The agency, Dalespay, places workers with client companies, and the individuals are then paid with a mixture of minimum wage taxed income and larger tax free payments made as a result of signing an annuity agreement.

HMRC published details of the company and warned that this type of annuity agreement was tax evasion and breaks the rules.

Dalespay was set up in June 2021 and is run by director Austen Merritt, operating out of an address in Richmond, Yorkshire as a sole trader business. The latest filleted accounts for year end June 2022 showed that the agency had a balance sheet of £217,046 with £239,819 in creditor debt. It also has an outstanding tax bill of £120,774.

Merritt is also a director of a recruitment agency called Elringtons in London, and also has his own business Expansion Wealth Ltd, which was registered in May 2022 according to records on Companies House and is described as a management consultancy.

Dalespay claims to ‘offer a simple, no-fuss contractor payroll solution that allows you to manage your finances effortlessly’ according to its website which is very similar to many of the umbrella companies recently named by HMRC. It features a number of articles on its website although most of them are blind links which do not open. The only active story about P60s goes straight to bona fide organisation Contractor UK which has nothing to do with Dalespay.

Merritt has a deal with offshore company Bestia Holdings, based in Larnaca, Cyprus, which is owned by Giannakis Fysentzou and was established in May 2020.

The agency’s contractors are hired for temporary work arranged by Dalespay through clients and then have to sign an annuity agreement with Bestia Holdings, allowing them to earn so-called ‘grantee payments’ which are tax free.

The individuals receive a payment from Dalespay; however, tax and National Insurance contributions (NICs) are only deducted on a small part of the amount. This is evidenced on the payslips and figures reported to HMRC.

HMRC said that the grantee payments are additional disguised income for services provided by individuals through Dalespay, and the entire payment should therefore be subject to tax and NICs.

Anyone being paid through this type of scheme ought to proceed with caution as the likelihood is that the individual will be avoiding tax at the very least and will be liable for all unpaid tax and related penalties. HMRC will take action if it suspects tax fraud.

Dalespay and its Cypriot partner will not be fined or penalised for running the schemes that flagrantly breach employment tax law.