FCSA Accredited New Red Planet highlight Mini Umbrella Co’s

HMRC updated their Mini Umbrella Company fraud guidance on the 10th August 2022 with one tiny sentence – The additional sentence is as follows: “These are some of the signs to look out for, although should not be taken in isolation. Most mini umbrella companies will display most, if not all, of the signs in the following sections.”

Although this does not have as much of an impact on the validity of the previous guidance it has been included to highlight that only one of the signs could mean you are using a Mini Umbrella solution.

As mini umbrella companies are low down in the supply chain it may be challenging to spot them. You must be vigilant, especially where the employer of the worker is not the umbrella company you have a contract with. A good starting point is to complete regular due diligence checks.

A list of things to look out for are detailed below:

• 

  How to spot a Mini Umbrella

  Unusual company names

  Multiple companies are often set up around the same time and given a similar or unusual name. The registered address may not seem suitable for their types of business activities.

• Unrelated business activity

  The business activities listed on Companies House entries will often not relate to the services provided by the workers.

  

  How to spot a non compliant umbrella company

• Foreign national directors

  Foreign nationals who have no previous experience in the UK labour supply industry, are often listed as directors. They can replace a temporary UK resident director after a short period of time.

• Movement of workers

  Employees may be moved frequently between different mini umbrella companies.

• Short-lived businesses (also known as transient businesses)

  These individual mini umbrella companies have a relatively short lifespan (often less than 18 months) before being allowed to be dissolved by Companies House as they do not meet filing obligations. New mini umbrella companies will then take their place in the supply chain.

  You should notice this as you may find that you need to issue a new key information document to workers on a regular basis.

  Information from sources such as the Companies House register might help you to spot warning signs when completing your quarterly employment intermediary reports.

   

  

  HMRC

What HMRC is doing about mini umbrella fraud

HMRC’s Fraud Investigation Service is using both its civil and criminal powers to challenge those involved in mini umbrella company fraud and those facilitating it.

HMRC has deregistered tens of thousands of mini umbrella companies who they believed were involved in one or both of the following:

• exploiting the VAT Flat Rate scheme
• exploiting 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, HMRC 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. This reduced the number of mini umbrella companies.

HMRC has been working with and continues to collaborate with trade bodies and other government departments to raise awareness of the mini umbrella company fraud model. New Red Planet (FCSA Accredited) highlight Mini Umbrella Co’s and are in contstant consultation with the FCSA, who work closely with Government and HMRC on issues of this type.

If you have any questions about how to protect you and your workforce from Mini Umbrella Fraud – Contact New Red Planet who are an FCSA Accredited Umbrella Company and compliant with all HRMC laws and legislation.