and claims
she was at her lowest point when she participated. “I had just broken up with my son’s father at the time. He also abandoned me in the apartment, leaving me with all the bills to pay. Since I had a six-month-old boy, I only had a part-time job, “she said. “I started doing it solely for the sake of paying the bills.” Emma joined the program four times and was paid £150 each time for “fronting” six businesses.
Her sole responsibility was to upload letters from HMRC and Companies House that she got in the mail to an online site operated by WRS Formations. She would resign as the owner of the six companies shortly after that and begin all over again. A Filipino director will be assigned to “front” these companies on the same day she resigned. HMRC can find it more challenging to pursue companies with directors based in other countries.
Mini umbrella businesses have sprouted up all over the United Kingdom
Tens of thousands of Filipinos from some of the country’s poorest regions are being recruited via Facebook and word of mouth, according to File on four. The only requirements for the work are an internet connection, a cell phone number, and email address, and a government-issued photo ID.
They must go through an online portal operated by Compass Star Limited to review and sign the documents of the British business. One Filipino manager, who asked not to be identified for fear of losing his job, said he joined last year to help support his wife and son. It was “actually straightforward,” he said, and the extra money was “a huge help.” It helped him pay his bills and cover his regular expenses.
However, he couldn’t recall the organization’s name for which he is the director, and he has no idea what the company does. Thousands of Filipino-owned businesses, including supply teachers and Coved testers, are then used to hire staff in the UK. WRS Formations and Compass Star Limited did not react to the BBC’s letters. “It’s not like this is a minor case of tax evasion, like when the local taxi company fails to declare any of the fares it collects. This is large-scale tax evasion. He said, “HMRC should take further initiative, in our opinion… and the Conservative government should have been dealing with this for a long time because many people have raised the alarm over the years, “she said HMRC said it was using both criminal and civil forces to combat “MUC fraud,” and that it had recently deregistered over 22,000 mini umbrella companies suspected of being involved in such schemes. It claims to have made some arrests and taken action to recover unpaid tax from companies that knew or should have learned about supply chain fraud.