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The Freelancer and Contractor Services Association (FCSA) has accused the authorities of failing to act on information it has supplied regarding the problem of cloned umbrella companies, which it claims has cost the Exchequer more than £1m to-date.
The Association is concerned with promoting tax and employment regulatory compliance in the extended temporary labour market supply chain, and also provides compliance accreditation to umbrella companies.
The FCSA issued a warning in September 2021 about the problem of umbrella company clones, after it discovered at least 10 of the umbrella companies that make up its membership had fallen victim to the practice.
The perpetrators’ aim is to extract payment from employment agencies and end-clients by attempting to pass themselves off as reputable umbrella companies. They do this by registering a new company with Companies House that has a similar name to an existing umbrella firm, effectively creating a clone of that company.
Individuals working for this clone will then contact employment agencies and end-clients and try to pass themselves off as working for the company they are imitating.
Typically, this contact will include a notification that the umbrella company being spoofed has changed its banking details, and all future invoices should be paid into a new bank account.
If the copycat company is successful in its attempts to dupe an agency or end-hirer in this way, this could result in sizeable amounts of money being diverted elsewhere, leaving the umbrella being spoofed and the contractors on its books out of pocket.
In a statement, the FCSA said it has “amassed substantial independent evidence” of this practice occurring, which it has passed on to the police, cyber crime reporting hub Action Fraud and several government departments, including HM Revenue & Customs.
“Unfortunately, the cloning activity continues and, to-date, we have not been made aware of any action being taken by the authorities,” the statement continued. “We believe that the fraudulent activities have so far deprived the Exchequer of well in excess of £1m through unremitted [National Insurance contributions] and income tax contributions.”
As a result, the FCSA said it is continuing to pursue the perpetrators via “civil means” while it waits for the authorities to take appropriate action.
“In the meantime, we urge employment businesses and contractors to ensure that the companies they are doing business with are the real thing by double-checking with Companies House or, for FCSA members, on the FCSA website,” the Association statement continued.
“Employment businesses should take great care to ensure that any requests to change destination bank accounts from an umbrella or accountant are legitimate and pay careful attention to company registered numbers and names.”
Meanwhile, the Association’s CEO, Chris Bryce, called on the authorities to act on any reports of cloned companies they receive.
“This form of corporate ID theft is all too easy, and the damage it does to all parties involved is substantial and lasting,” he said. “I urge the authorities to take immediate action to bring this criminal activity to an end. I’d also urge government to give the Registrar of Companies the power to quickly and without delay strike off companies which are so obviously clones.”