Hays, Capita, Petrofac. These are some of Britain’s best known companies and big players in the recruitment industry. 

Now, a Sky News investigation has revealed how, over the course of two decades, some of Britain’s biggest recruitment companies were linked to large-scale tax avoidance when placing workers into jobs, including government roles in Whitehall.

Many of these workers, typically agency workers and contractors, were paid by third-party umbrella companies that promised to take care of taxes but were operating tax avoidance schemes.

They worked by paying workers what were technically loans, instead of a salary. This allowed them to circumvent paying income tax.

Often the umbrellas were recommended by recruiters, although there is no suggestion the recruiters knew these third parties were operating tax avoidance schemes.

It is the latest revelation in a scandal that has caused untold misery for tens of thousands of people, who signed up with umbrella companies and were enrolled in tax avoidance schemes, thinking they were above board.

Many feel let down by the recruitment agencies who provided information linking them to the umbrella companies. They were not legally responsible for collecting the tax, as they did not run the payroll.

But the government is now strengthening the law to make them accountable for the tax collected by umbrella agencies on behalf of the workers they supply.

Tax avoidance is legal but HMRC has successfully challenged tax avoidance schemes in the courts and workers have subsequently asked to pay the missing tax.

In some cases, the tax demands have been crippling. It’s a campaign that has driven people to the brink of bankruptcy, devastated families and has been linked to 10 suicides.

Manuel’s story

Manuel Bernal did not doubt his working arrangement after taking on a piping supervisor job through Atlantic Resourcing, the recruitment arm of the energy giant Petrofac. In 2006, he was placed on an EDF plant in the Shetlands.

He received a contract between Atlantic Resourcing and an umbrella company, which managed his pay.

Weeks after he started working, he says he was pushed into an arrangement with a different company, which took over the payments. Hundreds of people were working on the site and “everybody on the management side was on that scheme”, he said.

Mr Bernal was assured that everything was above board. He did not know he was in a tax avoidance scheme.

The company was paying him a loan instead of a salary, via a trust, so avoided income tax and national insurance.

However, HMRC soon caught on and demanded he pay the missing tax for what it now deemed disguised remuneration.

“At the time, I was in two minds [whether] to pay or not to pay… At the time I couldn’t pay. I was short of money because I had cancer and I couldn’t work… I thought, ‘why should they not pay any money?'” said Mr Bernal.

Tax avoidance is the exploitation of legal loopholes to pay less tax. It is legal. It is not the same as tax evasion, which involves not paying or underpaying taxes and is illegal.

The scheme Mr Bernal was in, like other tax avoidance schemes, stretched the boundaries of the law.

Years later, HMRC successfully challenged the lawfulness of loan schemes in the courts. Workers paid the price. Irrespective of how they entered the schemes, they were deemed responsible for their tax affairs.

In a statement, Petrofac said: “Like any other company, we are not involved in, or responsible for, the administration of taxes for self-employed limited company contractors.”

The company stopped using umbrella agencies in 2016 after an internal review.

Six-figure demands

Manuel got off comparatively lightly. Having only worked at the site for a few months, his bill came in at £4,000, but others are facing six-figure demands. HMRC has pursued around 50,000 people.

Schemes like these proliferated from the early 2000s.

At the time the use of umbrella companies was becoming popular as workers were worried about falling foul of new rules – originally designed by Gordon Brown – that clamped down on contractors operating as limited companies.

Umbrella companies would manage the payroll so that businesses could avoid bringing workers onto their direct payroll. Others asked workers, like Manuel, to declare as self-employed, while continuing to distribute their pay.

Many umbrellas paid PAYE to the exchequer, but tax avoidance companies also entered the market.

Workers assumed their tax was being paid, but the schemes were pocketing deductions instead of passing them on to the exchequer.

The Treasury became alert to the scale of the missing tax revenue and sought to recoup it – not from the companies but from the individuals.

These schemes were deemed disguised remuneration and, in his 2016 budget, former chancellor George Osborne brought in the loan charge.

In its original form, the loan charge calculated the tax on up to 20 years of income as if it was earned in one financial year – 2018/19. The resulting sums caused considerable financial distress.

Mr Bernal said: “(HMRC) kept sending letters when I was in hospital and my wife had to deal with it. Eventually, I sent in a doctor’s report and they stopped.”

‘I trusted them’

Loan schemes became enmeshed in the recruitment supply chain.

Many recruiters were not aware that the umbrella companies they were working with were tax avoidance schemes. However, the strength of their recommendations often gave workers confidence.

John (not his real name), an IT worker, felt he was in safe hands when he used an umbrella company that was on an approved list given to him by the recruiter Hays in 2010.

