Are you planning to supply security
operatives to an event?
You need to be sure that any security services you supply are compliant with the law. This means ensuring that individuals are properly licensed where necessary.
The purpose of this guidance is to help you to identify the roles at your event that may require a security licence under the terms of the Private Security Industry Act 2001.
There is also guidance on the due diligence checks you should complete when supplying security. It’s important to understand what makes someone licensable.
This will help you make sure you have the right person in the right role at the right time.
Check if you need an SIA licence to work at an event
If you are working at an event (for example, a concert or a festival) then you may need an SIA licence.
When you need an SIA licence
Licensed premises
You need a door supervisor licence if all of the following statements are true:
‒ you provide a physical presence to guard against damage, theft, unauthorised access or disorderly behaviour
‒ your work is in relation to licensed premises
‒ you work when the premises are open to the public, at times when alcohol is being supplied for consumption, or regulated entertainment is being provided on the premises ‘Licensed premises’ means a venue that has a licence to sell alcohol and/ or provide regulated entertainment (for example, live music or film screenings).
The requirement for a door supervisor licence applies if either of the following statements is true:
‒ your work is part of a contract for services
‒ you work ‘in-house’ (that is, employed directly by the company running the event)
A ‘contract for services’ is when you or your employer have a contract to supply your services to another organisation.
An example of this would be where your employer is a private security company, and your job is to stop people who have not paid from entering the event.
Other premises
You need a security guard licence if all of the following statements are true:
‒ you provide a physical presence to guard against damage, theft, unauthorised access or disorderly behaviour
‒ your work is part of a contract for services
‒ your work is not in relation to licensed premises
A ‘contract for services’ is when you or your employer have a contract to supply your services to another organisation.
An example of this would be where your employer is a private security company, and your job is to stop people who have not paid from entering the event.
Other activities
You need an SIA licence if the work you will be doing is part of a ‘contract for services’ and involves any of the following licensable activities:
‒ guarding people against physical assault or injury (close protection)
‒ guarding property against damage or theft and transporting it in a vehicle designed for secure transportation (cash and valuables in transit)
‒ guarding premises, property, or people by using CCTV equipment (public space surveillance (CCTV))
‒ keeping, or controlling access to, any key or device for operating a lock (key holding)
‒ preventing or restricting the movement of a vehicle, or removing it, and then charging the owner to release it (vehicle immobilisation) in Northern Ireland
‒ managing or supervising anyone carrying out the licensable activities listed above, including security guarding and door supervision
A ‘contract for services’ is when you or your employer have a contract to supply your services to another organisation.
When you do not need a licence
You do not need a licence to:
‒ work as an unpaid volunteer, unless you are working as a vehicle immobiliser in Northern Ireland
(‘unpaid’ does not just refer to money: you must not receive any reward, benefit, or payment in kind)
‒ check people have paid for entry to an event or that they have an invitation – but if you then refuse them entry and/ or make them leave, you will need a licence
‒ perform stewarding duties, such as directing people to their seats, toilets, or first-aid facilities
You do not need a licence to work in- house at a certified sports ground in England or Wales. A certified sports ground is one that has an active sports ground safety certificate. If another team visits your certified sports ground, their employees will not need a licence if that team also has a certified sports ground.
Examples of licensable and non- licensable activity
The lists below are not exhaustive.
You should always remember that it is not the job title that matters; it is the work, or activity, that an individual does that determines whether they need a licence.
Licensable activity
You need an SIA licence if you do any of the following:
‒ screening a person’s suitability to enter the event or venue: for example looking out for individuals under the influence of alcohol or drugs, or behaving in an anti-social way. This includes those who are searching bags to ensure that there is no unauthorised access or any damage to property or injury to others
‒ searching people and/or property for the purpose of preventing unauthorised or illegal items from entering the premises e.g. cameras, alcohol, drugs, or weapons
‒ responding to incidents within crowds, queues, or the audience to control behaviour which is anti-social, undesirable or likely to result in harm to others
‒ protecting a pitch, track or other identifiable area from spectators or others with the intention of preventing unauthorised access or damage
‒ providing a security presence to prevent and detect crime within a designated area
‒ guarding property and/or equipment in situ during the set up and breaking down of an event, exhibition or similar
‒ patrolling the perimeter of an event to prevent unauthorised entry by individuals, whether by climbing or breaching any fences or barriers, or by being let in via an access point
‒ working as a bodyguard protecting performers, corporate guests, clients VIPs, etc. under a contract for services
‒ observations and reporting roles as part of, or in support of, guarding. Licensable activity includes providing a physical presence or any form of surveillance to deter or otherwise discourage something from happening, or to provide information
if it does happen about what has happened. Examples of such roles include (but are not limited to) patrolling the venue, observing from fixed positions, or monitoring CCTV footage
Non-licensable activity
You do not need a licence to do any of the following:
‒ customer care duties including directing patrons to refreshments, toilets and first aid facilities
‒ directing spectators to seating areas by checking tickets.
