NHS Covid lab staff hired via pay scheme with tax scam hallmarks

Revealed: Hundreds of workers recruited for Milton Keynes lab were employed by multiple mini companies

A recruitment firm that hires workers to conduct NHS Covid-19 tests – and is co-owned by a well-known football executive – has been supplying staff employed through a contrived network of companies that possesses many of the hallmarks of a notorious tax scam.

Industrious Recruitment has supplied laboratory staff to the Lighthouse laboratories in Milton Keynes, which was launched by the health secretary, Matt Hancock, last year as the first of three of the government’s “mega labs” processing hundreds of thousands of Covid-19 tests a week.

Hundreds of workers recruited by Industrious to process Covid-19 tests at the Department of Health-managed site have been employed by multiple companies, the Guardian understands, in a structure that appears to mimic schemes that have previously been cited as depriving the taxpayer of “hundreds of millions” of pounds a year.

Days after the Guardian confronted Industrious about the tax scheme, the Lighthouse lab workers said they had suddenly become directly employed by the recruitment company.

Industrious is the latest recruitment firm that appears to have been supplying pandemic workers employed via mini umbrella companies (MUC). The problem was revealed by a Guardian investigation that has shown how the supply chain of the government’s pandemic response seems to be riddled with such schemes.

HM Revenue and Customs warned in December that “most MUC arrangements are considered to be fraudulent”. While it is not illegal to set up a mini umbrella company, many are used to avoid employers’ national insurance contributions as well as a proportion of a company’s VAT bill. As far back as 2015, HM Revenue and Customs warned promoters of such tactics they could face fines of £1m.

In a separate December alert, the Gangmasters & Labour Abuse Authority, the agency responsible for investigating labour exploitation, echoed HMRC’s concerns, saying the use of such companies was on the rise, potentially “leading to tax fraud”.

The Biocentre laboratories in Milton Keynes
The Biocentre laboratories in Milton Keynes are currently supporting large-scale analysis of Covid-19 swabs from across the whole of the UK. Photograph: Graeme Robertson/The Guardian

Industrious was co-founded and is 33% owned by Marc Watson, a former barrister who was the boss of BT Sport when it acquired rights to Premier League football and now sits on the board of the majority owner of Leeds United.

The tax schemes that the Lighthouse labs structure appears to mimic supposedly work by transferring contracts of workers from a single large employment agency into a web of thousands of tiny companies. So, if an employment agency previously supplied a site with 300 workers, the scheme’s promoters may create 150 new tiny companies, each employing two workers.

In recent years the structure has been used to create thousands of micro companies from which to claim the government’s £4,000 employment allowance, a jobs subsidy that is only claimable once a year by a single firm and cuts employers’ national insurance contributions. Only small firms, with national insurance contributions of less than £100,000 a year, are entitled to claim this money. It is paid in the form of a national insurance refund by HMRC.

When that allowance is fully used, workers are frequently transferred to a new mini company so that another allowance can be claimed by the scheme’s promoters, experts say.

These artificially created micro companies are also entitled to the flat-rate VAT scheme, which allows very small firms to charge VAT at 20%, but pay it back to the exchequer at a much lower rate.

The Guardian spoke to a UK-based director of one MUC, who was then replaced by a Philippines-based director, who said she had formed the company as part of a batch of new firms after responding to an advert on social media, which had been placed by an individual who did not respond to requests for comment.

The Biocentre laboratories in Milton Keynes.
The Biocentre laboratories in Milton Keynes. Photograph: Graeme Robertson/The Guardian

“I did six every time,” the former director said. “You get six companies and then they pay you £50 a company through PayPal … just for sending letters back to them.”

Some of the hundreds of workers supplied by Industrious to work at Lighthouse labs have told the Guardian how they were employed through mini companies that had no obvious relationship to Industrious or Lighthouse labs.

They said they only learned they were employed by these companies by studying their payslips or tax records, adding that the mini company employing them was changed after a few months without any explanation.

In 2015, after a BBC investigation into an alleged promoter of such a scheme called Anderson Group, HMRC issued a notice advising anybody using these structures exploiting the employment allowance to withdraw from doing so to “avoid the costs of litigation and minimise any interest and penalties due on underpaid national insurance”.

The following year, after a Guardian undercover investigation, the government attempted to close down the VAT portion of these schemes, although employment sources say those efforts were ineffective.

Critics of the scheme say that the directors of the tiny companies are switched from UK-based directors to individuals in distant countries such as the Philippines in order to protect the real promoters from action by HMRC. The Lighthouse labs mini companies that have been examined by the Guardian were all controlled by a series of directors based in the Philippines.

Watson did not comment.

Industrious declined numerous invitations to comment in detail. Louise Matthews, who along with Watson is one of Industrious’s three founders and shareholders, said: “Where we use outsourced services, they are UK based, lawful and independently audited.”

It is not known if Industrious engaged a third party that ran the mini companies employing the workers, or if Industrious was hired by a branch of government or an outsourcer.

A spokesperson for NHS England said the hiring of Industrious to supply staff to Lighthouse labs was a matter for the Department of Health and Social Care (DHSC).

A DHSC spokesperson said Industrious had not been engaged directly by the department, and added: “We carry out due diligence on all direct contractors and we take these checks very seriously. We are in regular contact with our contracted suppliers, which enables us to take action if we become aware of any inappropriate practices by the supplier or any of their subcontractors.”

The Biocentre laboratories in Milton Keynes.
The Biocentre laboratories in Milton Keynes. Photograph: Graeme Robertson/The Guardian

I never noticed at first’

In the Milton Keynes Lighthouse laboratory, hundreds of technicians have been testing hundreds of thousands Covid-19 swabs every week.

They had responded to job adverts placed by Industrious Recruitment on a variety of well-known recruitment websites and they found they were quickly signed up and able to report for work.

“I never noticed at first,” one of the workers said. “It wasn’t until a month or six weeks ago when I was checking my HMRC account that I saw I was being paid by a separate company.

“I was then transferred to another company and I thought, ‘That’s odd’. Then I messaged a colleague and asked: ‘Is it the same situation for you?’ and it was.”

Both of the companies the worker identified were formed within the past two years and had switched the founding UK-based director with a new director living in the Philippines.

All the employers were different companies’

Another worker hired by Industrious Recruitment for a role at the Milton Keynes Lighthouse laboratory also did not at first notice she was being paid via an obscure, recently formed company whose director was based in the Philippines.

“Me and my colleagues were discussing tax and suddenly we noticed that all the employers were different companies,” she said. “And my employer had just been changed.”

The worker provided a list of mini umbrella companies that she and her colleagues had been employed by and the Guardian managed to contact a UK-based individual who had been a director of one of the MUCs, before she was replaced by a person in the Philippines.


Simon Goodley and Jasper Jolly

The GuardianTramp

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