Call for evidence on umbrella companies echoed, as cloning spreads to comparison sites

Umbrella cloning is spreading to umbrella company comparison websites, in a criminal development likely to be flagged up in the replies to HMT’s still-open call for evidence.

Phil Pluck, CEO of the FCSA, says it represents a “new fraud” because despite the scammers still using the old bait of unachievable take-home pay, HMRC is now among the targets.

Specifically, the impersonator umbrella is posted to the comparison site and then, “once on board”, while workers seem to get paid, “we suspect the cloners are not paying the correct deductions to HMRC.”

'Could be the next big contractor sector scam'

“And these fraudsters also seem to be using the legitimate, cloned umbrella company’s VAT number, thus pocketing any VAT,” Mr Pluck told ContractorUK, further warning:

“This could be the next big contractor sector scam to emerge which yet again makes victims of both the compliant umbrella and the contractor, [but now victimises HMRC too].”

Lucy Smith of Clarity Umbrella, which has shared with ContractorUK the gist of its reply to HMT’s umbrella sector call for evidence, is advising contractors directly:

“These [clone] companies are cloning documents and asking for the bank details to be changed. This is feeding funds through to them so they can skim the tax, NI and VAT payments.”

“So do NOT change any bank details,” she posted, “without first calling the umbrella company direct on a known contact number.”

'Share and air'

Another respondent to the Treasury’s evidence call on umbrellas, Professional Passport, was asked last week for its top tip for contractors in 2022.

But after offering a five-part formula for contractors to remind themselves about what a bonafide umbrella is, the compliance group said responding to the call was its second best tip.

“The government…is keen to hear from [umbrella] contractors,” said the group’s CEO Crawford Temple.

“So I would urge contractors to share and air their views on umbrella working with the government so that a fair system can be put in place that protects contractors from being caught up in schemes that will punish them and their pockets significantly.” 

'Really important HMRC hears directly from workers'

Mr Temple isn’t alone in worrying contractors might not be coming forward in significant enough numbers to give evidence on umbrella companies to HMT before February 22nd.

“Many of your readers will work through umbrella companies… and probably will have encountered problems,” began one ContractorUK reader in an email to this publisher last week.

“I’d like to draw your attention to…[the Treasury’s call for evidence still being open]. It’s really important that HMRC hear directly from workers.”

'Keep your video off if you want'

Similarly, the Low Incomes Tax Reform Group is also hoping actual users of umbrella companies come forward about brollies – potentially in a video call to HMRC.

“If you don’t want to write in, but still want your voice to be heard, you can join a small group video call with some other workers and HMRC staff members  and tell HMRC about your experiences of working through an umbrella company.

“Probably [to be held] in the week of 24 January…you do not have to provide any details about yourself [to take part in the call], and can even keep your video off if you want.”

The LITRG continued by saying it has HMRC’s reassurance that tax officials are “not interested” in probing or investigating the personal tax issues of would-be participators to the video call, but is happy to hear about them.

'HMRC are late to the party'

Individuals and not advisers being specifically urged to come forward to try to help HMT sort the brolly sector may lead to more responses, as many advisers believe it’s simply too late.

“As ever, HMRC are late getting to the party”, posted Tony Margartielli of e-magazine HMRC Enquiries, Investigations & Powers.

 “Bad [brollies] are a blight and need to be weeded out and stopped, and employers need to be held responsible if they pass their responsibility to their employees onto an umbrella company”.

'15 years too late'

Graham Webber, tax director of WTT Consulting says the ultimate solution for HM Treasury is to draw up a definition of umbrella companies.

“Until you do that, all talk of regulation and action is meaningless,” he reflected. “HMRC has done the right think in asking for evidence but….it's 15 years too late.”

However, initiatives are still being put in place to help workers who use umbrella companies.

'A lot behind the scenes'

For example, just before Christmas, JobsAware agreed a logo-sharing scheme with umbrellas which will now advertise the charity’s free ‘safer work’ resources to contractors.

And from HMRC’s side to help (also just before December), the department unveiled an avoidance risk-checking tool.

But reactions to the Revenue's tool can be similar to reactions to the HMT evidence-call.

“There is definitely a lot of work [now] being done behind the scenes…with EASI and HMRC, regarding [umbrella] regulation and what this may start looking like,” said Orca Pay Group CEO Robert Sharp. “But this doesn't detract from the fact that regulation is beyond overdue, and urgently needed.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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