Major UK recruiters linked to tax avoidance schemes after workers hit with crippling HMRC demands
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.
Manuel Bernal was not aware he was exposed to 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.
HMRC has pursued around 50,000 people for missing tax
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.
People have protested about the loan charge outside parliament. Pic: PA
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.
Hays is one of the best known recruitment agencies in the UK. Pic: PA
“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.
Capita says it has strict policies to ensure the company and suppliers comply with the law. Pic: PA
Read more:
Thousands targeted by tax-collecting scheme linked to suicides
HMRC accused of ‘sinister’ tactics in crackdown
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
UK
‘My dad could still be here’, says daughter of Bhim Kohli, 80, killed by children in Leicestershire park attack
The daughter of a man who was killed by two children has told Sky News “there is a possibility” he could have still been alive if police had taken anti-social behaviour reports more seriously.
Susan Kohli has spoken to The UK Tonight With Sarah-Jane Mee about what she says were failures by the Leicestershire force, leading up to the death of her 80-year-old father Bhim Kohli near Leicester in September 2024.
Mr Kohli was racially abused and physically attacked just yards from his home as he walked his dog in Franklin Park, Braunstone Town. He suffered a broken neck and fractured ribs, and died in hospital the next day.
Susan Kohli
Susan Kohli is critical of how Leicestershire Police dealt with earlier reports of anti-social behaviour in the area in July and August 2024, before the attack on her father. The force said it did not identify misconduct or missed opportunities, which could have prevented Mr Kohli’s death.
In one of the cases, Ms Kohli said her father faced abusive and racist comments and was spat at. Although the incident in August was not related to her father’s death, she believes a stronger police response could have deterred her dad’s killers.
“Why is it that they’re not taking these things seriously? Are they just waiting for something to happen? Because that’s literally what it looks and feels like.
“They waited for someone to lose their life before they took any stance. If they had arrested these two boys prior to that incident on the 1st of September, there is a possibility my dad could still be here,” she said.
A boy, who was 14 at the time of the attack, and a girl, who was 12, denied their part in the killing but were found guilty of manslaughter at Leicester Crown Court in April. The pair cannot be named because of their age.
Jurors heard the boy kicked and punched Mr Kohli – encouraged by the girl who recorded parts of the attack while laughing.
Susan Kohli told Sarah-Jane Mee she felt the children’s sentences were too lenient
Ms Kohli said she felt their sentences were too lenient after the boy received seven years’ detention while the girl was given a three-year youth rehabilitation order.
“We need the sentencing guidelines to be looked at, whether it’s a child or an adult, they know what they are doing at that age.
“Why is it that because they are a child that they get half the sentence of an adult? He’s going to be out in three and a half years or even less. How is that justice for taking somebody’s life? But that’s not justice at all. They’ve given us a life sentence.”
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Daughter’s anger over child killers
In August, the Court of Appeal ruled the boy’s sentence will not be changed, saying it was neither unduly lenient nor manifestly excessive.
Solicitor General Lucy Rigby had referred the sentence to the court under the unduly lenient sentence scheme. The girl’s sentence was not referred to the Court of Appeal.
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Leicestershire Police told Sky News that, due to prior police contact with Mr Kohli, the force referred itself to the Independent Office for Police Conduct (IOPC).
The force found that proportionate and reasonable lines of enquiry were followed and concluded that no misconduct or missed opportunities which could have prevented Mr Kohli’s death were identified.
Chief Superintendent Jonathan Starbuck said: “The death of Bhim Kohli is an extremely shocking, traumatic and upsetting incident and our thoughts, sorrow and sympathies continue to remain with Mr Kohli’s family and friends.
“We know that anti-social behaviour has a huge impact on people’s lives. Preventing and addressing incidents and community concerns is of the utmost importance to our force in order to ensure the safety of our residents. This is something we continue to work on, address and to make ongoing improvements wherever we can.
“Through our own local investigation, following direction by the IOPC, we also identified organisational learning in relation to improving our system of logging and tagging anti-social behaviour incidents.”
An IOPC spokesperson said: “We agreed with Leicestershire Police’s finding that police officers did proactively investigate matters reported to them and there was nothing to indicate any officers or police staff committed a criminal offence or behaved in a manner justifying disciplinary proceedings.
“And we agreed with learning identified by the force in respect of accurately recording and tagging incidents of anti-social behaviour (ASB), thus ensuring incidents can be dealt with appropriately and to support the long-term management and deterrence of ASB.”
The UK has just sizzled through its hottest summer on record, a phenomenon made 70 times more likely by climate change, the Met Office said today.
It beat the previous high set in 2018, and kicks the notoriously hot summer of 1976 into sixth place.
The persistent heat drove hosepipe bans, “nationally significant” water shortfalls, and even a “false autumn” in places.
The new provisional data found temperatures between 1 June and 31 August 2025 were 16.10C on average across the UK – much higher than the previous record of 15.76C in 2018.
The difference might sound small, but – as an average over a three-month period, including day and nighttime temperatures – is in fact substantial.
