Labour fraud in construction is the creation and use of fraudulent labour supply chains within the construction industry. It’s part of a wider group of crimes known as organised labour fraud.

You need to be aware of labour fraud in construction if any of the following apply:

Criminals create companies that become part of the labour supply chains of legitimate businesses. They then pass the related Income Tax and VAT liabilities through a number of shell companies.

The final company will either:

Some common signs of labour fraud include:

If your business has outsourced its workforce, it’s your responsibility to:

You should keep a detailed record of all the checks you do.

You can check a companies VAT registration with HMRC. You should also ask for evidence of returns and payments to HMRC.

If you use another company to hire workers, you should check the relationship between the supplier and the workers. Make sure you understand who is responsible for paying them.

Some suppliers may use a number of companies to create a complex labour supply chain. This way of obtaining labour can:

You must make sure your workers are paid the correct amount.

You should check the qualifications of the workers hired. Workers hired by fraudulent companies may have:

You should also check the employment status of your workers to make sure it matches their working arrangements.

You may be a victim of labour fraud if you’re a worker in the construction industry.

Companies involved in labour fraud may only want you to work through labour suppliers or agencies. They may also want to pay you through either:

If you’re self-employed, your Construction Industry Scheme (CIS) deductions may not be paid to HMRC. This could mean you may not be able to claim a repayment that you were expecting.

Your repayment may also be paid directly from HMRC to someone else, such as an agent or nominee.

If you’re employed through an agency, you can check your rights as an agency worker.

Contact HMRC to report tax fraud or avoidance if you have concerns about:

If HMRC finds that a business knew, or should have known, about labour fraud in the supply chain we may:

• charge a penalty for inaccurate returns

You may also be responsible for any unpaid taxes, such as CIS deductions, including interest.

Watch a video about labour fraud in the construction industry.

Labour fraud in the construction industry.

You will learn about the risks of fraud in the construction industry and the warning signs to look out for.

Published 1 December 2022
Last updated 7 February 2025 + show all updates