Crystal Umbrella

There is to be a crackdown on gangmasters and umbrella companies who flout rules and abuse tax free allowances to appear cheaper than their legitimate rivals. This is being pursued by the Gangmasters Licensing Authority (GLA), which was formed to protect workers from exploitation in horticultural, agricultural, shellfish gathering and associated industries.

The GLA has now issued guidance to all relevant businesses with a twelve-week warning. Once this period is up, on 17^th February 2010, they will start to take action. If non-compliance is proven, details will be passed to HMRC to reclaim tax arrears alongside national insurance. Anyone found to have been breaking the rules can also expect to pay a large penalty.

Chairman of the Gangmaster Licensing Authority, Paul Whitehouse, said: “We have issued clear guidance and this industry has been given 12 weeks to ensure they comply. There are no excuses and we will come down hard on anyone who is operating illegal schemes from February 17 2010.

The GLA stated that the schemes they are looking into are often touted as travel schemes or travel and subsistence schemes. Often, agencies or umbrella companies who are bending the rules inform their members that these schemes are compulsory for anyone earning minimum wage. Often the expended paid have not actually been incurred and are purely a means of reducing taxable income. GLA believe more and more companies are using such schemes purely to benefit their own finances.

The financial secretary to the Treasury, Stephen Timms is due to give a speech to industry tax experts regarding the effect on the economy of those who do not pay the tax they owe. The Observer has reported on the content of this speech based on exerts they have obtained.

He is expected to declare that these people are not only flouting their legal obligations but also their moral obligations. Timms will be stating that everyone should pay their ‘fair share’ of tax within our society and that “values of responsibility, morality and integrity are essential to tax fairness”.

The speech is intended to send a clear message on the need for tax evasion and tax avoidance to stop. It is expected that Timms will speak about this issue in the context of the current economic downturn, primarily focusing on the effect that non payment of tax has on public services. We all know that there is a strain on the economy at the moment and Timms will be stressing that the payment of tax “carries a responsibility for every taxpayer”.

Timms is also likely to disclose his proposed measures for dealing with people who continue to flout the rules. It is likely that these will include an increase in disclosure requirements and bigger penalties. The pre-budget report is due next month and this is also expected to include further details on how tax evaders will be dealt with.