A TEMPORARY employment agency has gone into liquidation owing HM Revenue & Customs (HMRC) £58 million in unpaid tax.
Edinburgh-based Employ-E, a division of Legitas Group which is also in liquidation, is owned by lawyer David Allen, who is reported to own a golf course and mansion house in the Borders.
Employ-E had about 60,000 low-paid temporary workers on its books, who it supplied to recruitment agencies throughout the UK.
That\’s from the Scotsman. Upon which Ritchie declares:
The real question here is, how could that have happened? How could HMRC have reached the point where it cannot chase that much tax? How limited are resources is this is the case?
There is also another question, which is, of course, where is the money? An agency should have been reimbursed all costs including tax. How could it lose that much money?
In the case of both questions surely HMRC should have been on top of this? If not I can only put it down to under-resourcing,
Hmm. So, HMRC is owed all this money because HMRC doesn\’t have enough money to check up on companies that owe it tax. Gosh, no, I wouldn\’t have expected such a response from someone funded by the taxman\’s union, PCS, no, not at all.
Actually bothering to find out what did happen I discover this:
A STRUCK-OFF solicitor\’s Edinburgh-based companies have run up tax debts of almost £60 million and have been placed into voluntary liquidation.
Officers of HM Revenue and Customs have submitted a claim of £58m in unpaid tax and penalties to David Allen\’s payroll and employment agencies.
It is understood Mr Allen\’s Employ-E company made the application for voluntary liquidation over the tax debt, which sources say he is not contesting.
Oh. It\’s not gone bust owing £58 million: it\’s gone bust as a result of owing £58 million. So, why\’s that then?
Mr Allen\’s companies help temporary workers and the recruitment agencies which place them in employment \”maximise earnings by offsetting legitimate expenses against gross pay\”.
But it is understood that HM Revenue & Customs was unhappy with attempts by Employ-E to exploit a rule that meant temporary workers treated money they spent on travel and food as a tax-deductible expense.
It is understood HMRC is investigating, prompting concerns about tax avoidance.
Tax officials are known to be concerned about the use of the \”payday by payday\” tax relief model, whereby the employer applies income tax and National Insurance relief to the amount of expenses which an employee has incurred, with the relief applied each payday. The effect is that only the balance is subjected to income tax and National Insurance.
HMRC has already warned that the model does not comply with Taxes or Social Security Acts and associated regulations.
It was estimated Legitas alone helped employment agencies, including Mr Allen\’s, avoid tens of millions of pounds in tax or National Insurance contributions.
Oh again. You mean that it\’s not that it just went bust because it owed £58 million. You mean that HMRC was investigating tax avoidance (or, if this is finally ruled illegal, tax evasion), discovered it and then put in the claim for that tax?
That is, HMRC clearly has the resources to be investigating tax avoidance, has successfully investigated this tax avoidance scheme and has closed it down. The tax gap shrinks as a result: yet Ritchie uses this success as evidence that HMRC doesn\’t have enough cash to chase tax avoidance.
Is there no limit to this man\’s genius? And clearly, just the man we need to write the rules for the global tax system.
What is there to say here except Tim Worstall’s analysis is spot on; Richard “Tax Expert” Murphy’s is useless, just useless.
Since the legal point does not yet seem to have been settled what business have the fucks at HMRC in putting in claims that have collapsed the company?.
They have far too much power/money to hassle people.
Dear Tim,
Your point is all too true here regarding the analytical skills of poor Mr Murphy.
However, there is an interesting point here.
In some european countries, the expense of travel to work is treated as a valid expense (functional countries like Luxembourg and Germany).
This is a civilised idea that we should be applying to temporary workers, usually on low wages, where the marginal cost of travel makes a big difference. In many respects, being a temporary worker is functionally equivalent to being self-employed: you put your skills on the market and you accept a degree of uncertainty. If you are self-employed you are allowed valid expense deductions.
Would it be legal to set up a temp agent that only contracts out to the officially self-employed (and helps with the paperwork etc…)? The answer is almost certainly yes.
@Paddy:
There are of course the “Temporary Workplace Rules”, but the problem is that temporary workers tend to be PAYE employees hired at the place they will be working for and therefore temporary workplace rules don’t apply.
The only people who seem to be able to make use of “Temporary Workplace Rules” are various forms of limited company contractors (IT, Oil & Gas, etc.) for which it is a substantial subsidy against their PAYE counterparts who have to pay commuting expenses out of their post tax income.
The problem with the Office of Tax Simplification is that they are not tackling the fundamentals such as this for the fear that it will cause substantial loss of tax revenue, despite the obvious fact that it would support those “hard working families” that the government goes on about and it is right to do so.
If you have to travel to work to generate your income then those costs should be deducted before your income is subject to tax.
It’s that simple.
Yes it is.
But there-ll be no change because then the wage slaves would realise that there-s an alternative to PAYE.
@ Paddy
These schemes are industrialised implementation of allowances and reliefs that are available to everyone. A genuine temporary worker is entitled to the relief whether or not employed under these models.
The advantage of the models is that they use flat allowances and avoid loads of paperwork. They invariably, therefore, involve claiming more tax relief than would be available in ordinary circumstances. So HMRC are getting stung.
Unfortunately, the benefit of all this isn’t going to the worker. The agency, the pay agent and the client carve that up between them. Certainly not, at least, in the case of the lower paid people you’re concerned about. They had no bargaining power before, and they have none after.
The right to claim expenses for temporary workers isn’t in question. What these agencies are doing is dodging National Minimum Wage laws by paying a salary below NMW, but topping it up to NMW with expenses. To the employee the total received is the same, so they have no incentive to complain; but the tax man loses out and the agency pockets the savings.
If they were paying employees NMW with expenses on top, it wouldn’t be an issue.
1. Did Legitas also employ comedians like Jimmy Carr? Because of the vagaries of the market comedians can legitimately also claim to be temporary workers.
2. Andrew M. The company, Legitas, used the law as it stands, and it was the self-righteous HMRC mafia that decided what was going on is not kosher. Now, because Legitas has folded, they are not getting a penny. The pomposity and officiousness of the HMRC mafia have succeeded yet again by shutting a private company.
Whether or not I agree with these comments, the contrast between the detail and underlying knowledge of the followers of this blog on the one hand and the owner/ sole contributor of a certain other blog on the other is sharp to the point of being lethal.
Look, whatever you think of HMRC, its resource compared with its remit is a question of fact, of evidence. So it is quite apparent here that HMRC has indeed put its resource in to attacking what it sees as an abusive operation. Whether the “claim” was a claim in Court or just an assessment, it was an amount that became ‘due’ because it put in the resource to make it due. So Murphy’s analysis was nothing more than reading the first paragraph of a story and hitting his laptop, convinced it was yet more proof that he is always right. Bollocks from a bullshitter.
BTW, check out the term “struck-off solicitor”. There is bound to be a bit more to this story then meets the eye.
Ritchie tries a rebuttal, gets his ass kicked so just gives up and closes debate.
http://fairtaxmark.net/fair-tax-mark/the-fair-tax-mark-dealing-with-criticisms-of-our-methodology/
I went to that thread and tried to explain what’s wrong with averaging percentages. But he won’t have it.