File on Four appear to have discovered a serious payroll fraud on Government (eg our) revenues. This will be played out on Tuesday evening at 8pm.

From the bones of the story, available here, Anna Meisel and Angus Crawford have uncovered yet another iteration of the offshore umbrella employer fraud, but this time exploiting the financial easements put in place by the Treasury to combat the impact of COVID-19 on small employers.

This is not a victimless crime.

The BBC claims that more than 40,000 people from the Philippines have been recruited to front British companies as part of schemes costing the UK “hundreds of millions of pounds” in lost taxes.

The scam involves recruiting Filipinos with no credentials other than access to the internet and a smartphone to front up umbrella companies small enough to exploit exploiting the government’s Employment Allowance – (an annual discount of £4,000 per company on National Insurance contributions), but numerous enough to make disreputable recruitment companies a small fortune.

Of course the worker is not to know until he sees his or her payslip and finds the employer , not the UK recruiter but a company in the Phillipines set up specifically to exploit the COVID regulations.

We will wait to see whether any of  these companies are complying with auto-enrolment regulations (unlikely) and how many eligible jobholders are missing out on pensions and other rights. As with previous offshore umbrellas, niceties such as employment rights, don’t seem to get a mention.

I know that many of this blog readers are experienced payroll experts and will probably be aware of these bad practices, but my question is how they get into the supply chain of some of the organisations mentioned in Meisel and Crawford’s articles.

There are governance issues here and what is worrying is the example given involving Group 4S and the NHS.  In the headlong rush to win contracts, it is only too easy to cut corners on the sourcing of staff.

Let’s hope that HMRC can close down as many of these mini-umbrellas as possible by taking away their registration at Companies House and let’s hope that they are assisted in this by the organisations who have let them into their service chains.

This is not a victimless crime and we will all pay the cost of its perpetration, I will be listening to file on four on Tuesday night with interest.