Some 21 people connected with the building sector were arrested in raids yesterday by HM Revenue & Customs officers investigating a multi million pound construction industry fraud.
18 men and three women from the West Midlands, Staffordshire, London and Manchester were arrested on suspicion of conspiracy to cheat the public revenue and money laundering offences amounting to over £6 million. They are currently being questioned by HMRC criminal investigators at police stations across the UK.
The plot is believed to have been orchestrated by organised crime gangs in a bid to steal millions of pounds in a complicated conspiracy through a version of ‘missing trader’ fraud. This sees the creation of a contrived chain of companies, which claim to subcontract labour for the construction industry, with the sole intention of disappearing before paying the taxes. They pocket the money and hijack legitimate companies along the way.
The conspiracy exploits individuals working in the construction industry and abuses the government scheme that regulates the industry’s tax affairs. It is thought thousands of construction site workers may have been robbed of the tax and national insurance contributions they believe they have paid over the last six years.
The arrests were made on suspicion of conspiracy to cheat the public revenue and money laundering offences under the Proceeds of Crime Act 2002. The Act was specifically designed to take the profit out of crime, making it harder for money to be laundered and depriving criminals of their illicit wealth.
Over 40 search warrants were executed at residential and business premises in the West Midlands, Staffordshire, Nottingham, London and Manchester. Further searches are underway.
Gross Payment Status
Businesses can apply for ‘Gross Payment Status’. This means a contractor can make payments, for labour provided, to a subcontractor without accounting for the tax due on the money. The subcontractor then becomes liable to HMRC to pay the tax and the VAT element of the money they have received.
However, it is alleged the subcontractor contracts out the work to a second subcontractor, who never actually carries out the work and goes ‘missing’ with the tax that is owed. The first subcontractor then covers the transactions by false paperwork which is used to fabricate their tax records and their position for direct and indirect tax purposes.