The risks of ignoring illegal workers are real. And construction is top of the government’s hit list

Hudson Contract Client Alert

Last month, we warned about the Border Force stepping up their surprise inspections to check for illegal workers and modern day slavery.  And just a few days later, a client got in touch to report that HMRC is also on high alert.

Our client had been using a steel fixer who brought with him his own gang, all of whom were from Romania. The payments to the steel fixer were large, and attracted VAT.  

Hudson Contract Managing Director Ian Anfield takes up the story.  “Thankfully, the client had been diligent and carried out the correct VAT verification required by HMRC and kept evidence. The firm also requested ID for the steel fixer and his men to confirm they were all entitled to work in the UK.

“It turned out that once the work was done, the steel fixer disappeared, taking the taxman’s money with him.  This sounded alarm bells with HMRC, and they made it clear that they would have imposed a huge bill – plus interest – for the VAT paid over.  The issues of forced labour and slavery were mentioned, but no action was taken.

“The client did the right things, but wants to let others know these risks are serious and very real.  HMRC reminded him that if there is ever the slightest doubt, construction firm owners should keep hold of the VAT and report the transactions to HMRC.

“On modern slavery, there are often tell-tale signs to be aware of, and turning a blind eye could lead to fines of £20,000 per head.  To make sure you don’t get caught up in this, look out for gangs who live and travel together, and don’t interact with anyone else on site.  Other red lights are when the same address is given by a number of subbies at site inductions, or the gangmaster rather than the individuals holds the CSCS cards.

“As this incident demonstrates, HMRC and other government departments are actively targeting labour supply, the construction industry at the top of their hit list.  In particular, they seem to be zoning in on VAT fraud, and this is likely to continue once VAT reverse charging is introduced in October.  Meanwhile, Border Force staff are turning up unannounced at construction sites and pulling vans off the motorways for spot checks. 

“Our client’s story has a happy ending, but it also goes to show that due diligence is more important than ever.”