Welcome to China street: The fraudulent businesses taking over UK homes creating a ‘huge tax black hole’

27 November 2024, 12:50 | Updated: 27 November 2024, 13:03

Bogus online businesses could be cheating the exchequer of ‘hundreds of millions’ of pounds in tax, LBC has learned, with MPs calling on Companies House to do more following our findings.

Figures seen by LBC show 30,000 Chinese companies have registered to a UK address so far this year - with a significant number believed to be fraudulent.

Registering an address for a new company in the UK is simple. It doesn’t require any proof of residency or connection to the property being registered.

The entire process through Companies House can take less than 24 hours and comes at a cost of £50 - recently increased from £12 in May - a system that is being exploited.

Read more: Matthew Wright 'crushed' by £19k fraud as he reveals how scammers tricked him into handing over bank details

Read more: 'We lost £60k to a scammer we genuinely thought was our son, then the bank - then the police'

LBC discovered 70 companies run by Chinese individuals registered to 38 houses in just one week on a street in a West Sussex village.

Residents in Billingshurst received letters from Companies House in April congratulating the new director of the company, with nationality stated as ‘Chinese’, resident country as ‘England’ and occupation as ‘Business Person’ - indicating the companies were fraudulent.

The companies claimed to be selling ‘footwear’, ‘perfume and cosmetics’ or were ‘non-specialised wholesale traders’.

Woman targeted by fraudulent Chinese businesses registering companies in her address

Some residents started receiving correspondence from UK-registered banks advertising business accounts.

One resident, Julie Waulmsley, said: “Letters started arriving from Companies House. I then came home one evening to see three more company letters through the door - it just went on and on.

“Eventually I had seven Companies House registration letters, letters from HMRC, and a number of credit card applications to my address which was really worrying and stressful.

“I’ve had to get my accountant involved, and his legal team because I can’t afford for this damage my credit score or my own legitimate company’s credit score and I’m still waiting on my accountant’s bill for helping sort it.”

Financial expert Graham Barrow, who runs the company RiskAlert247, which tracks suspicious firms popping up in the UK, told LBC some days this year he’s seen "200 to 300 Chinese businesses register to UK addresses". He believes "highly organised criminal gangs" are behind it.

“These companies are selling legitimate goods to UK consumers - not fake brands - but small electricals, toys, household goods - a range of things without paying tax," he said.

“Lots of these companies using UK addresses or using fictitious addresses won’t get a VAT return - they don’t have a registration number or they’re using someone else’s VAT registration number - they’re cheating HMRC out of hundreds of millions of pounds.

“It’s a huge problem – it’s happening in plain sight and it’s a great unreported crime because the loss of revenue, both VAT and corporation tax.”

Officer defers retirement to help elderly victim with fraud case

The vast expansion of Chinese businesses using British addressees this year is dramatic.

“We had in just one day in May - 791 Chinese individuals register a business in the UK," Mr Barrow said.

“We are talking about 30,000 companies coming out of China but being registered here in the UK, it’s very hard to conceive that activity is entirely independent.

“In October we saw a massive increase in Mexicans registering companies to UK addresses that Chinese companies used to register to - with Companies House now clamping down on the removal of fraudulent Chinese businesses from their register – fraudsters are simply changing their nationality to continue trading.”

Reacting to LBC’s findings, the All Parliamentary Group on Anti-Corruption and Responsible Tax said: “We are in the middle of a cost-of-living crisis and people are struggling to feed their children and heat their homes.

“It is absolutely shocking to discover that we are providing tax dodgers with a loophole to avoid paying their fair share.

“Companies House needs to get to the bottom of this. If it does transpire that these bogus registrations are the work of organised crime groups, the relevant crime agencies will need to step in, and indeed be resourced and empowered by Government to do so effectively.”

Foreign Correspondent Michael Sheridan explains why Britain is not China's favourite country

A spokesperson for Companies House told LBC: “We take fraud seriously and all allegations are fully investigated.

“Since March we have been using our new powers to crack down on the misuse of the register by querying and questioning information provided by companies.

“Where incorrect, suspicious, or fraudulent filings are made, we will take appropriate action. We proactively share information with other relevant government agencies and law enforcement.

“We are initiating the strike off process of 3,000 companies per week.

“From the 4th March to 11th November Companies House has removed 50,400 registered office addresses, removed 39,600 officer addresses, and 36,700 PSC addresses.

“Within the next two years, we will introduce compulsory identity verification checks for new and existing directors (and equivalents), people with significant control, as well as those filing information with Companies House.”