Data recently published by the UK wide Companies House shows that more than 800,000 companies were created in the year to 31 March 2021. That is a record, with maybe 150,000 more companies than usual being formed in this period. Most people might not get excited by this statistic. I do, and for good reason, which is that it is exceptionally hard to think of a legitimate reason for this increase. What I do not see it as is any indication of an increase in entrepreneurial activity in the UK.
Think about it: the last year has seen a massive reduction in overall economic activity. The last time this happened, in 2008, there was a significant reduction in the number of new business incorporations.
This time there has been no equivalent decline. There has instead been a significant increase in incorporations.
There are three possible explanations. One is that people have given up on employment and have really decided to set up on their own. But, that does not seem to be reflected in employment data, and directors of companies are employees, even when paying themselves minimum wages. It's not clear that there is such a spillover.
Second, it is just possible that all of this is planning for an upturn, and that most of these companies have yet to do anything. But if so, why did this not happen in 2008 onwards? This seems extraordinarily unlikely in that case.
Then there is the third option, and that is that this is related to a massive increase in fraud, of at least two types. One type was incorporation for the sake of fraudulently applying for a government backed loan. There is widespread belief that this has happened.
Then there are reports of the use of obscure companies being used to make payment to those in outsourcing contracts. These reports mention the use of multiple, and continually changing companies as employers. The reports also mention the use of multiple companies to abuse the so called employment allowance, which provides a national insurance saving for small employers, plus the VAT flat rate scheme.
How likely is it that many of the excess companies created over this period were used for the purposes of multiple forms of tax abuse? No one can of course know for sure. We can't also know which of these companies will ever declare any of the liabilities that they really owe. Nor will HM Revenue & Customs. They have literally no way of knowing for sure which companies operate false PAYE schemes in the UK, nor which should be VAT registered or not, let alone which might have a liability to corporation tax. They do not even know which companies have a bank account as an indication that they might even be trading.
Add to that the fact that Companies House has no remit to enforce company law, and consequently appears to make absolutely no effort to do so. Their standard response to a company whose directors make no effort to comply with regulations is not to investigate and prosecute. It is to strike the company off the register - and so remove the evidence that there has ever been wrong doing. A scheme better designed to facilitate fraud could not be imagined, but we in the UK have it.
So what do I think the growth in company numbers indicates? Fraud, is my answer, in a word. And a great deal of it. And none of it ill be investigated, let alone prosecuted, because let's also be honest and admit that that government has also destroyed the capacity of our court system where those charges with an offence can now wait for years for their case to come to trial.
We live in a lawless, fraudulent country managed by a government intent on providing opportunity for corruption. And apparently people do not care. And yet this is the basis for long term economic collapse. But what does that matter to those with short term abuse in mind?
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“We can’t also know which of these companies will ever declare any of the liabilities that they really owe. Nor will HM Revenue & Customs. They have literally no way of knowing for sure which companies operate false PAYE schemes in the UK”
HMRC have been aware of so-called Mini Umbrella Company fraud for quite a while now and have published warnings and given updates. For example, in an update published by HMRC last December (Employer Bulletin issue 87) , they said they had closed down many thousands of such attempted PAYE frauds and that a number of arrests had been made in November – presumably after many months of investigations. There have been other well publicised arrests over alleged ‘furlough fraud’.
How could HMRC be doing this if they have “literally no way of knowing” what’s going on?
“none of it ill be investigated, let alone prosecuted”
Quite clearly you are wrong in claiming that. If you are going to comment on these things, you should try and stay aware of developments. There’s plenty of information on MCU and other attempted fraud and HMRC’s work to combat it available on the HMRC website.
They know it is happening
They do not know who is doing it
If they did it would not be happening
It is
You are very clearly wrong here and I am right
A memo does not stop abuse
“They do not know who is doing it”
How do they know who to arrest then? As someone much closer to what is happening in the real world I can assure you that HMRC are taking positive action over these attempted frauds. Sat on your sofa in your home, you have absolutely no idea of what is happening at HMRC.
