Many fraudulent companies at Companies House are run by entirely fake directors – non-existent people with fabricated identities.
But, Dan Neidle from Tax Policy Associate, says many others are fronted by ‘muppet’ directors: real individuals, often recruited through Facebook, who lend their names to companies they don’t actually control.
It all means the true masterminds behind the fraud remain in the shadows.
From this month Neidle believes we are likely to see a surge in muppet directors. Companies House is introducing ID verification rules, making it much harder for fraudsters to register fake identities. He says the likely response will be to look for more muppets!
The Low Incomes Tax Reform Group issued a press releases in 2023 warning people not to get involved in these ‘director’ schemes, but Tax Policy Associates wants more done, and has three suggestions:
- Companies House’s incorporation website should add prominent warnings of penalties and criminal liability for people acting as “nominee” directors – i.e. agreeing to be a director on paper and follow someone else’s instructions. With the warning not merely a tick-box, but requiring new directors to type that they understand the warning.
- Harsh as it may sound, we need widely publicised prosecutions of people caught pretending to be directors. People will only stop being muppets if they know they face serious consequences.
- Facebook uses its immense resources and knowhow to block people from promoting ‘get rich quick’ scams.
Neidle believes an obvious response from the fraudsters if these moves were made would be to exclusively hire muppet directors from outside the UK, who are less likely to understand any warnings, and much less likely to have seen any prosecutions of previous muppets. That will, however, be less attractive to the fraudsters – if a company is trying to present itself as a real UK company (either to HMRC or other potential fraud victims) then foreign directors are a red flag. But if he is wrong about this, and Companies House sees an explosion in foreign muppets, then a radical solution might be needed, like requiring all foreign directors of UK companies to appoint a UK agent covered by money laundering rules.
Neidle and his Tax Policy Associates are hoping Companies House are ready to act.
Read the full story at: https://taxpolicy.org.uk/2025/02/13/how-criminals-use-muppets-to-commit-corporate-fraud-and-how-to-stop-them/
