What HMRC is doing about mini umbrella fraud

26 May 2022

Her Majesty’s Revenue and Customs (HMRC) has released information relating to increased efforts in combatting mini umbrella fraud.

Mini umbrella fraud is when multiple limited companies are set up to enable fraud. Each company has a small number of temporary workers, and a promoter business facilitates its structure. Sometimes referred to as an outsourcing business, it can have linked businesses which support the operation. The creation of the mini umbrella companies and complex layers of businesses within the supply chain help facilitate fraudulent activity. The companies also significantly reduce tax, National Insurance and VAT payments to HMRC. They abuse small business incentives from the government, like employment allowance and the VAT flat rate scheme.

HMRC’s fraud investigation service is using its powers to challenge those who are involved or help facilitation of such mini umbrella companies. Tens of thousands of these companies have been deregistered. Where investigations concluded that any business in the supply chain knew, or should have known about the fraud, HMRC has disabled them from recovering VAT on goods or services bought. 

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