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UK Issues Warning On Olympics Labour Taxes

by Robert Lee,, London

21 December 2011

Employers taking on more staff ahead of the London Olympics must carry out checks to ensure their labour suppliers are paying the correct taxes, HM Revenue and Customs (HMRC) has said.

The 2012 Olympic and Paralympic Games will lead to a substantial increase in businesses needing temporary workers. These businesses are expected to turn to labour providers (sometimes called 'gangmasters') - agencies that supply temporary workers to meet seasonal and market demand - to meet their needs. Aware of this trend, HMRC is urging employers to ensure, where possible, that their labour providers are paying value-added tax (VAT) and other taxes.

Among the businesses affected are those involved in the catering, food processing, construction, hotels, leisure and security industries. HMRC has warned there is a risk that employers could unknowingly hire workers who are in the UK illegally or are earning below the National Minimum Wage. HMRC is warning that this could result in tax enquires and other costs for the business, damaged reputation and even prosecution.

HMRC has therefore provided a number of questions it believes would be useful to employers in these circumstances. They include whether the provider needs or has a Gangmaster Licensing Authority (GLA) licence, and what the history of the business is. It is also suggested that employers check directors’ identities by asking for passports, and request copies of documents such as the firm's Certificate of Incorporation, VAT registration certificate and GLA licence.

Marie-Claire Uhart, Director of Specialist Investigations, said: “HMRC has found problems with fraud and unpaid taxes in the labour provider field and this might increase as companies employ more casual labour for the Games. HMRC routinely tackles attempts to defraud the Exchequer, including the use of false invoices and hijacked VAT registrations. Businesses that use labour providers can help prevent these forms of tax abuse – and avoid involvement in fraudulent supply chains – by being alert and asking the right questions.”

TAGS: individuals | compliance | tax | business | value added tax (VAT) | tax compliance | tax avoidance | revenue guidance | employees | United Kingdom | food | small and medium-sized enterprises (SME) | contractors | construction | services

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