HRGO Recruitment, a large nationwide temporary recruitment agency (http://www.hrgo.co.uk/about) , 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.