Mini Umbrella Company fraud is the disaggregation of a large, temporary workforce into multiple, small, limited companies (MUCs) by organised crime groups (OCGs). It costs the Exchequer in the UK hundreds of millions of pounds every year.
HMRC is aware that OCGs regularly target the temporary labour sector and has ongoing investigations using a full range of civil and criminal powers, in parallel, to provide the most effective and immediate response.
There is no reason to think that Ireland is not under threat too.
The OCGs break down one temporary labour provider, low in the supply chain, into hundreds of MUCs allowing each to build up debts to government and/or take advantage of government incentives aimed at small businesses. Each MUC then dissolves.
The OCG often uses stolen or fraudulently purchased identities for the MUCs directorships, to avoid personal association, including foreign nationals.
There is no standard model for MUC fraud. It is constantly evolving, as OCGs try to hide their fraudulent activities.
However, MUCs often only employ a few (mostly unaware) workers and there is always a promoter/umbrella-style business further up the supply chain that organises the structure of the MUCs. This is sometimes known as an ‘outsourcing business’. There are often other linked, administration style businesses to support the operation. MUC fraud steals money intended for public services and the rights and entitlements of workers are often compromised, including stolen taxes, National Insurance contributions and pension payments per the UK Financial Intelligence Unit.
This Unit advises on some of the signs to look for throughout the supply chain, although each should not be taken in isolation:
*Large volumes of companies registered at the same address, often residential/non business addresses.
*Periods of dormancy after bank account inception.
*Companies that hold the bank accounts lack an online presence.
*Few or no payments to HMRC.
*Receipts of large payments from recruitment agencies from the opening of the account, far in excess of the anticipated turnover or not consistent with the declared business type.
*Profits from the fraud are often extracted internationally by the OCGs, disguised as fees, admin expenses and other purchases, often through companies and bank accounts also based abroad.
*Links to/use of nonbank Payment Service Providers (NBPSPs) that use FinTech/Blockchain technology and Alternative Payment Systems (APS) to provide financial services without a traditional banking license.