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.
Image: 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.
Image: 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.
Image: 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.
Image: 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.
Image: Capita says it has strict policies to ensure the company and suppliers comply with the law. Pic: PA
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
For people with attention-deficit hyperactivity disorder, also known as ADHD, the traditional workplace can be a challenging world to navigate.
Yet, diagnosis rates of the condition are rocketing across all age groups and employment lawyers are now being flooded with enquiries from people who are concerned about how their condition has been handled at work.
Businesses are being forced to pay attention.
Bahar Khorram is one of those people. The IT executive was working at Capgemini, the global consultancy firm. While on her probation period, she started struggling with her tasks and asked for support.
Image: Bahar Khorram
“I was trying to avoid taking the legal route because I really liked the company. This was my dream job, I loved it, and I knew I could do it. So I was trying to manage it in my head and trying to do what they asked. But when I realised that I couldn’t, I was experiencing anxiety,” she said.
“I started losing a lot of weight, I went to the doctor, and I sat there, and I burst into tears, and he said, ‘you are depressed, and you have anxiety.'”
Not everyone’s experience is the same, but people with the condition might have difficulty concentrating on certain tasks or remembering instructions. They might struggle with organisation and restlessness.
Last month, an employment tribunal in London found Capgemini failed to provide the recommended neurodiversity awareness training, and this amounted to discrimination.
In a statement, the company said: “Capgemini is deeply committed to building a truly inclusive and diverse workplace, where everyone feels valued and respected.
“We continuously strengthen our culture of inclusion through employee networks, training, and open dialogue, ensuring that every voice is heard. We don’t comment on specific employees.”
An issue for businesses across the country
The Capgemini case is not remote or isolated. The decision has ramifications for businesses across the country, especially as rates of ADHD diagnosis are climbing.
Official data analysed by Sky News shows the number of people in work with disabilities or long-term health conditions has risen by 21% since the pandemic. That includes a 35% jump in workers with learning difficulties and mental conditions like ADHD.
Image: ADHD can manifest itself in a struggle to concentrate. Pic: iStock
Many of these people will already be in work and are being diagnosed as adults. This is a trend that is particularly pronounced among older women, with ADHD traditionally having been underdiagnosed in young girls.
However, it will also affect the future workforce. According to the Office for Budget Responsibility, the number of disabled children with ADHD as their main condition has more than doubled – from 38,000 in 2013 to 66,000 in 2023.
It means the profile of the workforce is changing, and businesses will have to think hard about how they can harness the potential and meet the needs of their workers to maximise their productivity.
A growing legal issue
Failure to do so could also have legal consequences. Although not every case of ADHD meets the definition of a disability, employment lawyers are increasingly receiving enquiries about possible discrimination related to neurodivergent conditions, especially since the pandemic.
Elizabeth McGlone, an employment lawyer at the law firm Didlaw, said every other enquiry she receives now relates to neurodiversity, up from one in every 10 or 20 before the pandemic.
“So the classic scenario is performance. They’re struggling at work in relation to time management, attendance, assimilating information, assimilating tasks, prioritising. And it’s not so much that they can’t do the job, they are just not having enough adjustments made to be able to do the job,” she said.
“I do think employers have greater responsibilities. I do also think it depends on the size and the resources of your business. So for a smaller business, it’s going to be much more difficult to make great changes. But some of the changes don’t have to be that significant.
“They can be as small as moving someone’s desk so they haven’t got as much surrounding noise, or making sure that they are taking regular rest breaks.”
Grey areas
However, not all cases are clear-cut. Neurodiversity sits on a spectrum, and a diagnosis can create grey areas for businesses, where it is difficult to determine how much of a role the condition is playing in an employee’s performance at work.
“You don’t want to be cynical,” said Ms McGlone.
“Obviously, you take everybody at face value, but I have had chronological circumstances where somebody has got performance issues, the employer isn’t aware of any diagnosis, then a diagnosis has been sought and confirmed… sometimes you do feel some element of it being contrived, but that’s very, very few and far between.”
British journalists have called on Sir Keir Starmer to protect their Gazan counterparts and press Israel to allow international reporters into the war zone.
A vigil was held opposite Downing Street on Wednesday for the nearly 200 journalists killed in Gaza since the war began in October 2023.
Ahead of the gathering, the National Union of Journalists’ (NUJ) London freelance branch handed a letter to Number 10 calling on the prime minister to clarify what steps the government is taking to protect journalists in Gaza and to ensure they have safe access to food, water and necessary equipment.
They also asked what the government is doing to get international journalists into Gaza to report freely. Currently, Israel only allows them in under IDF supervision.
Image: Journalists gathered outside Downing Street for a vigil. Pic: Reuters
At least 189 Palestinian journalists and media workers have been killed by Israeli forces in Gaza since October 2023, according to the Committee to Protect Journalists (CPJ).
It is the deadliest period for journalists since the CPJ started gathering data in 1992.
Israel has repeatedly denied targeting reporters and accused some of those killed of being terrorists, including prominent Al Jazeera reporter Anas al-Sharif, who was killed two weeks ago.
The latest attack happened on Monday, when five journalists were among 21 people killed at Nasser Hospital in a “double tap” strike. Benjamin Netanyahu described it as a “tragic mishap”.
Journalists at the vigil held up placards with the names of Gazan journalists, many of whom were freelance, who have been killed. They read their names out.
Image: Journalists killed on Monday (L-R): Mohammed Salama, Moaz Abu Taha, Hussam al Masri, Ahmed Abu Aziz and Mariam Dagga
The will of Mariam Abu Daqqa, made days before her death on Monday, was read out, bringing tears to the eyes of seasoned reporters as it contained a message to her two children.
