HMRC is doubling the number of its specialist compliance officers, from 100 to 200, specifically to crack down on labour providers who fail to pay their tax.
The extra 100 officers will offer free health checks to businesses to help them use legitimate labour providers and tackle fraud within the industry. Those found guilty of tax evasion could face jail.
David Gauke, exchequer secretary to the Treasury, said: “This government has invested £900m in HMRC to crack down on people who break the rules. Expanding these teams will help make sure that we bring in the additional money that the UK needs. They aim to stop tax losses and increase tax yields by more than half a billion pounds over the next four years. Gangmasters who think they can exploit their staff and the tax system need to think again.”
HMRC director general of enforcement and compliance Mike Eland said: “Building on HMRC’s successful approach to tackling fraud in the labour provider industry, these teams will make it even harder for fraudsters.
“We will tackle fraud by those employers who don’t play by the rules and the organised crime gangs who exploit their workers. We will also work collaboratively with labour users and businesses in these sectors to help them use legitimate providers. This will help to create a level playing field for compliant businesses to compete in the market place.”
Labour providers found guilty of tax evasion face custodial sentences, confiscation of their assets and further sanctions such as Financial Reporting Orders and orders banning them from becoming company directors.
HMRC said that the main compliance problems were:
- bogus supply chains
- repeated liquidations to avoid paying debts
- failure to keep business records
- VAT registration applications from bogus traders
- failure to submit VAT returns
- failure to make a return of income and gains
- failure to pay national minimum wage and operate statutory sick pay.
News of the crackdown was welcomed by construction union Ucatt, which has been lobbying the government over concerns that employment agencies, gangmasters and payroll companies have been flouting tax rules. Ucatt believes that employment agencies in the construction industry are increasingly forcing workers to be falsely self-employed to avoid paying employers’ national insurance contributions (12.8% of earnings), holiday pay, sick pay and other benefits.
Ucatt acting general secretary George Guy said: “Employment agencies in the construction industry increasingly believe they can ignore employment status rules and are denying the treasury millions every year in revenue. If agencies are not complying with employment status rules then it is unsurprising that other tax rules are also being flouted. It is vital that this crackdown has the widest possible scope in order to ensure that agencies are operating fairly across the board."
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