TC09590 - [2025] UKFTT 00878 (TC)

Mrs Walmsley explained that she had met Mr Charlie Vause in around 2016 at another role and that in late August 2019 he asked her if she would be interested in a CIS business opportunity. It was at that point that she had decided, together with her husband, to incorporate RRP. Her role was to manage the resources and processes of the business as well as to carry out the compliance function. She was assisted by Ms Shabbir in the book-keeping function. Mr Vause’s role was to introduce business to RRP. The latter did not have a shareholding in RRP and nor did he act as a director in relation to it. He was not paid by RRP for the work that he carried out and the introductions that he made to it.

In September 2019 Mr Vause identified a business opportunity for RRP with UK Professional Services Limited (“UKPSL”). Between September 2019 and December 2019 Mrs Walmsley spoke with Jeremy Robino (who claimed to be the owner of UKPSL) several times and attended three meetings with him in London. She and her husband, Mr Walmsley, decided that they did not trust UKPSL, and they decided not to work with it. She says that she checked UKPSL on Companies House and was suspicious because Mr Robino was not a director; his two young sons were the directors; and when she questioned him he was evasive.

Mr Vause also contacted Ian Hamilton at IAH Services Ltd, in January 2020, on behalf of RRP, to see if he could start a business relationship between RRP and IAH Services Ltd (“IAH”). Mr Hamilton was introduced to Mrs Walmsley by telephone as a director of IAH. She did not meet him in person, but says that this was largely due to the COVID restrictions in place at the time. Mrs Walmsley says that she understood, at the time, Mr Hamilton to be a qualified accountant (albeit she accepted that she had never, either at the time or subsequently, checked by consulting a professional register or making enquiries of any professional body).

Mr Hamilton left a favourable impression upon Mrs Walmsley. He appeared to be very knowledgeable about payroll and a bit of a workaholic. He approached RRP with a proposal that it provide outsourced payroll bureau services to IAH, which was seeking to expand its operations but lacked the internal capacity to manage high-volume payroll processing.

Mrs Walmsley said that RRP was well-positioned to meet this demand, having developed a reputation for accuracy, speed, and compliance in payroll administration. She describes RRP as possessing a team with extensive experience in processing payroll for numerous recruitment agencies, utilising various software platforms and banking systems. According to Mrs Walmsley, RRP’s operational strengths included rigorous internal controls, adaptability to client-specific requirements, and a commitment to high service standards, all of which were essential to maintaining agency relationships and ensuring regulatory compliance.

Mrs Walmsley characterises Mr Hamilton’s proposal as a conventional commercial arrangement within the payroll industry, whereby one entity subcontracts payroll processing to another with greater operational capability. She notes that such outsourcing is commonplace and unremarkable in the sector.

It was agreed, she states, that Mr Hamilton and his team (including, apparently, Mr Vause now) would be responsible for client acquisition and relationship management, whilst RRP would provide the underlying payroll processing and administrative support. The financial arrangement involved RRP receiving a percentage of the gross timesheet values processed, which included an administrative fee passed on to the agencies. Mrs Walmsley explains that this fee structure was designed to incentivise agency loyalty and varied depending on the complexity of the work and the nature of the agency relationship.

Mrs Walmsley further states that Mr Hamilton undertook responsibility for pension arrangements and for ensuring that all workers were paid under IAH’s PAYE reference. She confirmed that this division of responsibilities was standard industry practice. She also confirms that due diligence was conducted on IAH, including a review of its incorporation documents, VAT registration, and insurance policies, all of which were found to be in order. She was not concerned at the time regarding the legitimacy of IAH or its operations.

Following a telephone discussion between Mrs Walmsley, Mr Hamilton and Mr Vause, WM was incorporated on 4 March 2020 by Mr Hamilton or his associates. Mrs Walmsley explains that the naming convention—closely resembling that of RRP—was deliberate, intended to avoid confusion among temporary workers who might otherwise be unsettled by discrepancies between the names appearing on their payslips, P45s, P60s, pension records, and bank statements. She states that this practice was consistent with industry norms and based on her experience and discussions with senior figures in the recruitment sector.

Mrs Walmsley conceded during cross-examination that Mr Hamilton was not a director or shareholder of WM and yet she accepted that he not only appeared to be in control of WM’s operations (including banking and payroll administration), but also that she thought of WM as Mr Hamilton’s company. Despite this she never met or communicated with the sole director of WM, Mr Stephen Davis – not even remotely. Whilst she said that this was not necessarily problematic in the “payroll industry” she accepted that it could be a “red flag”.