And a voice note from Al Jazeera’s Gaza bureau chief, Wael Dahdouh, whose son and grandchildren have been killed, was played out as he encouraged the government and British journalists to do everything possible to stop the war.
Image: NUJ representatives handed the letter into Number 10
‘Starmer can do something’
Mariam Elsayeh, NUJ ethics council representative and freelance journalist, told Sky News the UK has the power to protect journalists in Gaza and ensure international journalists are allowed in.
“We can do anything, we’re a great country, and we have the law and a prime minister who graduated from law school and is known for decades for his humanitarian support,” she said.
“During the Iraq War, we all witnessed him defending activists, and he was defending the freedom of protest, and he was doing a lot, so we are recalling this from history, and we know he can do something.”
Image: Mariam Elsayeh, from the NUJ, said Sir Keir Starmer needs to stand up for journalists
‘A generation has been erased’
She added that foreign journalists are needed “because a generation of journalists in Gaza have been erased”.
“I’m not just looking for foreign journalists to get into Gaza, I would hope to see the Pope asking to get into Gaza, I would hope to see ministers here asking to get into Gaza, I would hope politicians in the European parliament would get in,” she said.
“If you don’t want us to report, at least let people witness, allow politicians to enter.
“This is not insulting the Palestinian people, what the Israelis are doing is insulting the entire international community because they are not respecting anyone, so at least, respect international law.”
The fertility rate in England and Wales fell to its lowest level on record in 2024. It is the third consecutive year that record has been broken.
Other than a slight jump during the pandemic, birth rates have been falling consistently since 2010. On average, women now have 1.41 babies, compared with 1.42 in 2023 and 1.94 in 2010.
Rates in Scotland are even lower still, according to data released on Tuesday by National Records Scotland. Women there have an average of just 1.25 babies, falling from 1.77 in 2008.
To sustain the size of the global population, demographic experts say women need to have an average of 2.1 babies. This is what they call the “replacement rate”.
A similar rate is required to maintain the population of England and Wales, but it has been below that for more than 50 years. Despite that, the population has increased, largely as a result of immigration.
What’s happening in Britain reflects part of a global trend in declining fertility rates. In South Korea, the country with the lowest fertility rate in the world, women now have fewer than one baby on average – just 0.75.
Fertility remains high in many African countries, however. Somalia has the highest fertility rate in the world, with women there having more than six babies on average.
Despite the declining fertility rate, more babies were born in England and Wales in 2024 compared with 2023, although the 2023 figure was the lowest it had been since 1977.
This is because the population of England and Wales grew by more than 700,000 between 2023 and 2024, mainly due to immigration. So a lower fertility rate is offset by there being more women in the country.
Although fertility rates are falling across England and Wales as a whole, they have risen slightly in London and the West Midlands.
Birmingham was the local authority with the largest increase, rising from 1.61 babies per woman in 2023 to 1.75 in 2024. The largest fall was in Maldon, in Essex, where the number fell from 1.59 to 1.37 per woman.
Since 2014, there has been a fall in fertility in every one of the 303 local authorities for which we have continuous data.
Luton, the local authority with the highest overall fertility rate, where women have an average of exactly two babies, recorded the smallest fall – dropping just 6% in the last 10 years.
In places like Torbay, in Devon, Denbighshire, in north Wales, and the City of Bristol, fertility has fallen by more than a third in the past decade.
Data released last month reveals more information about the demographic make-up of mothers in the UK.
There has been a steady and sustained fall in the number of babies born to British-born mothers, but in 2024 that was offset by an increase in births among those born abroad.
The rise is particularly pronounced among mothers who were born in southern Asia.
In 2024, there were 20,000 more babies born in England and Wales to mothers from that region than there were in 2021 – a rise of almost 50% in just three years.
Births to African mothers have also risen sharply over that period, although there has been an equally rapid fall in babies born to mothers from EU countries, coinciding with Brexit coming into effect.
In 2024, just over a third of babies born in England and Wales had mothers who were born outside the UK, but in some areas foreign-born mothers made up a much higher proportion.
In Luton, for example, which we mentioned earlier, has the highest fertility rate in England and Wales, seven in 10 babies were born to foreign-born mothers in 2024.
As of the 2021 census, the total foreign-born population of Luton was 38%, but many of the foreign-born population will be younger, in age groups more likely to have children.
Birth rates by age
Fertility rates for both men and women are now falling among every age group, and the birth rate among under-30s is the lowest it has ever been.
The number of births to women in their 30s had been rising early this century, but has been steadily falling over the last decade.
In 2024, the average number of babies born to mothers aged between 30 and 34 was the lowest it’s been in more than 20 years.
The average age that mothers have their first child is now 29 years and five months in England and Wales, although there are significant variations in different parts of the country.
In the North East, mothers have their first child shortly after their 28th birthday, on average. In London, it’s three years later – just after turning 31.
The financial burden of low fertility
A combination of women having fewer babies and people living longer means that there is a higher economic burden on each person of working age to support those in retirement.
Demographics expert Dr Paul Morland told Sky News: “In terms of economic society politics, the fundamental problem is that you get more people who are of retirement age [compared with] the number of people working.
“The workers are the ones who are doing the work, paying the taxes, and people over a certain age consume a lot in healthcare – an 80-something consumes five or six times as much as a 20-something.
“The triple lock in the UK means very often that pensioners, even at the very bottom, are better looked after than poor workers. This puts more and more pressure on the state and more and more pressure on labour markets.”
The Data and Forensics team is a multi-skilled unit dedicated to providing transparent journalism from Sky News. We gather, analyse and visualise data to tell data-driven stories. We combine traditional reporting skills with advanced analysis of satellite images, social media and other open source information. Through multimedia storytelling we aim to better explain the world while also showing how our journalism is done.