A recent report in the mainstream media links a high-profile name in the recruitment industry to an aggressive tax avoidance scheme which used mini companies with directors in the Philippines to pay workers.
Furthermore, it seems that some 2000 of these companies were simultaneously liquidated after HMRC came calling, minimising the tax man’s chances of recouping millions back into the public purse.
This is the latest case to cast a shadow over the umbrella industry – only recently we drew attention to three umbrella company directors being jailed for a huge VAT payroll fraud. Read full story
We’ve also talked about the promotion of contractor loan schemes disguised as legitimate umbrella companies and claiming to let workers take home up to 90% of their income. Read more about this
What all of these cases have in common is that recruitment agencies and end clients were usually blissfully unaware that the suppliers they were entrusting to pay their workers were defrauding HMRC.
When such avoidance schemes come to light and HMRC takes action to close them down, agencies and end clients are left wide open to reputational damage and potential financial liability. All because they don’t know what is happening further down their supply chain.
As a recruiter, the last thing you want is for your business’s good name to be dragged through the mud in the same breath as a tax scam, damaging your relationships with clients and candidates in the process. But how do you ensure your house is in order?
Ask yourself these 3 simple questions of every supplier on your PSL:
Do you know that the company you are paying money to is the same company which is paying your workers?
Have you got confirmation that they are not contracting with any entity outside of the UK?
Have you got evidence that the supplier is paying the correct VAT, PAYE tax and NI to HMRC?
If the answer to any of these is NO, it’s time to tighten up your PSL.
While it is in your best interests to carry out sufficient due diligence and demand transparency when you are selecting suppliers, we know that this is easier said than done and takes significant time and resources away from your everyday business.
The Freelancer and Contractor Services Association (FCSA) has essentially done the hard work for you. Julia Kermode, CEO of the FCSA has this advice for agencies:
“If you are a recruiter you can minimise risk when partnering with firms by only choosing FCSA Accredited Members who are rigorously tested annually for adherence with our Compliance Code, which does not allow models with offshore directors.”
The FCSA take a “belt and braces” approach to granting accredited membership and very few umbrellas make the grade. In fact, out of 280+ umbrella companies currently operating in the UK, only 8 are accredited members of the FCSA, of which Liquid Friday is one. Look out for the orange logo.
You never know what monsters may be lurking deep in your supply chain. If publicity around recent HMRC crackdowns is making you have niggling doubts about the integrity of your PSL, we can help.
We work with hundreds of leading recruitment agencies and know exactly what you should ask for when you are vetting umbrella suppliers. We can even provide you with a template documents to ensure you are asking the right questions. Get in touch today