• Do you know who you are doing business with? If you use temporary workers, are your recruitment agencies or any umbrella companies operating legitimately?

• Do you understand what mini umbrella company (MUC) fraud is?

• Can you recognise the key indicators of fraud and misconduct?

• Do you understand the potential risks?

An umbrella company is a company that employs a temporary worker (an agency worker or contractor), often on behalf of an employment agency, dealing with taxes and payroll. The agency will then introduce the services of the worker to their clients. 

This is a common and legitimate means of engagement.

Typically, organised criminals create multiple umbrella companies, each of which artificially employs a small number of temporary workers rather than through one umbrella company. 

These are set up to pretend to be small employers and fraudulently claim National Insurance Contribution and VAT reliefs that are only available to genuine small employers. 

Businesses need to ensure they are not enabling such schemes.

Not only could a fraudulent supply chain cause reputational and financial damage to your business; it could also mean your workers are not receiving all they’re entitled to.

As an end user or provider of temporary workers, it is your responsibility to be clear about who pays the workers and how they are paid, according to HMRC. This is the only way to protect your business from becoming involved in MUC fraud or other supply chain fraud.

HMRC recommends that businesses ensure they understand how their workers are being paid, and carry out regular due diligence checks for known red flags. These include:

• workers having unusual or unintelligible company names on their payslips that they most likely have never heard of, and which are different for different groups of workers from the same employment agency
• unrelated business activity detailed on Companies House
• frequent movement of workers between companies

If in doubt, ask your employment agency to confirm they are not using contractual chains with mini umbrella companies and point them to HMRC’s guidance.

For more information visit GOV.UK.