HMRC warns businesses of mini umbrella fraud danger
Days after the BBC reported around 48,000 mini umbrella companies created in the past five years to reduce recruiters’ national insurance contribution, HMRC has issued new guidance to warn businesses of the potential dangers of fraud in their supply chain.
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Oh goody, a new acronym - MUC.
HMRC's Titanic will always lose in a contest against the iceberg......
Sorry to sound doom and gloomy, but this looks like the onus / blame will fall on the employer to be penalised for someone else breaking the law, just like the CIS / UTR scheme. Surely HMRC and Companies House should carry out due diligence before registering and issuing NI and UTR`s.
HMRC call it fraud
Becoming very difficult to trust HMRC view of tax.
If it is fraud, then HMRC should show us by putting the fraudsters in prison. HMRC know who organised the 'fraud'.
This has been going on for years.
Did the BBC spoil a big HMRC SWAT team sting operation?
No
HMRC put up a pathetic scare tactic notice on their website because as usual they have been caught napping.
22,000 deregistered? really? deregistered from what? HMRC has the power to execute a living company? Co house do as HMRC say so?
And no action. Not even a tiny little tax tribunal.
Are there 22,000 prosecutions pending?
So HMRC issue guidance to warn businesses.
Are they going to actually take any action or just sit in their big fancy offices (or WFH) and issue guidance?
Sorry Richard, but why are you happy to regurgitate HMRC's words without questioning them?
"HMRC also confirmed that it had deregistered more than 22,000 mini umbrella companies." Really? Since when did HMRC have the power to de-register a company at CH? I suspect they mean they closed PAYE schemes - which is a start but not as news-worthy (and very much locking the stable-door after the horse has bolted, without worrying the MUCs).
"The tax authority reminds businesses that as an end user or provider of temporary labour, it’s their responsibility to be clear who pays the workers and to check the credibility of the supply chain." Quite correct. But if HMRC are now issuing guidance to businesses on how to do these checks, then surely it behoves HMRC to carry out those checks themselves before agreeing to register a PAYE scheme (which is seen as an imprimatur by HMRC)?
And I doubt that EA (whilst the most immediately visible element to this story) is the primary reason for this fraudulent modus operandi. Whilst not privy to the thinking of the people behind it all, it seems likely (and HMRC appear to think this) that the majority of fraud will come from good old-fashioned "you can't catch me" when it comes to tax collection - in this case by trading from the Philippines. So, at the risk of going full circle, why is HMRC allowing (almost enabling) PAYE schemes to be registered to these companies?
HMRC are not the bad guys - but they have some very serious questions of competence to answer.
The article insinuates that the smaller Umbrella Companies are the dodgy ones. In my experience recently,2020/21, I have had self assessment clients from the bigger umbrella companies and I couldn't believe how the taxes where being calculated. I wish I could put some names here!!
I suppose BBC owns the big ones so they are trying to discredit the upcoming guys!!
BTW, I own a mini umbrella and our calculations are spot on.
Of course most of us are working at the bottom of this food chain, where our one-time contractor clients are now being told that they have to acept employment through an umbrella company and have no idea what that company is until they receive their payslip.
Once again the Government is wilfully sidestepping the issue of the widespread use of contractors, esp in Government and council contracts, specifically to avoid employment obligations and the related costs. The whole mess of IR35 and umbrella companies only exists because no-one in Gov or Treasury wants to resolve this issue -I suspect because it suits them not to.
I have had a few discussions on this with local MPs, and frankly I don't think they have a clue what's going on!
This is the problem when HMRC try a 'one size fits all' approach to force everyone to be a PAYE employee, just because it's suits them, not the worker.
Schemes are created to get round restrictions, that inevitably lead to circumventing and ultimately and fraud.
What happened to the old concept of being entitled to arrange your affairs to (legally) pay the least tax ?
They keep forgetting that being self employed or working via a Ltd company does not give you the same benefits or protection of being an employee, so the (minimal) tax saving are the compensation for that.
A lot of workers are happy to take the risks and lose the benefits, because it give them flexibility that suits them, and some go on to grow into full blow large employers and businesses themselves in the process - so don't penalise and restrict them.
If only tax and NI were combined into one tax that would start to make these schemes less viable and certainly less tempting. As it is, I believe if the principal employer contracts for work with one large contractor then it is that primary contractor who is responsible to ensure the law is adhered to and is responsible for ensuring any subcontractors it uses make good payments of tax, pension, holidays etc. The penalties should be sufficiently large for the primary contractor to decide it is not worth it. The employee at the end of the food chain should not lose out.