Merely saying “you are wrong and I am right” in the face of obvious and reported actions by HMRC to combat this does not make you right, it just makes you look silly.
Come on then, list the prosecutions
Show me the actions taken by Companies House
Where is there anything but a press release
This is rampant and that is as far as they have got
And bluntly, I have substantiated my claim with data and you have not
Unless you post your CV, with evidence,I will entirely reasonably assume you are another troll providing excuses for abuse
I have the comfort of knowing I have always been right in this issue
And the discomfort of knowing nothing is ever done about it
And they have closed all the local VAT offices where new VAT registration applications were scrutinised before registering them
Indeed
Compare how many people are employed to investigate Benefit fraud and how many who are supposed to investigate tax evasion/corporate fraud and there’s your answer as to what the priorities are. (Note this has been the case under all recent governments, not just Tories).
None of the tax evasion gets the same MSM treatment and highlighting as so-called Benefit fraud. The people are fed propaganda to suit those in power. MSM owners being one group most open to tax evasion by non-resident owners.
I wonder what the Taxpayers Alliance, IEA, Adam Smith Institute, and the other right-wing think tanks will think or do about this?
Radio 4 File on four did an expose on this a few days ago . It seems a good example of how the BBC runs their investigative journalism well in the background, and well away from day to day news reporting, where it would shed light where its needed (eg on corrupt PPE and Test and Trace contracts) – but of course that is no longer the BBC’s mission.
https://www.accountancydaily.co/mini-umbrella-companies-set-avoid-tax https://recruiter.co.uk/news/2021/05/bbc-report-highlights-sham-mini-umbrella-companies
Thanks
I missed that
Slightly off the direct subject, I looked at the legislative proposals for the next term and found that they could be divided neatly into chumocracy and control based. Examples:
Freeport (chumocracy)
Planning (chumocracy)
Adult learning ( chumocracy)
Voter ID (contol)
Judicial review. (control)
“Free” speech at university (control)
Policing (control)
Fixed term parliament (control)
Mayoral voting (control)
Seen in the light of this clear government perspective, the lack of action over company formation and significant corrective action over abuses, I would place this in the “chumocracy” column. When do you think the UK will become a failed state at this rate of progress?
Soon
Its been failing since 1979 – if not before.
Voter ID = Chumocracy
Rumours are that the *hales group are in the running…
This report in economic crime may be on interest
https://rusi.org/commentary/getting-economic-crime-plan-done-why-economic-crime-matters-johnson%E2%80%99s-%E2%80%98global-britain%E2%80%99
They have described it as a National Security issue, quite rightly in my view.
We keep voting for the Tories despite the fact that it has made three catastrophic decisions. It botched a bank bailout during the financial crisis of 2008, which launched it to power, which set the stage for the second catastrophic decision, austerity – because all those bad debts had been shifted onto the public. The government, telling people the country was now “poor,” began a vicious program of cuts to basic public institutions. That led to the third catastrophic decision – Brexit. Because as austerity bit, people really did grow massively, suddenly poor – and now a scapegoat had to be found for their woes, which turned out to be, funnily, weirdly, Europeans.
The conservatives plan to make Britain a mini-America, a brutal place, with no functioning public institutions or social systems etc. Now here’s the problem, and it’s a big one. Brits keep voting for them. Not a little bit. But in massive landslides to the point where Labour has been wiped out. Despite destroying Britain with austerity, Brexit, cronyism, corruption, and sleaze, enjoy a tide of support that seems unstoppable – at this point, they’ll easily be in power for the rest of this decade which should give them a chance to do even worse because they are thinking most of us are careless or with no functioning minds for empowering them.
We the Brits, created the Tories as the Tories did not create themselves. They come from us, so we are all responsible for this mess.
The Tories did not bail out the banks
I have to point that out
Derek
Who is ‘we’?
I was a teenager when Thatcher came in and right away there was something about her I did not warm to (maybe because I saw my morning milk taken away from me as a kid); when I saw the first privatisations I thought ‘Aye up – here we go’. It was like watching another country within our country begin to take over.
