Who said crime doesn’t pay?

As part of today’s announcements the Chancellor increased the Employment Allowance by £,1000 bringing the amount to £5,000 per year. This change was well received by those who can claim it- businesses, charities, carers and support workers. This was championed by the FSB ( Federation for Small Businesses), however an unintended consequence is that unworthy recipients will also benefit from this announcement, which are called Mini Umbrella Companies (MUC’s) which operate FRAUDULENT schemes targeted at NMW workers. Whilst HMRC had started to clamp down on such operations, this is surely an own goal and someone at HMRC or HMT should have spotted this loop hole before the announcement and closed it. I wrote about MUC’s back in May 2021 and I am not sure that much has changed from our own intelligence and so it’s business as usual or shall we say better business than usual because the allowance has increased by 25% thanks to Rishi Sunak himself – an own goal I fear!

So what are MUC’s and why should you be concerned?

Mini umbrella company fraud creates an uneven playing field for those employment agencies and businesses who follow the rules and presents an organised crime threat to the UK Exchequer. The fraud is primarily based around the abuse of 2 government incentives aimed at small businesses – the VAT Flat Rate Scheme and the Employment Allowance. But this type of fraud can also result in the non-payment of other taxes such as PAYE, National Insurance and VAT “says HMRC

How do you spot a Mini Umbrella?

  1. There is no standard mini umbrella company fraud model and arrangements are constantly evolving as organised criminals try to hide their fraudulent activities from HMRC.
  2. These criminals create multiple limited companies and only a small number of temporary workers are employed by each one. These are set up to enable fraud.
  3. The structuring of the mini umbrella companies is facilitated by a promoter business (sometimes also known as an outsourcing business) which may have other linked businesses to support the operation. The creation of the mini umbrella companies and the complex layers of businesses within the supply chain help to facilitate the fraud. For more information read here MUC fraud


Agencies and Hirers, these schemes may help you to maintain a healthy margin, but you are stealing money from your contractors and the Government- who will want it back eventually. FD’s and MD’s, will be left holding all the risk.

All businesses are responsible for carrying out supply chain due diligence, if you need help our team of compliance and audit specialists at Pendragon Comply can investigate, assess any damage and advise on corrective action. Yes, it will cost money to fix the problem, but that’s got to be a whole lot better than losing your business.