The director of an umbrella payroll services firm that told contractors they could take home earnings of £90,000 on income of £100,000 has been disqualified from being involved in the promotion, formation or management of a business for eight years.
Adrian Benedict Sacco was the sole director of umbrella company Best Employment Services (BES), which provided payroll services for senior, specialist and high-earning contractors working in sectors including HR, engineering and IT.
BES’s contractors, who typically worked on fixed contracts or short-term, were advised by the firm’s website that, by using BES, they could take home £90,000 on income of £100,000, compared to £75,000 if their earnings were declared via a limited company or £55,000 if they worked as a PAYE employee.
Clients paid BES for work performed by contractors, before BES then paid contractors a small amount via PAYE, with the remainder being paid as a loan. As a result, PAYE and National Insurance Contributions were not deducted from the bulk of the pay, paid via the loan arrangement.
Administrative functions for BES were outsourced to several connected businesses based in the Isle of Man (one of which was co-owned by Sacco), with BES profits being split between these firms each month, enabling BES to reduce its profits and corporation tax liability.
Some loans due from BES contractors were transferred to Anguilla-based business Retentia Services Limited in exchange for an indemnity agreement, meaning BES held fewer financial assets and would have no indemnity liability claims. Retentia was ultimately dissolved prior to the loans falling due, meaning loans were not recovered and BES never paid the correct tax on employee earnings.
BES was liquidated in March 2019 after concerns were flagged by auditors over its 2017 accounts. As a result, HMRC issued a claim for £2.7 million in unpaid corporation tax, while the High Court approved a winding-up order regarding the company in Anguilla, with efforts underway to recover funds.
Upon BES’s liquidation, HMRC had £4.1 million in outstanding corporation tax, PAYE, VAT and interest claims, a figure that is expected to rise higher.
Sacco was reported to be aware that BES’s business model was open to HMRC challenge and, during a subsequent investigation by the Insolvency Service, said that he had taken legal advice, but not regarding the company’s business model.
The Secretary of State for Business, Energy and Industrial Strategy subsequently accepted Sacco’s disqualification undertaking after he admitted that he had failed his duties as director and had not acted with due care, skill and diligence in adopting BES’s business model.
Insolvency Service Chief Investigator Mark Bruce said: “Despite his awareness of the risks, Adrian Sacco has failed in his duties to his employees whilst wilfully abusing the tax system for his own personal benefit. He has shown complete contempt for taxpayers and to those his company was supposed to be providing a service to.”
“This disqualification should serve as a warning to any other company directors who may be tempted to operate similar business models and flout their obligations that they will be investigated and punished.”
