A TEMPORARY employment agency has gone into liquidation owing HM Revenue & Customs (HMRC) £58 million in unpaid tax.
Edinburgh-based Employ-E, a division of Legitas Group which is also in liquidation, is owned by lawyer David Allen, who is reported to own a golf course and mansion house in the Borders.
Employ-E had about 60,000 low-paid temporary workers on its books, who it supplied to recruitment agencies throughout the UK.
The real question here is, how could that have happened? How could HMRC have reached the point where it cannot chase that much tax? How limited are resources is this is the case?
There is also another question, which is, of course, where is the money? An agency should have been reimbursed all costs including tax. How could it lose that much money?
In the case of both questions surely HMRC should have been on top of this? If not I can only put it down to under-resourcing,
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This question has puzzled me also Richard, but to suggest that it’s simply an under resourced public body is trite. This is situation has occurred during all political administrations.
Employing more public servants may improve the situation; then so could employing the present public servants more effectively. However, no political administration has been successful in putting either of these ‘improvements’ into effect.
Which does not mean it could not be done
Hopefully RTI will bring this to light sooner. Those in my sphere say RTI does not stand for Real Time Information but Route To Insolvency. It will find many people out as they should no longer be able to play the game of using HMRC for cash flow management.
In particular I think we will see more football clubs going into administration.
I completely agree that under-resourcing is still an issue, but at least HMRC will have contemporary information rather than becoming aware of the level of liabilities maybe over a year after the event.
Perhaps the tax bill wasn’t apparent until HMRC enquired into the PAYE situation?
Rather like Rangers, or Sawbridgeworth Cricket Club.
It may be that the £58m hasn’t been established as an actual liability – as with Rangers, where the EBT liability was held not to be due even though the media had clearly stated that it was “an unpaid tax bill”.
Rangers did have an unpaid tax bill
And the appeal is not resolved
HMRC is in a mess and those in business know that. The corrosive effect of tax cheating by big business will more than “trickle down” to the SME sector where you can expect a different form of cheating to take place.
The Employ-E PAYE debacle has the whiff of fraud about it……
One wonders what action HMRC takes against the directors of companies in these cases. They certainly have the power to pursue directors for arrears.
There must surely be the possibility at least that the company were trading while insolvent, which does permit debts to be collected from directors I believe.
I hope so
HMRC only need to look at Chapter 9, Part 2 of ITEPA 2003 to deal with this. The powers in that piece of legislation are very widely drafted as is the ability to recover the debt.
Was HMRC resourcing and governance a topic for discussion at the One Nation Labour tax event yesterday evening, Richard? It seems to me – and you too, I’m sure – that its no longer sensible to discuss tax issues and policy without a parallel discussion of what we might appropriately refer to as the delivery mechanism.
It was covered – yes
Catherine McKinnell raised it very clearly
Will you be posting about last night’s meeting or is it not appropriate?
I don’t actually think there is much to say
Chris Wales tried to deflect the issues, Catherine repeated the recent policy document, the ICAEW said it was available to help and I summarised the G8 and where we need to go from here – outlining many points for action on the way that require serious attention if we are to create a fair tax system.
Perhaps the most telling comment was at the end – Wales said he thought I was not listening to him. I said I tried to do so. He replied saying he had never listened to a word I’d said
I tried to look up Chris Wales’ background. Am I right in believing that he is or was with Goldman Sachs? If so perhaps someone ought to tell him that he’s not in fact doing God’s work;-)
I came this link
http://denning.law.ox.ac.uk/tax/tax_centre.php
It was no surprise to see a well known face rubbing shoulders with Mr Irrelevant sorry, Chris Wales and other members the “Right Wing Vanguard” advertising the taxation law department at the Oxford (Big)Business (Only) Centre;-)
Andersens
Goldman Sachs
PWC
With the Treasury and Gordon Brown in between
It looks as if the picture is more complicated than appears from The Scotsman story. According to the Mirror this is not an ordinary trading company going under. It is a tax avoidance firm and the tax due seems to be missing PAYE from employer/ employees/agency staff, not tax due on company profits.
http://blogs.mirror.co.uk/investigations/2013/05/16m-black-hole-as-payroll-para.html
There seems to have been a HMRC investigation and it might be that this triggered the appointment of liquidators..
http://www.recruiter.co.uk/news/2013/05/alexander-tightens-noose-on-tax-avoidance-as-legitas-group-goes-bust/
This is confusing. If HMRC uncovered this situation, how does this equate to HMRC not having the resources to carry out their duties in a proper fashion?
Because the loss is £58 million before they could close it
My experience in practice is that inconsistency is the rule when it comes to HMRC chasing debts. Sometimes they do, sometimes they don’t. For Years. Sometimes they pass it on to to private enterprise tax farmers, sorry, I mean well-regulated revenue collection agencies.
I want to be able to say to my clients, knowing it is true, “you really need to sort this out or HMRC will be on your back”, but in fact, I know that HMRC may or may not be interested.
Sometimes it is the most egregious cases who get the least attention and the guy with a history of good compliance who has a temporary tax flow problem who gets dropped on from a great height. There is no rhyme or reason….
I agree
More resources are needed so that consistency can be assured – which would help everyone
£58m over 60,000 employees is only £967, so could just be a few months of unpaid tax and NI surely? In that case, I am not sure more staff would have had any impact, though maybe better systems would.
You think that happened that quickly?
have you ever recruited 60,000 in a few months?
Isn’t it a simple case of the agency not operating PAYE when it should have and being set up purely for that purpose? In which case, large tax bills rack up very quickly – through unpaid income tax, unpaid NICs and then grossed-up income tax on the benefit of the income not paid over through PAYE, plus penalties and interest. This looks like a win for HMRC to me and while I agree that it is generally understaffed and requires better resources and the ability to offer better salaries and to advertise its graduate scheme more effectively, I don’t think I would be using this as an example of that.
£58 million?
And all those P45s HMRC must have been getting?
Oh come on….
Well I assume that as it includes penalties, you can immediately cut the figure in half as HMRC can charge a 100% penalty in cases like this and the “58 million” is a headline figure only (i.e., what HMRC may able to recover). Not to mention that however large HMRC’s resources are, they won’t (and shouldn’t) enquire into very small amounts of tax: rather, they will wait until the sums add up to a figure worth chasing. I think it’s perfectly reasonable in this case, if you stop and think about what the 58 million figure is actually comprised of.