One British recruitment firm is allegedly suggesting that workers create hundreds of tiny companies to get big tax breaks
According to a massive investigation by the BBC, Anderson Group is depriving the UK Treasury of "tens of millions of pounds in National Insurance payments" by "abusing" the government's Employment Allowance scheme which launched last year.
The Employment Allowance scheme allows small businesses and charities to reduce the amount of National Insurance contributions (NICs) they pay for their employees by up to £2,000 ($3,058). It was intended to help smaller firms to grow.
Although the Anderson Group said in a statement that its services are fully compliant with UK tax laws and that it is "totally incorrect" to say that Anderson Group is promoting the scheme, the BBC secretly recorded Anderson Group's sales manager, Ian Moran, telling 300 workers "if the recruitment agency were to set up more than 100 limited companies with a couple of workers in each of them, each company could then claim the £2,000 ($3,058) allowance."
The secret recording also showed Moran calculating that the agency's National Insurance bill would then fall from £300,000 ($458,803) a year to £0.
He even admitted that the Employment Allowance was being misused: ''It wasn't intended to be used exactly like this. Let's be straight, but they set the rules, we'll build a product."
Jennie Granger, head of compliance at HMRC told the BBC that "schemes like this don't work and anyone thinking of using it should think again," before adding that Britain's taxman intends to "pursue users and promoters" of the scheme.
"Failing to disclose an attempted avoidance scheme is punishable by a fine of up to £1 million ($1.5 million)," she said.
Meanwhile, the head of the low income tax reform group at the Chartered Institute of Taxation, Robin Williamson, called the scheme "highly aggressive" and "abusive" to the BBC.
Business Insider contacted Anderson Group for additional comment in response to the BBC's report but was not immediately available outside office hours.