The scale of the debts owed by the capsized Legitas Group are emerging after news broke last week that liquidators had been appointed to recover debts.
The company offered outsourced payroll services to temporary workers and agencies but abruptly transferred all temps on its books to a PAYE scheme in April after an audit by HMRC raised concerns about its tax and NIC arrangements. Last week, the Daily Mirror revealed that the company was believed to owe around £18 million to its creditors, but the sum now appears to be considerably larger.
Claire Middleton of the liquidators Henderson Logie has told Recruiter magazine that Legitas owes its main creditors, Employ E Ltd, £22.56 million, along with a further £290,000 to Employ E Plus. The Revenue is also believed to be owed £40,000.
HMRC has so far refrained from commenting on Legitas specifically, but has made it clear that the ‘payday-by-payday’ arrangement it used does not comply with the legislation covering national insurance contributions and may also breach national minimum wage legislation.
The news denotes the relentlessly tough stance HMRC is now taking on tax and NIC avoidance schemes. Fully compliant Umbrella Companies in the UK are likely to approve of the Revenue’s efforts, as they do not wish to have their own untarnished reputations wrongly sullied by the dubious practices of the minority of payroll providers that deliberately seek to avoid tax and NIC obligations.
This minority actually place all those who are contracting with them at risk, whereas legitimate PAYE Umbrella Services ensure that all employees have all their due tax and NICs deducted on an automatic basis as they earn.