The Today program has uncovered the scheme, from the Anderson Group, that exploits the government’s Employment Allowance, which potentially deprives the Treasury of millions of pounds of National Insurance payments.
The government’s Employment Allowance, introduced last year and allows companies to claim £2,000 of their annual employers’ National Insurance bill, is alleged to have been exploited.
The BBC secretly recorded a sales manager for the group promoting the tax avoidance scheme to a recruitment agency, which employs 300 workers – most of whom are low paid workers.
Ian Moran, the sales manager for the Anderson Group, suggested to the agency that if it were to set up more than 100 limited companies with a couple of workers in each of them, every company could claim the allowance, which would cut the National Insurance bill of the company from £300,000 a year to nothing.
Mr Moran suggested that the recruitment agency, who told the BBC that they have no intention of using the scheme, to spend the cash on luxury cars and holiday homes.
Mr Moran told the recruitment agency that 10,000 workers were now being employed through these companies, and the goal was to increase that to 20,000.
At the meeting, Mr Moran admitted that the Employment Allowance was being misused: ”It wasn’t intended to be used exactly like this,” he said.
The head of the low incomes tax reform group at the Chartered Institute of Taxation, has called the scheme “highly aggressive” and “abusive”.
Robin Williamson told the Today Programme that it drives a coach and horse through the legislation ”To use the colloquial – they are having a laugh.”
It is made clear in the legislation for the allowance that artificially created companies cannot claim the £2,000.
The BBC reports that they found more than two thousand limited companies created by those behind the tax avoidance scheme on the Companies House website.
Anderson Group said to the BBC that all of its services are fully compliant with UK tax laws.
It says it is “totally incorrect” to say that Anderson Group is promoting the scheme and says it is a product being offered by one of its clients.
HMRC has promised to “pursue users and promoters” of the scheme, with fines up to £1million for failing to disclose the use of the tax avoidance scheme.
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