The outsourcing companies Serco and G4S have ordered the recruitment agencies that they rely on to provide workers for the NHS test-and-trace system to clean up their supply chains, after a Guardian investigation prompted concerns over tax dodging. Serco confirmed it had passed information on some of its suppliers to HM Revenue and Customs, after evidence emerged that agency staff were being paid via controversial “mini-umbrella companies” (MUCs), which are often used to fraudulently dodge national insurance contributions. The UK government relies on a complicated network of private companies to carry out its pandemic response work, although the system is labelled as NHS test and trace. The Guardian found evidence of MUCs across the system, from mobile testing units to contact tracing call centres, to laboratories testing samples. Experts believe MUCs are only one aspect of a broader problem with umbrella companies, which employ and handle payment for agency workers. The annual costs of unscrupulous umbrella companies to workers and the exchequer may be as high as £4.5bn through tax fraud and other issues such as withheld holiday pay. The government last week pledged to regulate all umbrella companies. They will fall under the remit of a new single labour enforcement body that will combine responsibilities currently spread between HM Revenue and Customs, the Gangmasters & Labour Abuse Authority, and the Employment Agency Standards Inspectorate. Other test and trace contractors have also moved employees out of payroll companies following enquiries from media. A supplier to G4S – a recruitment agency called HR GO – switched workers previously employed by an array of third-party companies onto its own internal payroll company following reporting by the Guardian, the BBC and Private Eye. G4S in 2016 said it would remove suppliers who did not follow its supplier code of conduct, after the Guardian reported on the use of similar companies by HR GO. However, it has continued to work with HR GO following those revelations and after the latest test-and-trace system scandal. HR GO previously rejected any suggestion that it engages in illegal, fraudulent or exploitative behaviour. G4S previously said it had taken action to ensure that all agency workers were employed by the approved company. Both companies declined to comment further. Serco said its investigation into its supply chain prompted by the Guardian’s reporting was still ongoing. The company was “confident that in the great majority of cases they have not been using mini-umbrella companies”. A spokesman said: “Where we have found evidence of the use of MUCs, we have insisted that the people have their employment transferred as soon as possible to companies which pay all the usual deductions.” Ant Marketing, a call centre supplier to Serco, has fired two recruitment subcontractors and moved all employees working on test and trace on to its own payroll. Ant said it has made a voluntarily declaration to HMRC. A spokeswoman said: “Ant does not condone or engage in any practices which constitute tax avoidance or tax fraud and is fully compliant and observant with all relevant statutory obligations and HMRC regulations.” Industrious Recruitment, which supplied staff to the Lighthouse laboratories in Milton Keynes, moved workers onto its own books after the Guardian’s initial approaches.