HMRC’s approach to labour supply chain risks

Purpose
HMRC’s approach to labour supply chain risks is to tackle tax risks and illegal working practices in labour supply chains, across all business sectors. The objective is to fund essential UK services, stop the exploitation of people, and create a level playing field for compliant businesses.

HMRC aims to achieve this by continually working to inform legislation and strengthen its own processes to enable it to address non-compliance within Labour Supply Chains (LSCs). This includes introducing new regulations, reforming existing rules, and announcing legislation to tackle specific non-compliance issues in the labour supply chain market. HMRC also publishes guidance on GOV.UK websites to improve understanding of LSC risks and the importance of effective supply chain assurance.

HMRC’s approach is proactive, working with partners such as the National Crime Agency, police, and the Gangmasters Labour Abuse Authority (GLAA) to investigate issues and enforce laws. It undertakes supply chain investigation and monitoring, using legislative powers and those established through caselaw to address tax risks and prevent and recover tax losses. HMRC also prosecutes those committing and facilitating tax evasion.

Effects on Industry
The effects of HMRC’s approach on the industry are multifaceted. Firstly, it creates a level playing field for compliant businesses by tackling non-compliance within Labour Supply Chains (LSCs). This ensures that all businesses, whether they use LSCs or not, are subject to the same tax rules and regulations.

Secondly, HMRC’s approach helps fund essential UK services by preventing tax losses. By recovering taxes owed to it, HMRC can invest in vital public services such as healthcare, education, and infrastructure.

Lastly, HMRC’s approach raises awareness about LSC risks and promotes effective supply chain assurance among businesses. This encourages companies to take steps to reduce the likelihood of LSC risks in their supply chains, creating a safer and more transparent business environment.

Relevant Stakeholders
The relevant stakeholders affected by HMRC’s approach are:

• Businesses that use Labour Supply Chains (LSCs) to source labour
• Compliance officers responsible for ensuring tax compliance within businesses
• Suppliers and contractors who may be involved in LSCs
• Trade unions and worker representatives concerned with fair working practices and minimum wage adherence

Next Steps
To comply with HMRC’s approach, businesses must:

• Ensure they have effective supply chain assurance processes in place to prevent non-compliance within Labour Supply Chains (LSCs)
• Review their tax compliance procedures to ensure alignment with HMRC’s rules and regulations
• Engage with HMRC through the GOV.UK website or by contacting a local tax office for guidance on specific issues

Businesses must also be aware of new legislation and processes introduced by HMRC, such as changes to VAT and off-payroll working (IR35) rules. They should stay informed about trends and increases in LSC risks to adapt their business practices accordingly.

Any Other Relevant Information
Additional relevant information includes:

• The introduction of the VAT domestic reverse charge and reform of IR35 rules demonstrate HMRC’s commitment to tackling non-compliance within Labour Supply Chains (LSCs)
• HMRC works with other government departments, organisations, and businesses to improve the health of labour supply chains economically, environmentally, and socially
• HMRC publishes guidance on GOV.UK websites to raise awareness about LSC risks and promote effective supply chain assurance among businesses