Case of the Two East Lancashire Firms
Two Lancashire firms were ordered to close after enrolling their workers in a tax evasion scheme that paid them below the minimum wage.
According to the Gangmasters Licensing Authority, Apus Contracting Ltd and Vela Contracting Ltd, both of which are based in Rawtenstall and operate under the Zeva brand, misclassified portions of the wages of their employees as unsubstantiated and inflated ‘expenses’ in order to make them exempt from tax by employing a ‘payday by payday’ tax relief model. This allowed employers to avoid paying taxes on those wages.
Workers were provided to fill roles in factories producing cheese and other dairy products, and those workers were automatically enrolled in the scheme. The scheme also covered the workers.
After that, their alleged expenditures were “sent for verification” to a different company known as UKPA.
As a result of the workers’ wages being reduced below the National Minimum Wage rate, the UKPA was in violation of the GLA’s licencing standards. The UKPA claimed that nearly 30 per cent of the estimated expenses should be paid as a service charge.
According to the findings of the investigation conducted by the GLA in East Lancashire Firms , Vela also engaged in wage theft against its employees by failing to pay holiday pay to former employees after those employees had left the company.
All three of these contracting businesses were directly owned by Gary Butterworth, who was also the company director for Apus Contracting, Vela Contracting, and UKPA.
According to the results of the investigation conducted by the GLA, the UKPA never checked or verified any of the claimed expenses, and neither Apus nor Vela offered any evidence to back up their claims.
In August of 2013, the GLA decided to revoke the licences of both of the companies “with immediate effect.”
The decision meant that the companies could no longer work in the GLA sector, which includes the agricultural, horticultural, and shell-fish gathering industries. Despite this, the companies still intend to work in other industries.
After that, Zeva filed an appeal against the decision, which allowed them to continue conducting business until the conclusion of their case. They also made an announcement that they would “vigorously defend this revocation.”
However, rather than contesting the appeal, which was supposed to begin in court on Monday (15 December), the case was withdrawn for ‘commercial reasons,’ as stated on the Zeva website. The appeal had been scheduled to begin on Monday (15 December).
“In my opinion, this appeal was entered solely to prolong the amount of time these companies could operate and bank further profits,” said Paul Broadbent, chief executive of the GLA.
They have also attempted to postpone the hearing in order to make this process take even longer and waste even more money that belongs to the public.
During the time that the GLA was looking into Apus and Vela, Mr Butterworth tried to put some distance between himself and the operations of the companies by reorganising the businesses through a series of companies that were registered in offshore tax havens. However, the GLA claims that he continued to be the beneficial owner of the businesses throughout the investigation.
They claimed that he changed the structure of his businesses once more without providing an adequate explanation prior to the hearing.
Zeva released the following statement on its website, which can be found here: “The decision to withdraw the appeal was a purely commercial decision.” Following discussions with the company’s legal counsel and an investigation into the costs associated with maintaining the appeal, it was determined that this was in the best interest of both the company’s employees and its customers.
“Zeva will now continue to focus the majority of its efforts on providing a compliant umbrella service to temporary workers in industries that are not subject to this regulation.”
According to Alyson Barnes, the leader of Rossendale Borough Council, “It’s appalling, attempting to dodge legislation in any way, let alone in this way.”
Since people’s pay has not been increasing and they are having a harder time making ends meet, it is outrageous that businesses like this one do not pay the minimum wage.
“I’m relieved that these businesses have been prohibited from operating.”
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