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Umbrella Company Fraud
Published: Friday, May 3, 2024
We have prepared a lineup of news articles that delve into a range of criminal fraud cases we encounter. This week's spotlight falls on
Umbrella Company Fraud
Umbrella Company Fraud
Contractors, freelancers, recruitment agencies, and employment businesses amongst others often enlist the services of an 'umbrella company' for managing payroll, whether for their personal requirements or to pay temporary workers.
In this arrangement, the umbrella company assumes the role of the employer, administering wages via PAYE. This system grants workers flexibility and access to regular work, while relieving them of the responsibility of managing payroll.
While many use legitimate umbrella arrangements, there are those who exploit these arrangements solely for the purpose of committing fraud. Mini umbrella company fraud refers to a scheme where individuals or businesses set up a number of small companies to exploit the tax benefits. Umbrella company fraud is also not constrained by trade sectors, it can be found within supply chains wherever temporary labour is used.
The Potential for Fraud
Mini umbrella fraud seeks to deprive HMRC of revenue by the abuse of:
National Insurance Contributions
VAT Flat Rate Scheme
Employment Allowance
PAYE
There is a strong allure for those seeking to avoid paying the appropriate amount of taxes, by limiting the number of employees and turnover at a level where they can exploit financial allowances available.
Numerous miniature umbrella companies have been established with the sole purpose of evading their tax obligations. These companies employ only the bare minimum of workers required to meet the thresholds for minimising tax liability.
This deliberate misuse of mini umbrella companies was designed to mislead HMRC and create confusion. Its effectiveness is evident in the numerous reports from workers who find themselves receiving payments from unknown entities, prompting them to report this discrepancy to HMRC. HMRC's response has been to deregister tens of thousands of these mini umbrella companies and using both civil and criminal measures to penalise those accountable.
Where HMRC has established that any company involved in a supply chain knew or should have known of the fraud (under the ‘Kittel Principle’), that party may be liable for the tax loss caused by all participants within the supply chain.
How we help our clients
It is crucial for businesses to stay vigilant about associations and who they conduct business with at all times to avoid being inadvertently drawn into any form of fraudulent tax evasion.
KANGS
acts for many companies who have been targeted by HMRC and served with
VAT Assessments
under the
Kittel principle
as a result of a tax loss occurring in the supply chain featuring mini umbrella companies.
Our Tax team boasts extensive expertise in aiding clients th
rough
HMRC investigations and prosecutions
spanning several years. If you need advice or guidance, we would be delighted too here from you.
Telephone: 0333 370 4333
Email:
info@kangssolicitors.co.uk
We provide initial, no obligation, discussion at our offices in
London
,
Birmingham
and
Manchester
.
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Hamraj Kang
Kangs Solicitors
Country:
England, UK
Practice Area:
Criminal Fraud
Website:
kangssolicitors.co.uk
Phone Number:
020 7936 6396
Email:
hkang@kangssolicitors.co.uk
Fax:
N/A
Hamraj acts for corporate and individual clients in investigations brought by the major UK law enforcement agencies including the SFO, HMRC, FCA, NCA, CMA, CPS, BEIS, ICO, Trading Standards and a wide range of regulatory bodies. He has particular expertise in HMRC investigations and prosecutions including MTIC & VAT fraud, money laundering, tax & duty evasion and regularly conducts cases throughout the country. There are few solicitors nationally who can match Hamraj’s experience of complex multi-million pounds MTIC and VAT fraud cases as he acted in many such cases in his career. He has considerable expertise in the areas of money laundering, bribery & corruption and insider dealing, having been instructed by a number of PLCs and senior company executives on such matters. The work is often complex, multi-jurisdictional and necessitates overseas travel which has led to Hamraj working in numerous overseas jurisdictions. Hamraj advises corporate and individual clients both during and in the immediate aftermath of a dawn raid when quick, effective and incisive advice is required to protect the legal rights and reputation of the client. He has considerable experience of representing clients in interviews with all the leading law enforcement agencies including the SFO, HMRC and the NCA. He is admired for his novel tactical thinking and possesses a proven track record of guiding clients to a successful conclusion in many difficult and demanding cases. As a result of working on high profile and complex fraud cases, Hamraj’s client base is both national and international ranging from publicly listed companies to individual clients. Due to his expertise and experience in international financial crime investigations, Hamraj is also instructed in complex extradition cases often with a financial crime background involving allegations such as money laundering, wire fraud, bribery and corruption. He accepts instructions involving all jurisdictions but most notably the USA, Russia, CIS countries, India, Pakistan, Africa, the Caribbean, South America and the Far East. Civil Fraud & Asset Recovery In addition to criminal fraud, Hamraj advises in relation to civil fraud matters acting for both claimants and defendants. His clients range from large corporations to private individuals with the work often including early action and interim reliefs. The areas of work include: Cryptocurrency disputes The conduct of internal investigations on behalf of corporate clients Obtaining and responding to freezing orders Obtaining and responding to search orders Norwich Pharmacal orders Receivership orders The civil fraud and asset recovery High Court litigation for claimants and defendants includes allegations of fraudulent misrepresentation, breach of fiduciary and directors’ duties, unjust enrichment, unlawful means conspiracy, bribery, deceit, carousel/MTIC fraud, boiler room fraud and bogus investment schemes. Civil Recovery | POCA Hamraj is recognised by Chambers UK as a leading lawyer in the area of proceeds of crime and asset forfeiture, being one of only six solicitors ranked in Band 1 in the country. His work includes civil recovery proceedings under Part 5 of POCA such as Property Freezing Orders, Civil Recovery Orders and Account Freezing Orders. Hamraj is also able to advise in relation to Interim Freezing Orders and Unexplained Wealth Orders. HMRC Tax Investigations | Tax Tribunals There is often a considerable overlap between criminal and civil fraud proceedings and HMRC civil tax investigations. Hamraj regularly advises both corporate and individual clients in relation to HMRC civil tax investigations, VAT Assessments including Kittel Assessments as well as COP8 & COP9 investigations. The work includes representation before the First-tier Tax Tribunal and the Upper Tribunal in relation to VAT Assessments, Kittel VAT Notices, Direct Tax Appeals, Personal Liability Notices, Condemnation Proceedings and Excise Duty matters. Disciplinary | Regulatory | Sports Work Hamraj has represented a number of professionals facing criminal and regulatory allegations including accountants and other financial professionals, solicitors, doctors, dentists and pharmacists. He has developed an excellent understanding of the regulatory framework and codes of professional conduct governing the professions. In recent years, Hamraj has successfully represented a number of solicitors in serious criminal fraud prosecutions and achieved their acquittal which has resulted in a successful outcome in associated SRA disciplinary proceedings. Hamraj has represented many individuals from the sporting world (mainly football, cricket, horse racing and boxing) and is regularly instructed by a number of Premier League and Championship Football Clubs. Serious Criminal Work Hamraj also undertakes serious criminal work such as historic sexual allegations, murder, corporate manslaughter, drugs offences and serious driving offences, having acted in many high-profile cases of this nature. Clients include football clubs, members of the professions, company executives and public figures from the world of entertainment, politics, media and sport. Hamraj places the issues of confidentiality, privacy and reputation management at the forefront of his strategy when conducting cases. Matters are dealt with the utmost sensitivity and complete discretion. He always adopts a strong and proactive approach to investigations with the overriding objective to bring each matter to a successful and swift conclusion, and where possible, to avoid court proceedings and any adverse publicity for his client.
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