All the top five warmest summers have occurred since the year 2000, which the Met Office called a “clear sign of the UK’s changing and warming climate”.
This summer was the hottest by far, much warmer than all the previous records, and relegating 1976 to sixth place.
Did autumn come early this year?
The heat gave rise to early signs of autumn, with blackberries ripening early and leaves turning brown and falling to the ground in August.
This so-called “false autumn” is not the early arrival of the next season, but a survival mechanism of trees and plants when stressed by extreme summer conditions.
They shed leaves and fruit ahead of schedule to conserve water and energy, especially the younger trees whose shallow roots can’t access moisture further underground.
Kevin Martin from Kew Gardens called false autumns a “visible warning sign”.
“Trees are remarkably resilient, but they are also long-lived organisms facing rapid environmental changes.”
Was this summer warmer than 1976?
This summer was the hottest on record going back to 1884, and far warmer even than the memorably hot summer of 1976, which now trails in sixth place.
The Met Office’s Dr Mark McCarthy said this shows how “what would have been seen as extremes in the past are becoming more common in our changing climate”.
The summer of 1976 is remembered for its heatwave that lasted more than two weeks, and 16 days in total with temperatures over 32C.
Although 2025 has had just nine days of temperatures over 32C, what is “striking” about this summer is how consistently warm it was, the Met Office said.
Why was this summer so warm?
There were a number of factors that made it so warm, so persistently.
Lingering high pressure made for settled, sunny and warm weather, and fuelled four heatwaves.
It was also very dry, with about a quarter less rain than average for summer – though that varied by region. But it followed the driest spring in England for more than a century.
Dry ground holds less moisture that can evaporate: a process that usually cools things down.
And a marine heatwave sent sea temperatures on the surface well above average, with a knock-on impact on air temperatures.
Overnight temperatures were also high, keeping the average up.
What about climate change?
Climate change made a summer as hot or hotter than this year 70 times more likely, the Met Office said.
It adds another layer of heat on top of the other weather patterns that may have happened without humans changing the climate.
The UK is warming by roughly 0.25C per decade, and is already at least 1.24C warmer than the period between 1961-1990.
Without climate change, a summer like in 2025 would have happened about once in every 340 years. Now it’s expected once in five years.
Anna Roguski from Friends of the Earth, said the summer “underlined how unprepared the UK is for extreme heat”.
She said we “urgently” need to adapt towns with things like stricter building standards, shaded streets and “far more nature woven through neighbourhoods – trees, wetlands and green spaces help to keep things cool”.
“But adaptation alone won’t be enough. To stop summers spiralling ever hotter, we must slash emissions.”
A retired Church of England vicar who was part of an extreme body modification ring run by man who called himself the Eunuch Maker has been jailed for three years.
Warning: The following article contains graphic details of extreme physical mutilation
Reverend Geoffrey Baulcomb, 79, pleaded guilty to causing grievous bodily harm with intent after a nine-second video of him using nail scissors to perform a procedure on a man’s penis in January 2020 was found on his mobile phone.
He also admitted seven other charges, including possessing extreme pornography and making and distributing images of children on or before 14 December 2022.
Prosecutors said some of the material included moving images which had been on the eunuch maker website, run by 47-year-old Norwegian national Marius Gustavson.
Marius Gustavson
Gustavson was jailed for life with a minimum term of 22 years last year after a court heard he made almost £300,000 through his website, where thousands of users paid to watch procedures, including castrations.
Baulcomb was said to have been an “acquaintance” of Gustavson, and the pair exchanged more than 10,000 messages with each other over a four-year period.
He was formerly a vicar at St Mary the Virgin Church in Eastbourne but retired from full-time ministry in the Church of England in 2003.
The diocese of Chichester said he applied for “permission to officiate”, which allows clergy to officiate at church services in retirement, when he moved to Sussex the following year.
But Baulcomb was banned for life from exercising his Holy Orders following a tribunal last year, which heard he was issued with a caution after police found crystal meth and ketamine at his home in December 2022.
He had claimed experimenting with drugs or allowing his home in Eastbourne to be used for drug taking would “better enable him to relate and minister to people with difficulties as part of his pastoral care”.
The diocese said the Bishop of Chichester immediately removed his permission to officiate after being contacted by police, and bail conditions prevented him from attending church or entering Church of England premises.
‘Nullos’ subculture
The Old Bailey heard last year that extreme body modification is linked to a subculture where men become “nullos”, short for genital nullification, by having their penis and testicles removed.
Gustavson and nine other men have previously admitted their involvement in the eunuch maker ring, which one victim said had a “cult-like” atmosphere.
The life-changing surgeries, described as “little short of human butchery” by the sentencing judge, were carried out by people with no medical qualifications, who he had recruited.
Prosecutors said there was “clear evidence of cannibalism” as Gustavson – who had his own penis and nipple removed and leg frozen so it needed to be amputated – cooked testicles to eat in a salad.
Gustavson, who was said to have been involved in almost 30 procedures, pleaded guilty to charges including conspiracy to commit grievous bodily harm between 2016 and 2022.
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