Mini umbrella company fraud
Source: gov.uk (2025-08-04)

Find out about mini umbrella company fraud, including checks you should complete and how to report potential fraud.

You should be aware of the potential dangers of mini umbrella company fraud in the supply chain if:
- your business places or uses temporary workers
- you are an agency worker
As a business, a fraudulent supply chain can lead to reputational and financial damage to your business and your workers.

As a user or provider of temporary workers, it’s your responsibility to be clear about:
- who pays the workers
- how they are paid
- who is responsible for making sure all tax returns are sent in and the correct taxes are paid to HMRC
This is the only way to protect your business from becoming involved in mini umbrella company fraud.

If you’re a temporary worker, agency worker or contractor, you may be having your taxes and National Insurance contributions stolen. This may have an adverse effect on your eligibility for sick pay, maternity or paternity pay, state pension and other benefits.

As a temporary worker, agency worker or contractor, you can:
- read more about how and what you’ll be paid (https://www.gov.uk/guidance/working-through-an-umbrella-company)
- use our tool to work out pay from an umbrella company (https://www.gov.uk/guidance/work-out-pay-from-an-umbrella-company)
You should also check that the amounts deducted on your payslip match the amounts shown in your:
- personal tax account (https://www.gov.uk/personal-tax-account)
- student loan repayment account (https://www.gov.uk/sign-in-to-manage-your-student-loan-balance)
- National Insurance record (https://www.gov.uk/check-national-insurance-record)
- pension accounts — contact your pension provider
What mini umbrella company fraud is

Mini umbrella company fraud happens in labour supply chains. Organised crime groups break down one umbrella company into multiple small limited companies. Each company only employs a small amount of workers.

By separating the workforce across many small companies, they can:
- claim incentives aimed at helping small businesses — like the Employment Allowance (EA) (https://www.gov.uk/claim-employment-allowance) or VAT Flat Rate Scheme (FRS) (https://www.gov.uk/vat-flat-rate-scheme)
- build up tax debts or fail to send returns to HMRC and then close the business without making full payment
There’s no single way this fraud is done — it changes as organised crime groups try to hide what they’re doing.

Workers employed by a mini umbrella company may be unaware of these changes or that they may have moved between mini umbrella companies without being told.

In the Upper Tier tribunal decision on 17 July 2025, the tribunal ruled that the mini umbrella company model used in this case was fraudulent. The decision upheld HMRC’s ability to deregister these companies from VAT and deny them access to government small business reliefs. Read the decision Elphysic Limited and others versus HMRC (https://www.gov.uk/tax-and-chancery-tribunal-decisions/1-elphysic-limited-2-phyarreidon-limited-3-rosscana-limited-4-zraytumbiax-limited-v-the-commissioners-for-his-majestys-revenue-and-customs-2025-ukut-00236-tcc) for more information.

The impact of mini umbrella company fraud

Mini umbrella company fraud creates a disadvantage for employment agencies and businesses who follow the rules. It presents an organised crime threat to the UK Exchequer.

It significantly reduces tax payments to HMRC, including:
- PAYE
- National Insurance
- VAT
The fraud can result in the loss of some of a worker’s employment rights.

Warning signs

Mini umbrella companies are low in the supply chain. This means it may be challenging to spot warning signs of fraud. You must be vigilant, especially where the employer of a worker is not the company you have a contract with.

These are some of the signs to look out for, although they should not be taken in isolation. Most mini umbrella companies will display most, if not all, of the signs in the following sections.

Unusual company names

Multiple companies are often set up around the same time and given a similar or unusual name. The registered address may not seem suitable for their types of business activities.

Unrelated business activity

The business activities listed on Companies House entries will often not relate to the services provided by the workers.

Foreign national directors

Foreign nationals with no previous experience in the UK labour supply industry are often listed as directors. They may replace a temporary UK resident director after a short time.

Movement of workers

Employees may be regularly moved between different mini umbrella companies. They are often:
- unsure who their employer is
- not aware of any fraud
Short-lived businesses (also known as transient businesses)

These mini umbrella companies have a relatively short lifespan. New mini umbrella companies will then take their place in the supply chain.

Because of this, you may find that you need to issue a new key information document (https://www.gov.uk/government/publications/providing-a-key-information-document-for-agency-workers-guidance-for-employment-businesses) to workers on a regular basis.

What HMRC is doing about mini umbrella fraud

HMRC’s Fraud Investigation Service is using its civil and criminal powers to challenge those involved in mini umbrella company fraud.

HMRC has deregistered tens of thousands of mini umbrella companies who we believe were involved in fraud.

Where we’ve established that a business in the supply chain knew, or should have known, that there was fraud, we’ve taken steps to:
- deny other businesses in the same labour supply chain the right to recover VAT input tax (https://www.gov.uk/guidance/vat-guide-notice-700#section10)
- transfer liability for any associated penalties to the company officer
In 2017, the government introduced the ‘trader of limited cost’ legislation, after seeing a surge in the number of mini umbrella companies. This helped HMRC to:
- remove several businesses setting up mini umbrella companies
- reduce the number of mini umbrella companies
HMRC works with trade bodies and other government departments to raise awareness of mini umbrella company fraud.

On 21 July 2025, the government published draft legislation making recruitment agencies responsible for PAYE on workers supplied through umbrella companies (https://www.gov.uk/government/publications/umbrella-companies-tackling-non-compliance-in-the-umbrella-company-market/) from 6 April 2026.

Checks you can carry out to protect your supply chain

If your business is using or providing temporary labour, it’s your responsibility to:
- undertake necessary and proportionate due diligence checks
- be clear who pays your workers and how they are paid
- check the credibility of the supply chain
These checks will help safeguard your business from financial, operational and reputational risks.

Information from sources like the Companies House register might help you spot warning signs when you complete your quarterly employment intermediary reports (https://www.gov.uk/government/publications/employment-intermediaries-reporting-requirements).

Read more about supply chain due diligence (https://www.gov.uk/government/publications/use-of-labour-providers).

For more information on recommended approaches on managing your supply chain, read Help with labour supply chain assurance — GfC12 (https://www.gov.uk/guidance/help-with-labour-supply-chain-assurance-gfc12/).

Report potential fraud or tax evasion

Contact HMRC (https://www.gov.uk/government/organisations/hm-revenue-customs/contact/report-fraud-to-hmrc) if you:
- have concerns about a supplier, hirer of labour or associated activities
- want to report someone you think may be evading tax
More information

Read about:
- joint and several liability for unpaid VAT (VAT Notice 726) (https://www.gov.uk/guidance/joint-and-several-liability-for-unpaid-vat-notice-726)
- how to spot missing trader VAT fraud (https://www.gov.uk/government/publications/vat-missing-trader-fraud)
Watch a video that explains what mini umbrella company fraud is.

Video explaining what mini umbrella company fraud is (https://youtu.be/OKuPr_IEECg).