UK – Director of Umbrella Payroll company banned for 8 years

June 07, 2022

An apex company director has been disqualified after running a payroll services apex company with links to the Isle of Man, which could cost the ‘treasury’ millions in unpaid income tax, insurance contributions national insurance and corporation tax.

Adrian Benedict Sacco was the sole director of Best Employment Services (BES), which was incorporated in March 2015 and provided global payroll services to high-earning senior or specialist contractors in various sectors, such as engineering, l IT or HR, who often worked on short-term projects or fixed-term contracts.

Its website advised entrepreneurs that based on an income of £100,000 they could keep £90,000, compared to £75,000 if reporting income through a limited liability company, or £55,000 if reporting income through a limited liability company. they were taxed as a standard employee via Pay As You Earn (PAID). Contractors paid a fee to BES for providing this service.

BES received payments from customers for the work of its employees as a normal supplier. However, instead of then paying his employees their salaries with the appropriate tax deductions, he paid them a small amount through PAYE, and the rest was given to them as a loan. Neither PAYE nor National Insurance was deducted and paid for the loan portion of employee compensation as it should have been.

The company has outsourced its administrative functions to a number of Isle of Man related companies. BES’ profits from its fees were split between these companies on a monthly basis, meaning that BES reduced its profits and reduced its corporate tax liability. Sacco was also a co-owner of one of these companies and derived income from it. The Insolvency Service’s investigation revealed a total of nearly £25million paid to these companies by BES.

Some of the outstanding loans owed by BES employees were transferred to Retentia Services Limited, a company registered in the British Overseas Territory Anguilla, with a loan book of £20 million swapped by BES for an agreement of compensation. This arrangement ensured that BES retained fewer financial assets, and Sacco knew that there were no claims for which the indemnity would ever have been liable. Retentia was dissolved before the loans were due, which means that the loans made by BES to its employees were never recovered and that BES never paid the correct tax on the income of its employees.

The Secretary of State for Business, Energy and Industrial Strategy has accepted a pledge to disqualify Sacco, after he admitted breaching his fiduciary duty as a director and breaching the Companies Act 2006 by failing to act with reasonable care, skill and diligence in employing such a business model. His forfeiture is effective as of May 24, 2022 and lasts eight years.

The forfeiture undertaking prevents him from getting involved directly or indirectly in the promotion, constitution or management of a company, without judicial authorization.

Mark Bruce, the Insolvency Service’s chief investigator, said: ‘Despite his awareness of the risks, Adrian Sacco failed in his duty to his employees while deliberately abusing the tax system for his own personal gain. He showed total disregard for the taxpayers and for those his company was supposed to serve. This disqualification should serve as a warning to any other business executives who may be tempted to exploit similar business models and flout their obligations, that they will be investigated and sanctioned.