Adrian Benedict Sacco, a 55-year-old Malta native, was disqualified for running an umbrella payroll services company with ties to the Isle of Man, potentially costing the public purse millions in unpaid income tax, NI contributions, and corporation tax.
Sacco was the sole director of Best Employment Services (BES), which was founded in March 2015 and offers umbrella payroll services to senior or specialised high-earning contractors working on short-term projects or fixed contracts in a variety of industries, including engineering, IT, and HR.
Contractors could keep £90,000 if they earned £100,000, according to its website, compared to £75,000 if they declared earnings through a limited company and £55,000 if they were taxed as a typical employee through Pay As You Earn (PAYE). BES received a charge from contractors for delivering this service.
As a standard supplier, BES earned paid from clients for the labor of its personnel. Instead of paying its employees their income with the required tax deductions, it paid them a little sum through PAYE and the rest as a loan. The loan component of the employees’ compensation was not deducted and paid with PAYE or National Insurance as it should have been.
BES outsourced its administrative activities to a group of Isle of Man-based enterprises. BES’ fee profits were distributed amongst these entities on a monthly basis, lowering BES’ profits and lowering its corporation tax liability. Sacco was a co-owner of one of these businesses and earned money from it. BES paid roughly £25 million to these entities, according to the Insolvency Service inquiry.
Some of the outstanding loans owed by BES workers were moved to Retentia Services Limited, an Anguilla-based company, with BES exchanging a £20 million loan book for an indemnification agreement. This structure allowed BES to keep less financial assets, and Sacco knew that the indemnity would never be held accountable for any claims. BES’s loans to its employees were never recovered, and BES never paid the requisite tax on its employees’ earnings since Retentia was dissolved before the debts were due.
The High Court approved the liquidators winding-up order for the company in Anguilla in March 2019, following the liquidation of BES in March 2019 after auditors raised concerns about the 2017 accounts, which led to a claim by HMRC for £2.7 million in unpaid corporation tax. Efforts are being made to recover funds.
HMRC had £4.1 million in outstanding claims at the time of insolvency, including corporate tax, PAYE, VAT, and interest, but this amount is projected to grow.
Adrian Sacco, who had previously been a director of a number of other payroll companies that had been dissolved or liquidated during this time, was well aware that the business model was vulnerable to HMRC scrutiny. He stated that he had sought legal assistance, but not in reference to BES’ business model, during the ensuing Insolvency Service probe.
Adrian Sacco accepted a disqualification undertaking from the Secretary of State for Business, Energy and Industrial Strategy after he admitted breaching his fiduciary duty as a director and the Companies Act 2006 by failing to act with reasonable care, skill, and diligence by employing such a business model. His disqualification will take effect on May 24, 2022, and will endure for eight years.
Without the court’s authorization, he is prohibited from becoming involved in the promotion, formation, or management of a firm, either directly or indirectly.
Mark Bruce, Chief Investigator at the Insolvency Service said:
Despite his awareness of the risks, Adrian Sacco has failed in his duties to his employees whilst wilfully abusing the tax system for his own personal benefit. He has shown complete contempt for taxpayers and to those his company was supposed to be providing a service to.
This disqualification should serve as a warning to any other company directors who may be tempted to operate similar business models and flout their obligations that they will be investigated and punished.