Monday, 27 June 2022 09:18

Contractors Face Losses as Tax-Dodging Director Gets Laughable Ban

Contractors could end up footing the bill after a recruitment agency director who swindled HMRC out of millions in unpaid taxes received a paltry eight-year disqualification.

Adrian Sacco ran Manchester-based Best Employment Services (BES), an umbrella payroll company targeting high-earning contractors in IT, engineering and HR

The 55-year-old, who company records show has been director of a string of liquidated or dissolved payroll agencies over the years, faced investigation by the Insolvency Service after BES was wound up in 2019 owing at least £4.1m in tax to HMRC.

He was found to have “wilfully abused the tax system for his own benefit” in a scam that involved him taking payment from clients for contractors’ services, but then only paying a small fraction to contractors through PAYE. The rest was passed on as a loan, avoiding Income Tax and National Insurance contributions until Revenue investigators caught up with his scheme.

In addition, Sacco dodged corporation tax by splitting BES profits between several Isle of Man-based entities - at least one of which he was registered as a co-owner of. He also transferred £20m in loans owed by BES contractors to a company registered in Anguilla in return for a bogus indemnity agreement.

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Joke of a punishment

One of the most concerning aspects of the case is the fact that HMRC could eventually turn to contractors employed by BES as it looks to recover money owed to the public purse. If it is unable to claim back assets held by Sacco (and his track record suggests he likes hoarding them away in offshore firms), legally contractors are next in line for the tax owed on the money they received.

Equally depressing is the Insolvency Service’s line that Sacco’s eight-year disqualification from serving as a company director “should serve as a warning” to other con-artists who want to masquerade as legitimate company bosses. Given the size of the fraud, and the fact that people who worked for BES could end up footing the bill, an eight-year ban is nothing short of a joke.

A real deterrent would see Sacco banned for life and jailed for criminal conspiracy to defraud. But once again, despite years of talking tough on IR35 and disguised employment, the UK government’s approach to the umbrella payroll sector has been exposed as riddled with holes and with no bite whatsoever when it comes to enforcement.

As long as that continues, rogue operators like Sacco will continue to be attracted to the sector, spotting it for the soft touch it is from a mile off. And it is ultimately contractors who will suffer the consequences.

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