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
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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
More than six million new cancer cases could be diagnosed in England between now and 2040, according to leading charities.
This would equate to a diagnosis every two minutes, which is up from one every four minutes in the 1970s.
A coalition of more than 60 cancer charities, known as One Cancer Voice, is warning the government must take urgent steps to tackle cancer care in England – including faster diagnosis targets and better prevention policies.
The analysis carried out by the charities is based largely on pre-pandemic data and suggests cases will increase by 14.2% over the next 15 years, with diagnoses of some of the most common cancers reaching all-time highs.
This includes over a million new prostate cancer diagnoses, and more than 900,000 for breast cancer by 2040.
The research also finds regional variations:
• South East – over a million diagnoses
• North East – 865,000
• East of England and the South West – 722,000
• London – 714,000
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Man loses voice box after late cancer diagnosis
Six key demands
These figures starkly set out the need for change, and the timing of their release is significant.
Later this autumn, the government is expected to publish its long-awaited National Cancer Plan.
These leading charities have combined forces to put pressure on ministers ahead of its publication, demanding six measures which they say must be implemented if cancer outcomes are to improve:
• A pledge to meet all cancer waiting times by the end of parliament in 2029
• A new earlier diagnosis target, with improved screening programmes
• The introduction of strong cancer prevention policies
• Addressing inequalities in patient care
• Improving access to clinical trials for cancer patients
• Better support for people to live well with and beyond cancer
‘A defining moment’
The pandemic had a huge impact on cancer care in the country, and an ageing population adds further pressures.
But the most recently available data, which is around a decade old, suggests the NHS is still lagging behind many comparable countries.
The chief executive of Cancer Research UK, Michelle Mitchell, described the national plan as a “defining moment”.
“If the UK government delivers an ambitious fully funded strategy, we could save more lives and transform cancer outcomes, propelling England from world lagging to among world leading when it comes to tackling this disease,” she said.
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A Department of Health and Social Care spokesperson said: “This government is prioritising cancer care as we turn around more than a decade of neglect of our NHS.
“We’re already making an impact, with 95,000 more people having cancer diagnosed or ruled out within 28 days between July 2024 and May 2025, compared to the same period the previous year.
“This will soon be supported by our new National Cancer Plan, setting out how cancer care will improve over the coming years.
“We’re also making it easier for people to get tests, checks, and scans with DIY screening kits for cervical cancer, new radiotherapy machines in every region, and by creating the first smoke-free generation.”
Nigel Farage has said he would take the UK out of the European Convention on Human Rights (ECHR) if Reform win the next election.
The party’s leader also reaffirmed his pledge to repeal the Human Rights Act and disapply three other international treaties acting as “roadblocks” to deporting anyone entering the UK illegally.
In a speech about tackling illegal migration, he said a Reform government would detain and deport any migrants arriving illegally, including women and children, and they would “never, ever be allowed to stay”.
Sky News looks at what the ECHR is, how the UK could leave, and what could happen to human rights protections if it does.
What is the ECHR?
On 4 November 1950, the 12 member states of the newly formed Council of Europe (different to the EU) signed the Convention for the Protection of Human Rights and Fundamental Freedoms – otherwise known as the ECHR.
It came into force on 3 September 1953 and has since been signed by an additional 34 Council of Europe members who have joined, bringing the total to 46 signatories.
The treaty was drafted in the aftermath of the Second World War and the Holocaust to protect people from the most serious human rights violations. It was also in response to the growth of Stalinism in central and Eastern Europe to protect members from communist subversion.
The treaty was the first time fundamental human rights were guaranteed in law.
Sir Winston Churchill helped establish the Council of Europe and was a driving force behind the ECHR, which came from the Charter of Human Rights that he championed and was drafted by British lawyers.
Sir Winston Churchill was a driving force behind the ECHR
To be a signatory of the ECHR, a state has to be a member of the Council of Europe – and they must “respect pluralist democracy, the rule of law and human rights”.
There are 18 sections, including the most well-known: Article 1 (the right to life), Article 3 (prohibition of torture), Article 6 (right to a fair trial), Article 8 (right to private and family life) and Article 10 (right to freedom of expression).
The ECHR has been used to halt the deportation of migrants in 13 out of 29 UK cases since 1980.
ECHR protections are enforced in the UK through the Human Rights Act 1998, which incorporates most ECHR rights into domestic law. This means individuals can bring cases to UK courts to argue their ECHR rights have been violated, instead of having to take their case to the European Court of Human Rights.
Article 8 is the main section that has been used to stop illegal migrant deportations, but Article 3 has also been successfully used.
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The ECHR is interpreted by judges at this court in Strasbourg, France. File pic: AP
How is it actually used?
The ECHR is interpreted by the European Court of Human Rights (ECtHR) – you’ll have to bear with us on the confusingly similar acronyms.
The convention is interpreted under the “living instrument doctrine”, meaning it must be considered in the light of present-day conditions.
The number of full-time judges corresponds to the number of ECHR signatories, so there are currently 46 – each nominated by their state for a non-renewable nine-year term. But they are prohibited from having any institutional ties with the state they come from.
