Policy and Research Officer
The Chartered Institute of Payroll Professionals (CIPP)
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There are a variety of different models and arrangements relating to MUC fraud, which are continually evolving and changing, but the activity that came under public scrutiny this month related specifically to the practice of abusing the employment allowance.
The employment allowance is offered to certain eligible organisations and allows them to offset a figure of £4,000 (2021-22) against their annual national insurance (NI) liability. It has been highlighted that certain recruitment agencies exploit the employment allowance by employing temporary workers through a variety of MUCs. Each MUC only hires very few workers and so each single company is entitled to the NI relief.
As a result, every business which places or uses temporary labour has been advised to be vigilant to fraudulent activity carried out by MUCs within their supply chain.
A fraudulent supply chain could ultimately result in financial and reputational damage to a company but will also mean that their workers do not receive the pay that they are entitled to. There are additional consequences for HMRC as fraudulent activity carried out by MUCs results in lower PAYE, NI and VAT payments.
There are several warning signs to watch out for in relation to MUCs. It can sometimes be difficult to spot these warning signs as MUCs are often low down in the supply chain. This is why those who engage with MUCs are encouraged to carry out frequent due diligence checks to ensure that they can spot these red flags and act accordingly.
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