Council Pays Tax Dodgers Thousands

Shepway District Council (SDC) continue to use HR Go a temporary staff recruitment agency based in West Terrace (pictured); which is alleged by The Guardian to be involved, along with several other temp agencies, in “aggressive tax avoidance schemes” which are reported to cost the exchequer hundreds of millions a year in lost taxes.

HRGO Recruitment, a large nationwide temporary recruitment agency (HR Go) , has provided staff to SDC’s  Democratic Services and Law department among others according to SDC payment to suppliers data. SDC have been using HR Go since Sept 2013 and have spent £74,641 with HR Go Folkestone on recruiting 137 temporary staff  between Sept 2013 & Jan 2017

According to the Guardian the company operates a system whereby its workers’ contracts are “transferred from a single employment agency into a web of thousands of tiny companies that benefit from the tax breaks. These tiny companies employ just 2 or 3 workers. The mini-companies, qualify for a “£3,000 government subsidy called the employment allowance, which can only be claimed once by a company and was designed to help very small businesses create more jobs or increase wages. The mini employment companies can also generate an additional windfall by charging VAT at 20% but paying it back to the government at about 12%, exploiting arrangements designed to free very small businesses with revenues of less than £150,000 a year from red tape”.

SDC has a legal duty under Section 1 of the Public Services (Social Value) Act 2012 to check to ensure how its contracts  “might improve the economic, social and environmental well-being of the relevant area”. The Council’s internal Purchasing Guide advises staff that they must take into account this legal requirement when entering into contracts. If a company is using aggressive tax avoidance techniques, as HRGO  is alleged to be doing, its  actions will actually detract from the economic,  social  and environmental well being of Shepway because less money is available to invest in our schools, housing, social services, environmental  improvements etc.  What due-diligence has SDC conducted into  HRGO and it is aware of the company’s alleged tax avoidance practices, it should be as The Guardian reported on this in Nov 2016. So why does it continue to use HRGO?”.

We also wonder why Shepway Council chose to employ temporary staff from HR Go and other recruitment agencies across many of its departments instead of employing them direct on temporary contracts. We can only assume that the Council chose not to directly employ them temporarily to avoid paying pension contributions and sick pay which are part of the  council terms and conditions of employment.

We contacted HMRC for comment and they said  “We do not comment on ongoing investigations” and HR Go’s comment was “they take compliance seriously and that they had taken legal advice before signing up with any suppliers of this type of scheme.”

As the companies mentioned in the Guardian article continue to be investigated by HMRC for possible aggressive tax avoidance, why does SDC continue to use HR Go Folkestone?

Shepwayvox