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Five Companies Wound Up Following Tax Avoidance Case

It’s been clear for some time that Government’s attention is focussed on the recruitment industry and enforcement activity is increasing. We’re seeing more and more agencies taking great care about who they work with as the potential consequences of a non-compliant supply chain get ever more severe and more likely. We believe this can only be a good thing for the recruitment industry in the long term.

As an example of this, the government recently published this article about the winding up of five companies by the insolvency service, following confidential enquiries by Company Investigation. The companies in question were:

A&T Active Recruitment (UK) Limited (A&T) – recruited temporary workers and offered them a choice of being employed directly by them, or trading through their own limited company (PSC).

KSA Associates (UK) Limited (KSA) – provided bookkeeping and other services to the PSCs

EZY Backoffice Limited (EZY) and Temp Payroll Services Limited (TPS) – provided payroll services to the PSCs.

B Diminish Limited (BDL) – was one of 211 PSCs set up under the scheme.

While the investigation was confidential and we have little detail about its findings, or the exact reasons these five companies were wound up, some details are available.

For example, we know that many of the workers had no meaningful knowledge of the companies they were supposedly directors/employees of, and some were not even aware of their appointment as directors.

Alex Dean, Chief investigator at the Insolvency Service said, This was a complex enquiry into a sophisticated scheme involving systematic abuse of the corporate regime and where the named directors of the PSC companies often had no idea of the scheme they were involved in. Those operating such schemes should be aware that the Insolvency Service will intervene when appropriate to stop them.”

Perhaps most damning, enquiries found that KSA, EZY and TPS were the main beneficiaries of the scheme, rather than the PSCs or temporary workers, suggesting exploitation as well as tax avoidance.

A&T, KSA, EZY and TPS all share directors, so all were clearly aware of the scheme. However, it’s worth noting that neither A&T (the recruiter at the start of the chain) or BDL (one of the PSCs set up under the scheme, not sharing directors with the other four companies) are included in that list of the scheme’s “beneficiaries”. It isn’t clear to what extent A&T were involved, or if they made additional profit as a result of the scheme, but the consequences for them and the PSC were the same, and they are no longer trading as a result.  

For recruiters and contractors alike, this example proves:

  • There are still non-compliant companies operating within our industry and the consequences of working with them could be severe.
  • Government are undertaking compliance activity and they are taking strong action against non-compliant companies. Anyone breaking the rules should expect to be caught.

If you have questions about supply chain compliance or if Orange Genie can help in any way, please call our expert team on 01296 486483 or email info@orangegenie.com

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