An individual, group of individuals, or one or more of the signatory states can lodge an application alleging one of the signatory states has breached their human rights. Anyone who have exhausted their human rights case in UK courts can apply to the ECtHR to have their case heard in Strasbourg.
All ECtHR hearings must be heard in public, unless there are exceptional circumstances to be heard in private, which happens most of the time following written pleadings.
The court may award damages, typically no more than £1,000 plus legal costs, but it lacks enforcement powers, so some states have ignored verdicts and continued practices judged to be human rights violations.
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Inside the European Court of Human Rights. File pic: AP
How could the UK leave?
A country can leave the convention by formally denouncing it, but it would likely have to also leave the Council of Europe as the two are dependent on each other.
At the international level, a state must formally notify the Council of Europe of its intention to withdraw with six months’ notice, when the UK would still have to implement any ECtHR rulings and abide by ECHR laws.
The UK government would have to seek parliament’s approval before notifying the ECtHR, and would have to repeal the Human Rights Act 1998 – which would also require parliamentary approval.
Would the UK leaving breach any other agreements?
Leaving the ECHR would breach the 1998 Good Friday Agreement, a deal between the British and Irish governments on how Northern Ireland should be governed, which could threaten the peace settlement.
It would also put the UK’s relationship with the EU under pressure as the Brexit deal commits both to the ECHR.
The EU has said if the UK leaves the ECHR it would terminate part of the agreement, halting the extradition of criminal suspects from the EU to face trial in the UK.
Keir Starmer has previously ruled out taking Britain out of the ECHR
How would the UK’s human rights protections change?
Certain rights under the ECHR are also recognised in British common law, but the ECHR has a more extensive protection of human rights.
For example, it was the ECHR that offered redress to victims of the Hillsborough disaster and the victims of “black cab rapist” John Worboys after state investigations failed.
Before cases were taken to the ECtHR and the Human Rights Act came into force, the common law did not prevent teachers from hitting children or protect gay people from being banned from serving in the armed forces.
Repealing the ECHR would also mean people in the UK would no longer be able to take their case to the ECtHR if the UK courts do not remedy a violation of their rights.
The UK’s human rights record would then not be subject to the same scrutiny as it is under the ECHR, where states review each other’s actions.
Two victims of John Worboys sued the Met Police for failing to effectively investigate his crimes using Article 3 of the ECHR. Pic: PA
How human rights in the UK would be impacted depends partly on what would replace the Human Rights Act.
Mr Farage has said he would introduce a British Bill of Rights, which would apply only to UK citizens and lawful British citizens.
He has said it would not mention “human rights” but would include “the freedom to do everything, unless there’s a law that says you can’t” – which is how common law works.
Legal commentator Joshua Rozenberg said this would simply confirm the rights to which people are already entitled, but would also remove rights enjoyed by people visiting the UK.
The mother of a baby whose stomach and bowel “moved into her chest” has hailed new research aimed at treating her daughter’s rare condition.
Amelia Turner was given life-saving surgery at Great Ormond Street Hospital (GOSH) when she was a few days old.
She suffered from severe congenital diaphragmatic hernia (CDH) – a potentially fatal condition affecting one in every 3,000 babies.
The condition means the diaphragm – the muscle between the abdomen and the chest – has not fully developed.
As a result, organs that are supposed to sit within the abdomen could move into the chest space and crush fragile growing lungs. It means babies don’t have enough space to grow fully formed lungs.
Current treatment for severe CDH involves surgery while the baby is in the womb, with surgeons delicately placing a surgical balloon into the baby’s windpipe to stimulate the lungs to grow. This only increases survival odds to 50%.
Amelia was born with severe congenital diaphragmatic hernia. Pic: Georgia Turner/PA
‘A complete whirlwind’
Amelia’s mother, Georgia Turner, 26, from London, said finding out she had the condition made her pregnancy “a complete whirlwind”.
“The team hoped Amelia’s condition would only be moderate,” she said. “Unfortunately, after Amelia was born, the clinical team told me how serious her condition was as her bowel and stomach had moved into her chest.”
Amelia spent four months recovering on the neonatal unit at GOSH, then another three months at her local hospital, before she could go home for the first time.
The “cheeky” 17-month-old needed a second surgery after her CDH reoccurred when she was 15 months old.
It’s hoped new research will not only make treatment less invasive and significantly increase survival rates but also lower the chances of relapses.
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Georgia Turner with her daughter Amelia. Pic: Georgia Turner/PA
Science-fiction made real
A system developed by experts at GOSH and University College London in the UK, and KU Leuven in Belgium, would see treatment delivered straight to a baby while still in their mother’s womb.
It would see nanodiamonds used to transfer a hormone, known as vascular endothelial growth factor (VEGF), which stimulates lung growth.
It was tested on lab-grown mini-lungs, using 3D printing to simulate compression, as well as rats with the condition.
One of the experts, Dr Stavros Loukogeorgakis, a GOSH surgeon, said: “Nanodiamonds, 3D-printing and growth hormones in the womb all sounds a bit science-fiction. But this research is really showing us what is possible.”
He said the treatment could be available to families in as little as five years.
Ms Turner said: “New research like this is great to see how experts are trying to make the treatment for CDH more successful for all children, and less invasive.
“Hopefully better treatments will also prevent relapse cases like Amelia.”
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