Question submission date: May 2022
Full Question: “I have a friend who has been promised 90% take home pay through another accountancy firm. I’ve also heard about companies being cloned. How do I spot a real from a fake?”
This is something we hear about all the time and it is very frustrating because people are being deceived. So, let’s help clear this up and try and stop more people falling foul of dodgy firms.
What exactly are cloned companies?
They are newly incorporated companies with names that are virtually identical to existing accountants or umbrella companies – they can be a big problem for freelance workers and contractors.
They often set up with a name and information so close to the legitimate company that they are trying to portray, and then offer a significantly higher take home pay with the indication that they offer a tax avoidance scheme. They are very skilled at looking like an existing, legitimate company, often with only one word different in their name, so it’s easy to believe they are one and the same. They can, on the surface, be a very appealing option… but they ARE too good to be true.
The problem for you, the person doing the work, is that if you use one of these companies you’ll think your taxes are being paid or that you’re covered by insurance should there be an accident, but neither is the case.
What can you look out for to spot a real from a fake?
Fake companies will very often try and entice you by telling you that you’ll have a higher take home pay by reducing PAYE, VAT and national insurance. Be VERY wary of this! By doing it they are putting your business at significant risk and if HMRC investigate you could end up with very hefty penalties and unpaid bills.
Here’s some tell-tale signs to look out for:
- Does the company you are talking to have an unusual name or address that sits at odds with the type of business activity they are running?
- Do they have a company website, or social media presence? It’s hard not to leave a trail now a days, so if they do not have this, how come?
- Have they been running for less than 18 months? Do they have any historic company information?
- Does the service they are offering match with the description they have on the Companies House website?
- Are the company directors based in the UK or abroad?
- Is there a UK contact number? Or are you sent across multiple dialing codes?
Don’t be tempted
Just always bear in mind that everyone pays a certain amount of PAYE, VAT and national insurance and there is no way around that. If someone tells you they have found an ‘alternative’ way to pay, it is unlikely to be lawful. Remember… if it sounds too good to be true, it usually is! If you work in the UK then you will be required to pay UK taxes, it is that simple.