The £45 million VAT scam that highlights the importance of a watertight PSL
A family of fraudsters have been jailed for a total of 27-and-a-half years after being found guilty of stealing more than £45m from the public purse in the largest payroll VAT fraud uncovered in the UK.
Geoffrey Copp, 55, his son Joshua Copp, 24, and brother Andrew Copp, 51, used the money to fund lavish lifestyles including luxury cars, property and art. They were sentenced at Wood Green Crown Court on 9 June. Geoffrey was jailed for 10-and-a-half years, Joshua received 8 years and Andrew was handed 9 years. Read more about the case
Used by agencies in good faith
The trio ran Central Payroll Specialists (CPS), which was later rebranded as Quality Premier Services (QPS). The companies were used by recruitment agencies in good faith to manage the wages of thousands of temporary workers. But over the course of three years, the Copps did not pass the VAT they received from agencies to HMRC. Although the fraud itself was VAT, the mechanism used to payroll the workers was umbrella.
John Chaplin, Executive Director of business advisors Ernst & Young said: “This fraud clearly shows the dangers of not checking that your supply chain is compliant. A simple check by any of the agencies using this business would have highlighted that their declared VAT returns came nowhere near matching the turnover of the business and could have uncovered the fraud much earlier. This type of case reinforces the already poor reputation that the temp supply market has in some quarters and so it’s no surprise that more and more agencies are undertaking even fairly basic checks before deciding to do business with their suppliers. It’s not the responsibility of agencies to do HMRC’s job for them but I wonder how many of the ones involved in this case have come under closer scrutiny as a result and wish now that they’d paid a bit more attention?”
Having faith in your suppliers is great, but it must have a foundation in facts and evidence. The QPS case shows once again that unfortunately there is a dark and corrupt corner of the industry which no recruitment agency (or legitimate umbrella provider for that matter) wants their business to be associated with. Above all it highlights the need for agencies to set stringent criteria for their PSL and ensure that the umbrella companies they deal with have been properly vetted.
So how do agencies do this?
The easiest way for recruiters to be assured of the integrity of their PSL is to only use umbrella companies who are full accredited members of the The Freelancer and Contractor Services Association (FCSA )
Members are independently audited against the association’s robust Code of Compliance on an annual basis. The assessors are regulated accountants and lawyers and are proven experts within the field.
To ensure total transparency, copies of all documentation and audit findings are sent to HMRC as an integral part of the selection and review process. In short, the compliance and ethical benchmark is set very high.
Look for the orange logo
We asked Julia Kermode, Chief Executive of the FCSA, to comment and she said: “While there are some cases of bad practice amongst a minority of businesses which have grabbed the headlines, there are also a large number of highly compliant organisations working ethically and correctly to provide a high level of service for its clients and contractors. The challenge comes in identifying a compliant company you can trust, sound in the knowledge that it continues to work within the rules. There are an alarming number of recruitment firms that don’t have time to do even basic checks, but this case highlights the importance of investing the time in your PSL. FCSA can help as we set extremely high standards for our Accredited Members to adhere to, and they are independently tested for compliance by regulated accountants and solicitors every year. In short, we do all of the compliance testing so that you don’t have to. A word of caution though; it is only FCSA Accredited Members that are tested for compliance and entitled to use our orange logo, our associate members are not tested and use our blue logo.”
The Recruitment & Employment Confederation (REC) advises its own members to use only FCSA member companies. In fact all umbrella companies must be members of the FCSA before they can be granted REC business partner status.
The REC’s CEO Kevin Green confirms: “We are happy to recommend to all REC members who use or are looking to use a third party supplier of contractor accountancy or umbrella services, to use FCSA compliant members to minimise their risk”.
Checklist for a watertight PSL
As a recruitment business, you have a right to carry out due diligence and demand transparency when you are putting together your preferred suppliers list.
As well being fully accredited members of the FCSA, at Liquid Friday we give our agency clients access to the following:
- The right to audit us – carry out a full review of our VAT, NI and PAYE transactions
- Copies of our audited accounts
- Copies of our assurance documents – including all policies and procedures
- Quarterly onshore intermediaries reports
- The right to copies of our RTI submissions
More about the right to audit…
Supplier audits are definitely something agencies should consider when putting together their PSL. This could be a request for supporting documentation which can be reviewed in your office or an on-site visit. The visits can vary from day or two day-long audits to less formal “come and meet the team” style events. At Liquid Friday we welcome such an approach, as it gives us the opportunity to differentiate ourselves by the quality of our staff and processes, in what can often seem like an undifferentiated market.