The Gangmasters Licensing Authority (GLA) is clamping down on those gangmasters and umbrella companies who abuse tax-free allowances for workers as a method of undercutting rivals.

The authority has issued a 12-week warning to comply before enforcement action begins. If labour providers and umbrella companies do not heed this warning, the GLA will take action from February 17, 2010.

Also, where non-compliance is proven, in addition to GLA action, HM Revenue & Customs (HMRC) will take action to seek arrears of tax, national insurance and national minimum wage, with penalties and interest also being sought where appropriate.

Paul Whitehouse, chairman of the GLA said: “We have issued clear guidance, and the 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 schemes that are often known as travel schemes, travel and subsistence schemes or mobile worker schemes were initially set up to benefit self-employed contractors but they have now become prevalent with labour providers, making it compulsory for their minimum wage workers.

The concern of the GLA and some within the industry is that more and more companies are using these schemes to benefit themselves and allow them to offer reduced rates to customers undercutting those not using these schemes. Although the workers may possibly receive more take home pay if they had not actually incurred the expenses in the first place, the reduction in national insurance payments could have an impact on their contributory tax benefits, such as pensions and job seekers allowance.

The GLA has recently seen cases where minimum wage workers have well over 50 per cent of their pay attributed to expenses, leaving their actual salary and the taxable amount as low as £97 for a 38-hour week.

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