Gangmasters to pay more than £2m to UK Government thanks to the GLA

More than £2 million in VAT payments are due to be paid to the Exchequer from gangmaster businesses, thanks to the Gangmasters Licensing Authority (GLA). The money was identified during the first year of GLA operations (April 2006 – March 2007) and with a further 289 licence applications since this period the total of VAT payments is likely to increase.

The GLA requires that all gangmasters who operate in the agriculture, shellfish gathering and food processing and packaging sectors are licensed in order to protect vulnerable workers from exploitation. As part of that process, as with all businesses, gangmasters must ensure they follow VAT registration rules.

GLA in conjunction with HM Revenue and Customs (HMRC) have revealed that at least 40 businesses who applied for a GLA licence had not previously been registered with HMRC. The VAT payments demonstrate that an agency set up to protect exploited workers can also benefit the UK economy.

Paul Whitehouse Chairman of the GLA said:

“I am very pleased to see the quantifiable benefits that have been achieved due to the close partnership between the GLA and HMRC. It is fantastic to see that the public no longer have to subsidise the non-payment of tax by these gangmasters.”

“Assisting the recovery of UK taxes is an important role of the GLA. The £2 million recovered goes to show that the GLA can benefit the UK economy”

“Gangmasters who avoid paying taxes may often break the law in other areas. We will continue to take this very seriously as part of the fight to end worker exploitation.”

The calculation was based on the companies’ turnover in the GLA regulated sectors alone which was provided as part of the licence application process. These figures were adjusted to take into account the input tax that the businesses may be able to reclaim.

The GLA expect a potential net income of £2,075,000 will be received by UK government from gangmaster licensing in VAT payments alone, working out at an average £51,887 per gangmaster.

In addition to the VAT, these businesses declared that they supplied 6,193 workers which may have led to an increase in national insurance payments and individual tax payments by the workers, as well as the corporation tax that the companies would be liable to pay themselves. Andy Armitt Deputy Director, HMRC Labour Provider Unit said:

“The work of the GLA in partnership with HMRC is now producing real benefits. The identification by the GLA of businesses trading in the licensed sector has greatly assisted HMRC in ensuring compliance with taxation obligations and in protecting the rights of workers.”

Jonathan Shaw Parliamentary Under Secretary of State at Defra said:

“Law breaking Gangmasters who defraud the public purse undermine legitimate business. We want to stamp out illegal practices within the Gangmaster industry and this latest success demonstrates the reason the government introduced the legislation. As minister with responsibility for the GLA I’d like to congratulate the Authority on the contribution it has made so far in this area. I am delighted to see the benefits that stem from close partnerships between the GLA and other government departments.”

More than 1,100 gangmasters are now licensed to operate legally in the UK and the GLA has uncovered worker exploitation and illegal activity that led to the revocation of 42 licences.

Notes to editors

1. The Gangmasters Licensing Authority was set up to curb the exploitation of workers in the agriculture, horticulture, shellfish gathering and associated processing and packaging industries. It was set up following the death of 23 Chinese cockle pickers in Morecambe Bay in 2004. The majority of workers involved in these industries come from countries such as: Poland, Slovakia, Hungary, Bulgaria, Romania, Lithuania, Latvia, India, Pakistan and Portugal.

2. There are currently 1140 gangmasters licensed by the GLA

3. A gangmaster is an individual or business who:

• supplies labour to agriculture, horticulture, shellfish gathering and food processing and packaging

• uses labour to provide a service in the regulated sector, eg harvesting or gathering agricultural produce

• uses labour to gather shellfish.

To be granted a GLA licence all businesses must meet the GLA licensing standards and the principle authority of the business must meet ‘Fit or Proper’ person criteria. Cross government checks are made on all licence applications.

4. It has been an offence to supply labour to the GLA regulated sectors since 1 October 2006, with the maximum penalty being ten years imprisonment and an unlimited fine.

5. The gangmasters who were not registered with HMRC operated in Scotland, Wales and the following regions of England:

• North West

• North East

• East Midlands

• West Midlands

• East of England

• South East

• London 6.

HMRC deals with the collection and administration of a variety of Direct and Indirect Taxes paid by individuals and businesses on the money they earn or the capital they gain.

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