TWO Lancashire firms have been told to shut up shop after they enrolled their workers on a scheme which reduced their wages to below the minimum wage to avoid tax.

Rawtenstall-based Apus Contracting Ltd and Vela Contracting Ltd — both operating under the Zeva brand — classified amounts of their workers’ wages as unsubstantiated and inflated ‘expenses’ to make them exempt from tax by operating a ‘payday by payday’ tax relief model, according to the Gangmasters Licensing Authority.

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Workers were supplied to carry out roles in factories producing cheese and other dairy products and were automatically enrolled onto the scheme.

Their ‘expenses’ were then sent to another company called UKPA ‘for verification’.

UKPA claimed nearly 30 per cent of the estimated expenses as a service charge, which reduced the workers’ wages below the National Minimum Wage rate, a breach of the GLA’s licensing standards.

The GLA investigation found that Vela also withheld wages from its workers by failing to pay holiday pay after workers left the company.

Apus Contracting, Vela Contracting and UKPA were all owned directly by the same person – company director Gary Butterworth.

The GLA inquiry found no expenses were ever checked or verified by UKPA and no evidence was provided by Apus or Vela to support their case.

The GLA revoked the licences of both companies ‘without immediate effect’ in August 2013.

The ruling meant the companies could no longer worker in the GLA sector — the agricultural, horticultural and shell-fish gather industries — although they still plan to work outside the sector.

Zeva subsequently lodged an appeal against the decision, which allowed them to continue to trade until their case was concluded, and announced they would ‘vigorously defend this revocation’.

However, instead of fighting the appeal – which had been scheduled to start in court on Monday (15 December) – the case was withdrawn for ‘commercial reasons’, as stated on the Zeva website.

GLA chief executive Paul Broadbent said: “In my opinion this appeal was entered solely to prolong the amount of time these companies could operate and bank further profits.”

“They have also sought to adjourn the hearing in order to prolong this period, wasting more public money.”

During the GLA’s investigation of Apus and Vela, Mr Butterworth attempted to distance himself from the companies’ operations by restructuring the businesses through a series of companies registered in offshore tax havens, though he remained the beneficial owner throughout, according to the GLA.

Before the hearing, they said he altered the structure of his businesses again with no proper explanation.

In a statement on its website, Zeva said: “The decision to withdraw the appeal was a purely commercial decision. After consulting with legal advisors and ascertaining the costs of continuing the appeal, this was in the best interest of the company’s clients and staff.

“Zeva will now continue to focus its efforts on providing a compliant umbrella service to temporary workers outside of this regulated sector.”

Leader of Rossendale Borough Council, Alyson Barnes, said: “It’s appalling, attempting to dodge legislation in any way, let alone in this way.

“People’s pay has not being going up and they are finding it harder to make ends meet, so when you get companies like this not paying the minimum wage, it’s outrageous.

“I’m glad these companies have been banned.”