MUPPET DIRECTORS INVOLVED IN “MINI UMBRELLA COMPANY” FRAUD – case studies

The following is sourced from TAX POLICY ASSOCIATES, a not-for-profit company founded to improve tax and legal policy and the public understanding of tax –

• https://taxpolicy.org.uk/about/

HOW CRIMINALS USE “MUPPETS” TO COMMIT CORPORATE FRAUD – AND HOW TO STOP THEM

• https://taxpolicy.org.uk/2025/02/13/how-criminals-use-muppets-to-commit-corporate-fraud-and-how-to-stop-them/

OR READ BELOW

Many fraudulent companies at Companies House are run by entirely fake directors – non-existent people with fabricated identities. But many others are fronted by “muppet” directors: real individuals, often recruited through Facebook, who lend their names to companies they don’t control.

The true masterminds behind the fraud remain in the shadows.

From next month, we’re likely to see a surge in muppet directors. Companies House is introducing ID verification rules, making it much harder for fraudsters to register fake identities.

The fraudsters’ likely response? Recruit more muppets.

X2 EXAMPLES OF MUPPETS

Meet Donna:

Note: Donnas identifying details caught up in this scheme are masked because it would be unfair for them to attract random abuse on social media.  

Donna's Facebook profile

Donna seems like a nice person but tends to promote “get rich quick” internet promotions to her friends. These posts didn’t get much attention, and nobody commented.

This one is different:

Unsurprisingly, dozens of people responded, offering £1,800 of free money.

But what is this thing that you can do up to four times, but not if you’re Scottish, and if you’ve done one, then you can’t do another?

Donna’s companies

Here’s what happened to one of Donna’s companies:

Four months after becoming a director, Donna resigned and was replaced by Josefina – a resident of the Philippines:

Not long after, the company was struck off. And this happened 23 times. Usually, Donna is a director for a few months, then replaced by a Philippine resident individual, and then the company is dissolved:

Kelly

Kelly responded to that Facebook comment thread on 15 March:

These companies are still active.

What’s going on?

Donna and Kelly’s companies were used in what’s called “mini umbrella company” fraud—thousands of small companies created to claim tax incentives they’re not entitled to.

• TAX POLICY ASSOCIATES published a four-part report into these frauds in 2023. https://taxpolicy.org.uk/2023/07/03/scheme/
• HMRC’s view of these frauds is set out here. https://www.gov.uk/guidance/mini-umbrella-company-fraud#:~:text=Arrangements%20are%20constantly%20evolving%20as%20organised%20criminals%20try%20to%20hide%20their%20fraudulent%20activities%20from%20HMRC.

HMRC's initial response to the fraud was to ensure that companies with UK directors could only claim the tax incentives. That’s why Donna and Kelly were hired.

But once the fraud has started, they’re not needed—it's better to use directors who can be paid less, which is much more challenging for HMRC to track down. The Philippines is an ideal location.

Is it a crime?

Donna and Kelly know nothing about tax fraud, which is the goal of these companies.

But they both incorporated a company and clicked a box that says they control it – that they’re the “person with significant control”:

This isn’t true.

Donna and Kelly aren’t in control of these companies—they’re doing what someone tells them.

They provided false information to Companies House, and if they did so recklessly or intentionally, that’s a criminal offence.

• https://www.legislation.gov.uk/ukpga/2006/46/section/1112

CONCLUSION

• DO YOUR DUE DILIGENCE AND DO MORE THAN TICK THE BOX

SOURCES

• https://taxpolicy.org.uk/2025/02/13/how-criminals-use-muppets-to-commit-corporate-fraud-and-how-to-stop-them/
• Simon Goodley at the Guardian for his original reporting on the MUC tax fraud  https://www.theguardian.com/uk-news/2016/nov/15/revealed-temp-agencies-avoidance-scheme-costs-taxpayers-hundreds-of-millions