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A quick guide: what is mini umbrella company fraud?

If your business places or uses temporary workers, you should be aware of the potential dangers posed by mini umbrella company (MUC) fraud.

Key considerations:
  • Do you know who you are doing business with? If you use temporary workers, are your recruitment agencies or any umbrella companies operating legitimately?

  • Do you understand what mini umbrella company (MUC) fraud is?

  • Can you recognise the key indicators of fraud and misconduct?

  • Do you understand the potential risks?

What is an umbrella company?

An umbrella company is a company that employs a temporary worker (an agency worker or contractor), often on behalf of an employment agency, dealing with taxes and payroll. The agency will then introduce the services of the worker to their clients. 

This is a common and legitimate means of engagement.

What is mini umbrella company (MUC) fraud?

Typically, organised criminals create multiple umbrella companies, each of which artificially employs a small number of temporary workers rather than through one umbrella company. 

These are set up to pretend to be small employers and fraudulently claim National Insurance Contribution and VAT reliefs that are only available to genuine small employers. 

Businesses need to ensure they are not enabling such schemes.

Where can MUCs be found?
MUCs are particularly relevant to the business services sector, given their regular use of large numbers of temporary workers. But MUC fraud is not limited to specific trade sectors and can be found in supply chains whenever temporary labour is used.

Mini umbrella company fraud is not limited to specific trade sectors and can be found in supply chains whenever temporary labour is used

Why should you be aware of this issue?

Not only could a fraudulent supply chain cause reputational and financial damage to your business; it could also mean your workers are not receiving all they’re entitled to.

As an end user or provider of temporary workers, it is your responsibility to be clear about who pays the workers and how they are paid, according to HMRC. This is the only way to protect your business from becoming involved in MUC fraud or other supply chain fraud.

What are the warning signs to look out for?

HMRC recommends that businesses ensure they understand how their workers are being paid, and carry out regular due diligence checks for known red flags. These include:

  • workers having unusual or unintelligible company names on their payslips that they most likely have never heard of, and which are different for different groups of workers from the same employment agency
  • unrelated business activity detailed on Companies House
  • frequent movement of workers between companies

If in doubt, ask your employment agency to confirm they are not using contractual chains with mini umbrella companies and point them to HMRC’s guidance.

For more information visit GOV.UK.

This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of the NatWest Group Economics Department, as of this date and are subject to change without notice.

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