The Tories are actually now a Neo-liberal party – the old Tories – patrician but also aware of being in the public eye – also took being in charge seriously, and as you say were part of the established social class order in this country – home grown indeed.
The Tory Neo-liberals however were made elsewhere – post war Europe and America (where it was far easier to grab everything that you can for yourself from native Indians and other prospectors) – in response to the horror of that war and the rise of the State thereafter in its attempts to capitalise socially and economically on that war.
The Neo-libs are a strange lot and I can tell you that they were not made here. But they are very good at growing their influence and strangling heterodox ideas about anything.
Neo-liberalism is the equivalent to me of knotweed in all areas of our lives – philosophy, economics business etc.
Neo-liberal knotweed is an invasive foreign species that needs to be wiped out.
The truth of the matter is that a lot of people simply do not vote because there is nothing to vote for. All our politicians seem to like and tolerate this neo-liberal thinking ‘knotweed’ in our midst.
But what the people need is something that politics in this country has failed to deliver: something to wipe out neo-lib knotweed. An alternative.
‘We’ have not made neo-liberalism. And it is our opposition politicians who are culpable – not he British public in my view at least. What we are seeing is a failure of opposition politics in particular. Simple as that.
We have endured the Tory neo-libs but I don’t think we created them. And isn’t it funny how many Neo-libs come from comfortable backgrounds?
Pilgrim,
Labour’s opposition is not good enough for us to the point we are happy to keep the Tories, the destroyers of the UK, in power just to teach Labour a lesson on how to be a better opposition. “Labour bad opposition vs Tories UK worst destruction”. Which is worse? The answer is clear, that’s why I keep saying the problem is us, the Brits, whether both you and I vote Labour or not because we are all responsible for the rescue of the UK from further destruction.
You stated that the reason why the Tories keep winning because many people are not voting but why is it that Labour is not winning? It must be that, excluding people who do not vote, that the number of those who vote the Tories is higher.
I know why they keep winning and Hartlepool is a perfect example. It is because Labour it is not as nationalistic, xenophobic, aggressive and foolish enough to appeal to these guys. That’s why they keep voting the Tories.
I do not agree with your claim, although these are issues
The big problem is Labour have no big ideas
Sorry I was wrong here Richard. It was Gordon Brown, Labour.
Typically Neo-liberal: as Steve Keen states, all the neo-libs just like to see money; knowing how that money came to be (base, credit, laundered, criminal etc.,) is of no the concern to any of these reductionist idiots who – as Mirowski confirms – ‘promote ignorance’.
@PSR
“Neo-liberalism is the equivalent to me of knotweed in all areas of our lives — philosophy, economics business etc.”
Great metaphor and spot on!
And Labour doesn’t realise it – never mind the voters…
Why thank you Peter.
I’m a housing developer by trade (social) and we know all about knotweed. Awful stuff.
In my line of work there are certainly a large number of small companies in the mix that dissolve, etc and then re-establish a new company doing exactly the same thing and often from the same premises. Much of what I see looks very suspicious. This continual change should be investigated.
To register a company the checks should not be unlike those that apply when you buy a house. There should also be a register, if not public, at least accessible to the relevant authorities.
It has to be public
Limited liability creates moral hazard for us all
I am not questioning the probability that many/most/all of the 800k companies may well have been created for dubious purposes. What got me wondering is this part:
“Then there are reports of the use of obscure companies being used to make payment to those in outsourcing contracts. These reports mention the use of multiple, and continually changing companies as employers.”
How do they get a bank account (to make payments). I am a director of one Uk company & I know that getting (or even changing) a bank account is a 24 carat pain in the arse. Perhaps some bank are in on the fraud? 800k companies will need 800k bank accounts. Either my experience wrt banks is atypical or some banks are happy to give fraudsters a free ride.
