FCSA calls on government to stop umbrella company cloning

The FCSA is urging government for a multi-organisational response to 13 contractor service firms being cloned on Companies House.

In a statement yesterday, the Freelancer and Contractor Service Association said its officials had already taken action to help “strike off the clones” and “pursue the perpetrators.”

But apparently, it isn’t enough.

“[We are] calling on government to…form a rapid response team consisting of The Registrar of Companies, HMRC, the National Crime Agency, and Nominet.

“[The aim is] to take down these fraudulent companies and prosecute and disqualify their directors as quickly as possible,” FCSA chief executive Chris Bryce told Contractor UK.

'Ignorance of Companies House'

Clarity Umbrella says 13 contractor service firms including itself have seen Companies House-registered ‘copycats’ try to fool the 13’s existing and prospective clients into sending them money.

“The worst thing is the ignorance [of the BEIS-run agency] to what is blatantly an attempt to target over a dozen companies, simply by making very minor name changes,” says Clarity’s Lucy Smith.

At the Freelancer & Contractor Services Association, CEO Mr Bryce agrees, describing the ease at which variants can be created, and formed, as the ‘situation that needs fixing.’

“Companies House processes permit companies with incredibly similar names – sometimes just a one letter difference - to be registered without any real checking and this can’t be allowed to continue.”

“Another real problem,” Mr Bryce added, “is that Companies House’ rules currently don’t allow for rapid action to strike off cloned companies. The process can take several months.”

'Sophisticated'

At the time of writing, much of the cloning is carried out to try to defraud the supply chain, notably by stealing the umbrella company’s revenue from the company’s agency partners.

Often, this involves the fraudster – posing as the genuine umbrella -- telephoning the recruitment firm to notify them of a change in banking details.

But “slightly more sophisticated” cloning is underway too, whereby the spurious brolly, with a clone website to boot, tries to engage legitimate contractors with offers of legally unachievable take-home pay, FCSA says.

'No social media footprint'

A red flag for contractors and agencies to note is that the genuine brolly’s clones (often there is more than one) will have been formed on Companies House within just a few days of each other.

The clones also have a director who the umbrella’s genuine partners won’t have heard of.

“Also if you check Companies House because you’re suspicious, none of the names of the directors of the cloned companies seem to have any social  media footprint,” says Ms Smith, clearly having turned detective because she felt the government agency wasn’t being proactive.

“And if the directors do actually exist, they will invariably be based in India, as it’s assumed by the fraudsters they can then sit outside UK jurisdiction. So legal recourse may be useless.”

Pending the government and Nominet’s reply to its call for coordinated action, the FCSA said individuals suspecting of a clone could check its website to see the genuine details of its member companies.

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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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