Recruiter tax evasion exposed in Guardian investigation

Recruiter tax evasion

19th July 2017

The recruitment industry doesn’t do itself any favours. Yet another firm has been caught out for promoting tax avoidance schemes when it really should know better. This time it’s the turn of Anderson Group, which was exposed via an investigation looking into recruiter tax evasion. Many of you will recognise the company as the lead sponsor of the past three iterations of the Recruiter Awards and a supposed bastion of the industry.

Recruiter tax evasion exposé

A Guardian investigation found that the firm was promoting an aggressive tax avoidance scheme which had been used by recruitment agencies supplying professionals to businesses including M&S and Dixons Carphone.

The scheme involved setting up thousands of tiny firms to exploit VAT and National Insurance rules which were originally designed to help very small businesses which were then registered for the flat-rate VAT scheme, which allows firms to charge VAT at 20%, but only pay it back to the exchequer at half that rate. The Guardian revealed evidence last week showing that parts of the scheme were shut down immediately after an enquiry by HMRC, suggesting that the firm was aware of its non-compliance. In addition, documents have revealed that nearly 2,000 of the Anderson Group scheme’s mini companies are now in the process of being liquidated. This makes it particularly challenging to trace the companies for any VAT or National Insurance debt, especially as each of them has just one Philippines-based director and very few, if any, assets.

Criminal charges

Some legal commentators have suggested that the scheme has exposed Anderson Group to potential criminal sanctions which, following the introduction of the Criminal Finances Act in the coming months, could lead to its directors facing unlimited fines or even potentially prison sentences.

Dan Niedle, a tax partner at legal firm, Clifford Chance, commented on the allegations and suggested that, in his view, the scheme had been set up to avoid tax: “I am troubled by the involvement of multiple Philippine individuals, when there is no commercial or tax reason to involve anyone offshore. The obvious inference is that the purpose of choosing the Philippines was to hinder HMRC’s ability to investigate and recover any tax due.”

It remains to be seen whether Anderson Group will face charges for allegedly promoting the scheme and therefore facilitating tax avoidance. Indeed, the firm has refuted the allegations and suggested that the case was simply an inaccurate rehash of an existing investigation in 2015.

However, to most observers it’s clear that the firm is operating in a way that attempts to trick the system and allow organisations to avoid paying appropriate and fair levels of tax, which it shouldn’t be doing. And with HMRC increasingly hunting down anyone suspected of promoting evasion or avoidance then its directors could face unlimited fines or even prison sentences as a result of the introduction of the Criminal Finances Act. This greatly ups the ante for firms and means that they simply have to ensure that they’re operating in a compliant way. We’re sure this won’t be the last time we see an incidence of recruiter tax evasion or avoidance, however the changing landscape could mean that agencies are put off from trying to cheat the system.


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