Further successes against "payday by payday" models - Apus and Vela withdraw appeals

Two Lancashire businesses have been found not ‘fit and proper’ and must cease trading in the GLA sector next week (22 December 2014) after they were identified to be operating a “payday by payday” tax relief model.

Apus Contracting Ltd and Vela Contracting Ltd - both based in Rawtenstall and operating under the Zeva brand – classified amounts of their workers’ wages as unsubstantiated and inflated ‘expenses’ to make them exempt from tax.

Workers were supplied to carry out roles in factories producing cheese and other dairy products and were automatically enrolled onto the scheme. Their ‘expenses’ were then sent to another company called UKPA ‘for verification’.

UKPA claimed nearly 30% of the estimated expenses as a service charge, which reduced the workers’ wages below the National Minimum Wage rate, which is a critical breach of GLA Licensing Standards.

Apus Contracting, Vela Contracting and UKPA were all owned directly by the same person – company director Gary Butterworth.

The GLA investigation found no expenses were ever checked or verified by UKPA and no evidence was provided by Apus or Vela to support their case.

It was also discovered that Vela had withheld wages from its workers by failing to pay holiday pay after workers left the company, which constitutes another critical breach of GLA Licensing Standards.

The GLA revoked the licences of both companies ‘without immediate effect’ in August 2013.

Zeva subsequently lodged an appeal against the decision, which allowed them to continue to trade until their case was concluded, and announced they would ‘vigorously defend this revocation’.

However, instead of fighting the appeal – which had been scheduled to start in court on Monday (15 December) – the case was withdrawn for ‘commercial reasons’, as stated on the Zeva website.

“In my opinion this appeal was entered solely to prolong the amount of time these companies could operate and bank further profits,” said GLA Chief Executive Paul Broadbent.

“They have also sought to adjourn the hearing in order to prolong this period, wasting more public money.”

During the GLA’s investigation of Apus and Vela, Mr Butterworth attempted to distance himself from the companies’ operations by restructuring the businesses through a series of companies registered in offshore tax havens, though he remained the beneficial owner throughout.

Prior to the hearing, he altered the structure of his businesses again with no proper explanation.

In withdrawing both appeals the Zeva press release of 12 December 2014 said it was their ‘firm intention to continue to operate a “Pay Day by Pay Day” model outside of the sector’.

Mr Broadbent added that he was concerned that Zeva considered it to be acceptable to operate this type of tax relief scheme in areas outside the GLA’s control. He added that details of the outcome of the appeal would be referred to HMRC to address the continued use of the “payday by payday” scheme.

END

Press release issued by GLA Communications and Information Officer Paul Fearn. For more information contact 0115 959 7069 or email communications@gla.gsi.gov.uk.

Notes to editors

1. The GLA operates throughout the UK and is a Non-Departmental Public Body, reporting to the Home Office.

2. An appeal court judge previously upheld the GLA’s decision to refuse a licence to FS Commerical, a company that operated a similar scheme to the one used by Apus and Vela. The transcript of the judge’s decision can be found here.

3. It was claimed that the Apus and Vela model differed to that of FS Commercial because of the operation of UKPA. However, in a letter to the GLA on 11 July 2013, it was conceded: “It would be fair to say that the payroll calculation used by [Apus/Vela] to arrive at taxable pay is similar to that described in the FS Commercial judgment.”

4. The GLA has now revoked and refused the licences of eight companies that have operated payday by payday tax models.

5. In their press release, Zeva also cited three key legal areas – Income Tax, National Insurance and National Minimum Wage – and in respect of these stated ‘we are confident that we are acting in a compliant manner’. Advice received by the GLA suggests this is not correct and the three legal areas referred to do not support their use of “payday by payday” models, nor alter the legal position regarding National Insurance Contributions. The GLA’s most recent guidance can be found here. Therefore the GLA will not be changing its stated position as set out in GLA brief 39.

6. HMRC guidance can be found at: http://webarchive.nationalarchives.gov.uk/+/http://www.hmrc.gov.uk/news/reliefmodels.htm and http://webarchive.nationalarchives.gov.uk/+/http://www.hmrc.gov.uk/news/news29 0812.htm

7. Apus Contracting Ltd was revoked with a score of 120 penalty points and Vela Contracting Ltd with a total of 150 points. Points are accrued for breaching GLA Licensing Standards with a total of 30 being enough to result in the loss of a licence.

8. When a licence is revoked “without immediate effect” the company can continue to trade until the appeal is heard (see: The Gangmasters (Appeals) Regulations 2006, 5(3): http://www.legislation.gov.uk/uksi/2006/662/regulation/5/made)

9. The Apus and Vela appeals were withdrawn on 12 December 2014. The revocation takes formal effect on 22 December 2014. This is accordance with regulation 5(5)(b) of The Gangmasters (Appeals) Regulations 2006 (see link in point 7 also) which states that a decision shall take effect the sixth working day after the being notified of the withdrawal by HM Courts and Tribunal Service.

10.Any GLA licenced labour provider currently using the services of any company within the Zeva group must cease using the company on 21 December 2014. On 22 December 2014 the names Apus Contracting Ltd and Vela Contracting Ltd will be removed from the GLA Public Register.

11.The use of an unlicensed company to provide services that require a licence is a criminal offence

www.gla.gov.uk