HMRC fraud team targets mini umbrella companies
HMRC is ramping up its activity against mini umbrella companies using both its civil and criminal powers to challenge use and curb abuse
HMRC’s Fraud Investigation Service has deregistered tens of thousands of mini umbrella companies which they believed were involved in exploiting the VAT Flat Rate scheme and the Employment Allowance.
Where investigations established that a business in the supply chain knew, or should have known, that there was fraud, HMRC has taken steps to deny other businesses in the same labour supply chain the right to recover VAT input tax.
Input tax is the VAT added to the cost when a person or business buys goods or services that have a VAT liability.
In 2017, the government introduced the trader of limited cost legislation after seeing a surge in the number of mini umbrella companies. This helped to remove a number of businesses setting up mini umbrella companies.
There is no standard mini umbrella company fraud model. Arrangements are constantly evolving as organised criminals try to hide their fraudulent activities from HMRC.
These criminals create multiple limited companies and only a small number of temporary workers are employed by each one. These are set up to enable fraud.
HMRC is working with trade bodies and other government departments to raise awareness of the mini umbrella company fraud model.
If your business is using or providing temporary labour it is your responsibility to undertake necessary and proportionate due diligence checks by checking warning signs, for example be clear who pays your workers and how they are paid, and check the credibility of the supply chain.
Story by Sara White from Accountancy Daily