“I thought Hays is one of the biggest recruitment companies in the country,” he said. “They’re saying they are okay, so I started using them.”

Hays said it “engages only with umbrella companies that appropriately meet legal and financial obligations… We conduct thorough due diligence… we recommend (contractors) also do their due diligence”.

HMRC has previously warned recruitment agencies they face penalties if they refer people to non-compliant umbrella companies but it has not confirmed whether fines have ever been levied.

Meanwhile, new tax avoidance promoters continue to enter the market.

A recent government report concluded there could be “70 to 80 non-compliant umbrella companies involved in the operation of disguised remuneration avoidance schemes”.

Crackdown

The government is now attempting to clean up the industry. It plans to hold recruitment companies legally responsible for PAYE, rather than umbrella companies.

Sky News understands that the Treasury will today unveil a package of reforms it will consult on as part of a crackdown on tax avoidance schemes.

However, this offers little respite to those who have already fallen victim to these schemes.

While in opposition, key Labour Party figures railed against what they described as mis-selling and promised they would review the policy.

The government has now launched an independent review into the loan charge – and HMRC is pausing its activity until that review is complete – but its focus is on helping people to reach a settlement. The review will not look at the historical role of promoters and recruitment agencies.

That is a bitter pill to swallow for those affected by the loan charge, particularly as many of them were working for the government itself.

‘I sent them a suicide note’

Peter (not his real name) worked at the Department for Business, Innovation and Skills as a project manager for the regional growth fund, a role he was recruited into in 2012 by the agency Capita.

He said Capita recommended he use an umbrella arrangement, which he was told was above board.

“I’m really angry. [Capita] gave me confidence. They are the key agency for central government work… If Capita say something to you then you believe it’s correct. You have to trust what you’re told.”

Capita said: “We have strict policies in place to ensure both Capita and our suppliers comply with relevant law, policies and procedures. Given this was over 12 years ago, we do not have the details to be able to comment on this particular matter.”

Sky News has spoken to other Whitehall workers who have also been affected.

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After the loan charge came into force, Peter was inundated with letters from HMRC. It became overwhelming and in 2019 he tried to take his own life.

“I sent them [HMRC] a suicide note because I was just fed up with all of this,” he said. “I’ve been on anti-depressants. I live in denial. I drink alcohol sometimes quite a bit.”

HMRC said it takes the wellbeing of taxpayers seriously and believes it has made significant improvements to its support services in recent years.

The government department Peter worked for has since been fashioned into the Department for Business and Trade.

It said it was unable to comment on the previous department’s arrangements with Capita but said the government was cracking down on non-compliant umbrella companies.

Anyone feeling emotionally distressed or suicidal can call Samaritans for help on 116 123 or email jo@samaritans.org in the UK. In the US, call the Samaritans branch in your area or 1 (800) 273-TALK

The crash involving a cargo ship and oil tanker off the East Yorkshire coast is bad news for the sea, fish and air in the area. What we don’t know yet is quite how bad it will be.

That depends on a few things – but the speed of the collision, clouds of filthy black smoke from the fires and the leaked fuel are certainly worrying.

Firstly, it matters what was on board those two massive vessels.

Follow live: Jet fuel spilling into sea after tanker collision

Analytics firm Vortexa estimates the 183m-long tanker was carrying about 130,000 barrels of jet fuel (kerosene), which is now leaking into the sea.

Jet fuel is not as sticky or viscous as heavier types of oil, thankfully, so it’s less likely to clog the feathers and fur of birds and seals. It can also be broken down by natural bacteria.

But it can still poison fish and kill animals and plants on the shoreline if it makes its way into the soil there.

The Marine Conservation Society has pointed out the site in the Humber estuary is close to some protected areas and is important for seabirds and harbour porpoises.

‘Hopefully, the effect on wildlife will be minimal’

Martin Slater, director of operations at Yorkshire Wildlife Trust, said: “East Yorkshire’s coast is home to protected and significant colonies of seabirds including puffins, razorbills, gannets and kittiwakes.

“Many birds are gathering offshore on the sea ahead of the nesting season. There are significant numbers of Atlantic grey seals in the area, many rearing this year’s young, as well as porpoises and other cetaceans around Spurn.

“If pollution spillage enters the Humber, this could potentially be devastating for the wildlife of the estuary, including important fish stocks and tens of thousands of overwintering and migrating birds who use the mud flats.”

The Royal Society for the Protection of Birds (RSPB) said the crash was close to the biggest gannet colony in England and warned a leak could be “lethal” to seabirds.

Wildlife authorities have stated they will not intervene in the rescue efforts until all the mariners are accounted for.