She further accepted that, with hindsight, the fact that Mr Vause disclosed that Mr Hamilton was doing this with other companies represented a “wider problem”. She accepted that she was not given a reason as to why Mr Hamilton was not a director of WM, but said that she had no basis for concluding that WM was not legitimate – she had done the only due diligence possible on a newly incorporated company and confirmed that Mr Hamilton was not “struck off”. She further agreed that Mr Vause had not done his own due diligence on WM.

Nevertheless, Mrs Walmsley did not accept that any reasonable person would have refused to go into business with WM until the issue with regards to Mr Hamilton and WM had been “bottomed out”. She argued that it was very “fluid” in the payroll industry and that businesses might have different companies and bank accounts so as to ensure, essentially, some redundancy around payments.

When asked if it was legitimate to conceal who is running a company Mrs Walmsley replied that she knew Mr. Hamilton was running WM and she never had any reason to contact Mr Davis. She denied that the situation was similar to when she had been introduced by Mr Vause to UKPSL. In that instance she dealt with a Mr Robino, who represented himself, she says, as the owner and director of UKPSL. However, her suspicions were aroused upon reviewing UKPSL’s records at Companies House, which revealed that Mr Robino was not listed as a director; instead, the directorships were held by his two young sons. When she questioned Mr Robino about this anomaly, he responded evasively.

It was agreed that six recruitment agencies, initially processed under RRP’s PAYE reference, would be transferred to WM’s PAYE. Mr Hamilton was able to offer rebates to these agencies to secure greater volumes of business—an incentive RRP could not afford. Mrs Walmsley notes that such rebates are commonplace in the payroll industry and are often decisive in agency decision-making.

Mr Hamilton also offered to fund the development and hosting of a website for RRP. From July 2020, RRP obtained an industry accreditation known as “Professional Passport,” which was displayed on the website and served to reassure recruitment agencies and end clients of RRP’s compliance with employment legislation. The accreditation process involved audits of RRP’s contracts, policies, payroll systems, and regulatory compliance, with follow-up reviews conducted quarterly.

In December 2020, Mr Hamilton requested RRP’s urgent assistance after CSP and Vital, two recruitment agencies, lost their payroll provider. RRP commenced work on 23 December 2020. Mrs Walmsley states that all commercial arrangements were agreed between Mr Hamilton, Mr Vause, and the directors of CSP and Vital, and that RRP was not involved in those negotiations. The work was complex and time-sensitive. In June 2021, Mrs Walmsley requested and secured an increase in RRP’s processing fee.

Mrs Walmsley describes the operational structure in detail. When new clients were introduced, responsibilities and procedures were set out in comprehensive email correspondence. Mr Vause regularly updated RRP on deadlines and procedural changes, often following up with telephone calls. Mrs Walmsley encouraged her team to engage actively in these discussions. Her own role was hands-on, involving oversight of service delivery, resource planning, and financial management.

Mr Hamilton and his colleague Matt, whom Mrs Walmsley believed to be employed by him, liaised directly with clients and relayed any changes in process requirements. Mr Hamilton was deeply involved in day-to-day operations, including the design of spreadsheets for holiday and AWR calculations, invoicing, bank reconciliations, and payroll queries. He appeared to exercise control over WM’s banking arrangements and was able to authorise immediate payments.

The only formal written communication between RRP and CSP or Vital, aside from invoicing, occurred in January 2022, when Mrs Walmsley contacted the agencies regarding unpaid VAT. As to the six agencies originally referred by Mr Vause, Mrs Walmsley states that she handled most of the communication, with some involvement from Mr Vause. Contracts were issued, though not all were returned signed.

Communication with The Recruitment Group (“TRG”) was initially conducted by Mr Vause and his colleagues at WM, but later transitioned to Mrs Walmsley following the appointment of a new Finance Director at TRG. No concerns were raised by TRG or the six smaller agencies during the trading period. Mrs Walmsley did not communicate with CSP or Vital, as they were considered clients of WM. She asserts that the processes were transparent and robust, with daily reconciliations and oversight by RRP’s accountants.

When asked, during cross-examination, why RRP had accepted payments from third party companies for services delivered to WM, Mrs Walmsley said that she knew that Mr Hamilton had other companies and it would not be unusual in the industry. Mr Hamilton always paid on time and there was never a dispute.