THE scale of claims being made by HM Revenue & Customs against a string of employment companies run by an Edinburgh businessman has risen to £126 million.
Liquidators have already been appointed to two companies run by former solicitor David Allen and on Friday were brought in to a third, Work Legal-E, at a creditors’ meeting in the capital.
HMRC has submitted claims totalling £58m for unpaid taxes and penalties in respect of the first two companies but has now claimed £68m from the third.
While the process of unravelling the financial affairs of the three companies is likely to take many months, the total amount which may be available to pay creditors is expected to be dwarfed by the figure being claimed by HMRC.
Claire Middlebrook, an insolvency partner with Scottish accountants Henderson Loggie who is handling the affairs of all three companies, told Scotland on Sunday that so far some £7m of cash and assets had been identified across the three companies.
Although Employ-E, Legatis Group and Work Legal-E, which operated from offices in George Street in Edinburgh, were legally separate companies they were all linked through 60-year-old Allen, who is understood to own a home in the Borders. In total some 60,000 workers – mostly in manual and low-paid roles – were on the books across the three companies which provided services included outsourced payroll schemes for recruitment agencies and temporary workers.
It is understood the huge claim submitted by HMRC mainly relates to tax, National Insurance contributions and penalties which it believes are due on the earnings of workers handled by the companies but which were not paid because of the way expenses were accounted for.
Although HMRC said it was unable to comment on individual cases, because of confidentiality, it is thought it may look to recoup the money it believes it is owed from individual workers.
Paul Hughes of Liverpool-based i-Paye, which provides tax services to contractors and temporary workers, said those affected could be hit hard. “These workers are likely to be on very low wages and to be landed with a tax bill for say £1,000 and then to have to pay it through deductions from their future earnings would be a major issue for them.
“These aren’t IT contractors on £500-£600 a day but food packers and warehouse workers earning the minimum wage,” he said.
According to its latest accounts for the 13 months to 31 December 2010, Work Legal-E had a turnover of £108.8m but lost £16m.
In the director’s report Allen blamed the loss on “substantial fraudulent transactions carried out by an employee of and external consultants to the company”.
Middlebrook said that as no accounts had been filed since then, one of her first tasks was to establish the full financial position of the company.