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Wednesday, 16 November 2016

Council Pays Tax Dodgers £Millions

Thanet District Council (TDC) has paid £millions to a temporary staff recruitment agency which is alleged by the Guardian newspaper to be involved, along with several other temp agencies, in “aggressive tax avoidance schemes” which are reported to cost the exchequer hundreds of millions a year in lost taxes

HRGO Recruitment, a large nationwide temporary recruitment agency ( ,  has provided  Thanet District Council with its refuse collectors and drivers and street sweepers for at least 5 years. It has offices on Queen Street Ramsgate.
According to the Guardian the company operates a system whereby its workers’ contracts are transferred from a single employment agency into a web of thousands of tiny companies that benefit from the tax breaks. These tiny companies employ just 2 or 3 workers. The mini-companies, qualify for a “£3,000 government subsidy called the employment allowance, which can only be claimed once by a company and was designed to help very small businesses create more jobs or increase wages. The mini employment companies can also generate an additional windfall by charging VAT at 20% but paying it back to the government at about 12%, exploiting arrangements designed to free very small businesses with revenues of less than £150,000 a year from red tape”.

I have checked TDCs  invoice payment spreadsheets and discovered that during  the 12 months between September 2015  and September 2016 the council paid £1.5million to HRGO for providing refuse collectors and drivers and street sweepers. To the best of my knowledge, Thanet Council has been using HRGO to provide its staff  for at least 5 years, if not longer. “This means that the Council  may have paid somewhere in the region of £8 million to HRGO. Out of this large sum of money it’s possible that tens of  thousands of pounds, if not more,  in PAYE and VAT may have  been avoided by HRGO”.

Thanet Council has a legal duty under Section1 of the Public Services (Social Value) Act 2012 to check to ensure how its contracts  might improve the economic, social and environmental well-being of the relevant area”. The Council’s internal Purchasing Guide advises staff that they must take into account this legal requirement when entering into contracts. If a company is using aggressive tax avoidance techniques, as HRGO is alleged to be doing, its  actions will actually detract from the economic,  social  and environmental well being of Thanet because less money is available to invest in our schools, housing, social services, environmental  improvements etc. I will be asking Thanet Council to provide me with a full explanation of what due-diligence it conducted into  HRGO and whether it was aware of the company’s alleged  tax avoidance practices and if so what action it took”.

I also wonder why Thanet Council chose to employ its refuse collectors and drivers and street sweepers via employment agencies for so long. These are mainly permanent jobs which should be carried out by staff directly employed by the Council. I can only assume that the Council chose not to directly employ them to avoid paying pension contributions and sick pay which are part of the  council terms and conditions of employment. This is clear discrimination and prejudice against blue collar workers and I’m astonished that this practice flourished under a Labour controlled council which  said it was opposed to zero hours contracts and supported strong employment right, whilst hypocritically allowing alleged  tax-dodging employment agencies to provide their staff.   

Following the Guardian revelations MPs are now calling on HMRC to close the tax loopholes which allow companies such as HRGO to get away without having to pay their fair share. Personally I hope these tax dodgers are heavily fined and forced to pay back what owe the tax authorities. I also hope that Thanet Council will now end its contracts with HRGO and offer permanent jobs to those staff provided by this shameful and disreputable company.


  1. And they employ people starting them off on a lower rate telling them after you have done 12 weeks your money goes up. Then after 11 weeks they keep a few going and get rid of a load and then take a whole new lot on again and start then off on a low wage again. So they don't have to pay them time and half on Saturday and double time on Sunday. And the whole process starts again 11-12 weeks later. Check there council employment files and you will see there us a pattern on changing staff

  2. £8M in agency fees? Why aren't TDC's HR dept hiring people directly? How many in TDC's HR dept?