Agencies face probe into tax fiddles

Agencies supplying drivers to transport operators are to be investigated by HM Revenue & Customs about the so-called ‘umbrella’ schemes they run, which see them pocket most of the tax relief which they claim for their ‘self-employed’ employees. In some cases, recruits are told they must join the agency’s umbrella scheme if they wish to be allocated work.

Such schemes are legal if the agency worker is genuinely self-employed, but the umbrella company is legally only allowed to retain 30 per cent of the rebate at maximum as a fee: fees of up to 80 per cent are not unknown in the industry.

Agency workers are often told that only companies can reclaim these expenses, which is completely untrue. The reality is that many are left earning less than the minimum wage, making the schemes themselves illegal.

Industry figures estimate that at least a quarter of a million agency workers are in umbrella schemes, which cost the public purse around £390 million a year.