The bizarre fact is that U.K. banks do not have to report which companies they act for to HMRC
I wrote a bill to require this in 2014, for the late Michael Meacher MP
The government opposed it
Labour tried to amend a finance act to make it a requirement and failed
Mike – once a person knows how the system works it becomes quite easy to open bank accounts – at least that’s my take. It is clear that banks do not know their customers – they make it difficult for ‘little old ladies’ with no passport, driving licence etc., but readily seem to allow fraudsters to get bank accounts.
I often wonder that the reason banks don’t seem to properly tackle fraud is because they know that they don’t know who their customers are.
From todays Grauniad, Scottish Conservative Leader said this on ITV’s Peston
They can’t cite any evidence of [electoral fraud being a problem] because I don’t think there’s ever any evidence to cite. I think in terms of this particular part of the Queen’s speech, I think it’s total bollocks, and I think it’s trying to give a solution to a problem that doesn’t exist, and that makes it politics as performance.
And I think that given where we are and the year we’ve had, we’ve got real problems to solve in this country, and the idea that this is some sort of legislative priority I think is for the birds.
Whoops, Ruth Davidson of course
Why does the UK not regulate company formation agents / corporate service providers / trustees and so on, as is the case in some jurisdictions ? I’ve always been puzzled by that.
Because economic crime has always been a speciality of the City of London and its agents
Am because so has not paying tax been seen as a social achievement
Good point well made. I think it’s highly likely but it’s a shame we can’t somehow find proof.
And while I’m here (just coz I’d want to know if it were my article) there’s a typo/words transposed in:
“offence can now wait for years four their case to come to trial.”
The Uk , and I suspect many other countries who offered financial support for business is not the only one possibly a victim of fraud. In Canada we had a program where business who had experienced a drop in income (30% I believe) could claim financial assistance in order to keep and pay employees. news trickling out right now has found that large successful companies have used the money to pay out bonus, raised their stock prices, even companies that were on the point of bankruptcy have claimed money and in their case the employees had already gone. Hedge funds have benefitted! Our national newspaper (The Globe and Mail) is covering the story but is finding it difficult to track down the actual companies because the information has not been collected in an easy accessible form. Sound familiar? I don’t know if more companies have been formed just to access the funds but its probably likely.
‘It leads to another question. As MMT is supposedly how modern economies actually work (even if they deny it) and therefore the Gov. can access money in a much freer way than was posited when supposedly it came from taxes and the budget had to be balanced are we running the risk of such uncontrolled profligacy on the part of Gov that we are in effect out of control?
BTW am reading “Kleptopia” by Tom Burgis. While I don’t follow all the arcane ins and outs of global financial crime it reinforces the desperate need for Gov. worldwide to get a handle on money and where it goes but they don’t seem really interested.
Depressing to know we are not alone…
Re your MMT question, the answer is ‘yes’, that is the risk
And ‘yes’ too to your last comment
Correction to Derek Mabrouk.
I share your outrage, but it is not the “Brits” or British that keep voting for the tories, it is the English. Other parts of Britain do not vote for them in anything like the same way.
Claire,
Most of them do. It cannot be all.
Derek, not only do the non English parts of the UK not vote heavily for the Tories, there are quite a few of us English who can see them for what they are, and don’t vote for them.
You are quite right that, at over 40% in the last election, far too many do, but please don’t damn the rest of us by association. The real reason they keep winning elections is English politics; that is, its the voting system, stupid. And the utter idiocy of the Labour party in (a) not getting rid of FPTP when they had a massive opportunity to do so in 1997, and (b) arrogantly refusing to cooperate with other non Tory parties in forming electoral pacts whereby only one progressive candidate stands in elections.
Only when, or if Labour stops being so stupid and tribal will we get anywhere.
Only a minority of the English vote Conservative. That can win parliamentary majority for sure, but:
* Millions of eligible voters are not registered.
* A third of those registered stayed away in 2019. Turnout was about 67%.
* Even in England, the Conservatives gathered just 47% of the votes in 2019. But that secured 345 out of 533 seats (almost 65%).