'Appalling' payroll boss Scott Rooney's 11-year ban slammed as too lenient

A payroll boss has got off with just a yearly ban for every month he managed to channel £37million out of his company, while running a multi-million pound avoidance scheme.

Scott Rooney only came to the authorities’ attention because when winding up his Magnetic Push Ltd (MPL) after just 11 months, he refused to hand the liquidator his books and records.

Upon probing, the Insolvency Service found the 40-year-old to be using MPL (formerly The Knowledgeshares and My PSU Subcontractors), as an umbrella company in an avoidance scheme.

But the investigation also found that despite Leicester-based Rooney declaring just £609 in VAT to HMRC, tax officials were able to go onto claim some £4million from the Liverpool-registered company’s liquidation.  

That was salvageable by the Revenue even though MPL was found to have no PAYE and no NI declarations, and no books or records either, meaning a mega £37million in company expenditure – racked up over just 11 months – could not be accounted for.

'Ghost company'

Claimed by Rooney to be genuine company expenses that left MPL’s bank account between February 2017 and December 2017, the sum, like the reason behind the company’s failure, remains unsubstantiated.

“Most crime in this area targets the Flat Rate VAT scheme but this case seems to have involved a ‘ghost company’ – MPL - that traded just to reap the VAT on workers’ incomes,”  explains former tax inspector Carolyn Walsh.

Now boss of Andraste Accounting, Walsh added: “The wider tax avoidance scam Rooney was said to be a part of involved a network of companies that were set up to trade, often as payroll or contract payment companies as they can generate turnover in the millions, and in the majority of cases, the companies were allowed to fold after a year.

“So no accounts or returns were submitted and the companies were allowed to be struck off, thereby hiding many millions in taxable income.”

'Appalling'

At the High Court in March, and partly reflecting his non-cooperation, Rooney received a judge-extended ban of 11 years, prohibiting him from directly, or indirectly, being involved in the promotion, forming or managing of a company.

Afterwards, the Insolvency Service’s Martyn Pettitt described the ban as “significant”.

Contractor industry advisers sound like they couldn’t disagree more.

Tax lawyer Rebecca Seeley Harris said: “Despite the appalling way that Mr Rooney behaved, and that he orchestrated a multi-million pound tax avoidance scheme, the only repercussions are that he has been banned from being a director. 

“He can still work, and hasn’t [even] had to pay out thousands of pounds – [just] like those [wronged by schemes] have had to do under the Loan Charge.”

'Tougher sentences should be applied'

Clarity Umbrella’s managing director Lucy Smith agrees Rooney has largely got away with it.

“Thirty-seven million pounds -- in 11 months? Due to bad record keeping? Surely this should become more of a criminal offence. And tougher sentences should be applied,” she said.

“That turnover through an umbrella company is large, so a close eye on the finances is absolutely necessary. This was no administrative error!”  

'Now easy to trace and track accountants who assisted'

At Andraste, Ms Walsh agrees that £37m is such a lot of money to generate, and in such a short period of time, that it indicates MPL continued to trade after it was dissolved.

“As Companies House recently placed all dissolved companies back on the register, this type of network of dishonest company set-ups can now be easily traced and tracked back to the individuals -- generally accountants -- who assisted with the company formation and advice on fraudulent trading and then the striking off to avoid tax.”

She continued: “But banks are working closely with the [companies] register, a company name change or closure is immediately taken account of by banks, and dissolved company bank accounts are closed more quickly with banking data being supplied to the appropriate authority.

“So this kind of tax fraud will be harder to perpetrate in the future. But those individuals who managed it in previous years should be worried that the taxman is closing in.”

'Be warned'

Online yesterday, NumberMill boss Louise Rayner said the 11-year ban was what it cost Rooney for orchestrating a tax avoidance scheme.

“This is what is likely to happen if you run schemes dedicated to avoiding paying the correct amount of tax,” she said, seeming to address those tempted by malfeasance. “Be warned.”

However, given Rooney was using MPL to play an active role as an umbrella company in an avoidance scheme, law firm Re Legal Consulting believes mere warnings won’t cut it.

'Need for umbrellas to be regulated'

“This case is a further reminder of the need for umbrella companies to be regulated,” began the firm’s founder Ms Seeley Harris.

“The government has now promised to create a Single Enforcement Body but, it has still got to get the funding for it and there is no parliamentary timetable. 

“The response from the government last week looked promising but, it has only high-level detail. So, there is still much work to be done to regulate the industry.”

'Light reprimand'

But last night a serial umbrella company director said a more age-old deterrent might serve to protect contractors and others from the likes of Mr Rooney.

“Personally I think this sort of announcement by the Insolvency Service is a good thing, even if the official reprimand is light. It really is nice to see people like him being named and shamed.”