A spokesperson for Whitby Wildlife Sanctuary said: “Hopefully, the effect on wildlife will be minimal, but there is an emergency contingency plan in place if lots of oiled birds wash up.”

‘Heavy fuel oil is nasty stuff’

Both ships will have been powered by a dirtier, heavier kind of oil – likely marine gas oil or heavy fuel oil, though we don’t know the details yet.

Heavy fuel oil is nasty stuff.

Cheap, thick and tar-like, it can smother animals and is very dangerous if they consume it, and is extremely difficult to clean up. Let’s hope this isn’t creeping around the North Sea already.

We don’t know how much of either the jet fuel or the oil powering the ships has leaked, or how much will be burned off in the violent fires – which themselves are ploughing black smoke and filthy air pollution into the surrounding atmosphere.

Cargo ship ‘had sodium cyanide on board’

The Solong cargo ship was carrying 15 containers of sodium cyanide among other cargo, according to a report from maritime data provider Lloyd’s List Intelligence.

The container vessel was also transporting an unknown quantity of alcohol, said the casualty report – an assessment of incidents at sea – citing a message from the local coastguard.

Plastic takes hundreds of years to break down, and potentially can choke or trap animals.

Many of us have seen that uncomfortable viral video of a turtle having a straw yanked out of its nose. Previous accidents on cargo ships have seen plastic Lego pieces wash up in Cornwall 25 years later.

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Secondly, the impact depends on the sea and weather conditions around it.

Things like the wind and currents affect how an oil spill spreads in the sea. Scientists can draw up computer models to simulate how the oil could behave.

Thirdly, it matters how quickly this is all tackled and then cleaned up, if necessary, and if it can be.

Usually the slower the response, the worse the impact.

The coastguard has said the incident “remains ongoing” and it has started assessing the “likely counter pollution response” that will be required.

Such a response might need the help of numerous public bodies: the government environment department, the transport department, the Environment Agency and the Maritime and Coastguard Agency.

So for now the best we can hope for – aside from the welfare of the people involved – is that not all the oil is spilled or burnt, that conditions are calm and that rescuers and those cleaning up can work swiftly.

For the first time, young people have been involved in the creation of a major royal palace exhibition, after curators at Kensington Palace approached teenagers to engage a younger audience in what is seen as a very traditional space. 

It’s culminated in Dress Codes – the first ever exhibition positioning young people’s work alongside some of the most significant historic pieces in the royal ceremonial dress collection.

Among the items on display are a red beaded Bruce Oldfield dress worn by Diana, Princess of Wales, on a royal tour to Saudi Arabia in 1986.

Going back a few more decades, there are the two Liberty floral cotton dresses worn in 1936 by then-Princess Elizabeth and her younger sister, Princess Margaret.

Of the 34 items on show, 15 have never been displayed anywhere before, including a rare mourning bodice worn by Queen Victoria.

The involvement of the young people is seen throughout, on the storyboards and videos they’ve created, describing many of the pieces, as they explore the symbolism of royal fashion, court dress codes and diplomatic dress.

They also produced their own garments in response to the priceless royal pieces, to bring to life themes such as soft power, including a punk-style outfit, inspired by a tartan suit worn by the Duke of Windsor.

Autumn, 18, who helped produce it said: “It speaks to what we know as a generation and it gets our insight into what we find interesting…

“I think it’s a way of bringing in a whole new audience.”

Sneha, 17, another of the young producers, said: “I was particularly entranced by the collection… Seeing things like Princess Diana’s dresses, and actually looking at what young Elizabeth and Margaret wore, it actually made it feel so much more real, especially because we were able to go to Hampton Court Palace and look at them, up close, and being able to look at all the weaving, it just made it seem more real, like these were real people wearing it.”

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Helene, 17, was particularly interested in Queen Victoria’s sense of style.

She said: “She was a woman in the highest position of power, surrounded by men, many of which may have thought her inadequate or not right for that position, so I loved how her dress took up space and some elements were quite masculine and I was really interested by that power.”

At a time when the soft diplomacy of the Royal Family has been in the spotlight and discussions around power dressing, it was one of the distinctive themes drawn out by the teenagers involved.

Matthew Storey, collections curator at Historic Royal Palaces, said: “This is such a well-informed generation so they were interested in the politics, and the history as well as the design, of the objects that I care for every day and that was wonderful, they really tested my knowledge as well, [they] asked some amazing, searching questions so they brought out the best in me and the other professionals working on it. It was a genuine two-way collaborative experience.”

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More than three years in the making, Dress Codes brings together pieces from the Royal Ceremonial Dress Collection from 1870 to the present.

The exhibition runs at Kensington Palace from 13 March to 30 November.