LPOG1000 - Introduction

Labour Market (LM) teams were established following the Morecambe Bay tragedy in 2004. They exist to ensure that businesses and individuals in this high-risk sector pay the right tax at the right time across all Heads of Duty (HOD), and aim to create a level playing field where compliant labour providers (LP) are not commercially disadvantaged. Many LM businesses operate to margins where, under normal business practices, it would be impossible to make a profit.

The UK labour market has changed significantly since LM teams were formed. As well as the traditional non-compliance, new risks have emerged and evolved, especially aggressive tax avoidance and fraud related to the use of intermediaries and also the increase in Payroll Fraud. These risks lead to significant tax losses for VAT, NIC’s and PAYE. LM teams will investigate the integrity of tax declarations in supply chains, undertake verifications and take remedial action.

Fraud Investigation Service (FIS) were the only directorate that specifically tackled labour market Risk, however we now work closely with other directorates such as Large Business, Counter Avoidance and parts of Individuals & Small Business Compliance (ISBC) to develop and implement our strategy to tackle the emerging risks. Our LM teams are part of FIS, covering the whole of the UK. They are integrated multi skilled teams, having developed specific techniques to counter inaccuracies peculiar to the nature of risk, and carry out a wide variety of compliance checks and interventions.

LM activity is divided broadly into Tier 1 (foundation) and Tier 2 (formal intervention) work.

Tier 1 work is essentially ‘prevent’ work and largely comprises pre-registration cases where registration refusals stop fraudsters having access to the means by which they can make repayment claims. The other Tier 1 interventions are missing returns and Debt Pursuit work. LM officers undertake debt pursuit work as a result of a Memorandum of Understanding (MOU) agreed with Debt Management (DM).

Tier 2 work concentrates on investigative activities, including follow-up VAT registration checks and visits, employer compliance reviews, Corporation Tax (CT) and Self-Assessment (SA) enquiries, VAT audits, veto and verification actions. Tier 2 work also focuses on educating LM customers ‘End-users’ to enable them to adopt due-diligence and discourage involvement in non-compliant supply chains.

LM teams work collaboratively with other teams within FIS (see LPOG8100). They also work with external agencies such as the Gangmasters and Labour Abuse Authority (GLAA), Security Industry Authority (SIA), UK Visas and Immigration (UKVI - now part of the Home Office) and the Modern Slavery Human Trafficking Centre (MSHTC - now part of the National Crime Agency - NCA) and are keen to develop further links both within HMRC and with other organisations to address non-compliance and assist in the protection of workers’ rights.

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