‒ providing safety advice and assistance to patrons
ensuring gangways and exit/ evacuation routes are kept clear for health and safety purposes
‒ helping with evacuation procedures in the event of danger to patrons, including liaising with representatives of the emergency services
‒ having responsibility for the health, safety and comfort of spectators within a designated area
‒ monitoring and maintaining the pedestrian flow at key locations e.g. entry and exit points
‒ providing guidance and direction to visitors arriving by car or on foot, including the management of roadway crossings to ensure the safe passage of visitors over the roads
‒ reporting to a supervisor or safety officer any damage or defect which is likely to pose a threat to spectator ‘health and safety’ e.g. a damaged seat or barrier
‒ work as a volunteer
Multi-role staff
It is worth considering if licensed staff could be used for more than one activity. They could, for example, be part of a quick response team if they are no longer needed to search people and property at the entrance to an event. If licensed staff are able to carry out more than one role, it may reduce the number of SIA licensed staff you need without compromising the safety of the event.
Licence integration
Licences that cover more than one job activity
Some licences may be used for more than one licensable activity. This is the case where we are satisfied that the training required for one role is sufficient for that individual to carry out licensable activity in another role.
You will usually need to get a licence for each type of licensable activity that you do. For example, if you work as a security guard and as a CCTV operator, you will need a security guarding licence and a public space surveillance (CCTV) licence.
However, in some cases, if you hold an SIA licence for one licensable activity, you will also be able to perform activities covered by other licences.
Front line licences
All front line licences allow you to perform the activities covered by a non- front line licence.
If you hold a close protection licence, you are also covered for:
‒ door supervision
‒ security guarding
‒ using CCTV to identify a trespasser or protect property*
If you hold a door supervisor licence, you are also covered for:
‒ security guarding
‒ using CCTV to identify a trespasser or protect property*
If you hold a security guarding licence, you are also covered for:
‒ using CCTV to identify a trespasser or protect property*
Non-front line licences
A non-front line licence covers you for:
‒ key holding
‒ managing, supervising and/or employing individuals who perform licensable activities in their job
‒ being a director of a company, or partner of a firm, where any other directors, partners or employees of that company or firm perform licensable activities in their job You only need one non-front line licence.
Volunteers
Many events across the UK rely on volunteers to help deliver an event safely and provide a positive customer experience. We recognise the value of volunteers, but for the purposes of the Private Security Industry Act 2001 there needs to be clear dividing line between volunteers and contracted-in security, and clarity regarding the criteria for both.
Only individuals employed, or contracted in, to carry out licensable activities are covered by the legislation. Volunteers, by virtue of not being employed or contracted in are not considered to be employees. Therefore they are not licensable under the Private Security Industry Act 2001 (unless in relation to vehicle immobilising – refer to the Private Security Industry Act 2001).
However, volunteers working as manned guards at events must provide their services for free. They must receive no financial benefit, payment in kind or reward for their services to be defined as a volunteer. The principles on what constitutes a payment in kind or reward are defined by HM Revenue & Customs. They identify a payment in kind or benefit as one that is subject to either PAYE (tax) or National Insurance contributions.
The list provided on the HMRC website is comprehensive, but not exhaustive. If in doubt, individuals or organisations should seek independent legal advice.
The following examples show some common occurrences are likely to be treated:
‒ the payment of out of pocket expenses (e.g. travelling to and from the event) would not be considered a payment in kind
‒ the payment of a donation made direct to a charitable organisation would not be considered as a payment in kind as long as no part of this payment is then passed on to the individual
‒ the provision of a meal or meal vouchers during the working day is acceptable. However, provision of vouchers to be exchanged for, ‘lunch at the Ritz’ for example could be considered a reward
‒ the ability to view the event while working (directly before, during or after a shift) would not be considered a reward, however preferential treatment, or discounted rates for premium tickets (e.g. Men’s Final on the Centre Court at Wimbledon, or a Cup Final match) could
‒ tickets provided to an individual for use by themselves (whilst not working), their family or any associate could be viewed as a reward
‒ the provision of uniform or appropriate equipment for the job would not be considered payment in kind or a reward, nor would certain other items of clothing such as a motif tie. However, the provision of official merchandise e.g. CDs or DVDs could be
Licensed premises
For many events in the UK you need a licence in order to supply alcohol and provide entertainment at an event.
Legislative requirements are different throughout Scotland, Northern Ireland and England and Wales so it is important organisers check with police forces and local authorities as to which permissions they require. The Private Security Industry Act 2001 has a clear definition of what constitutes a “licensed premise” throughout the UK. The definition can be found in Appendix A.
If you are planning to supply security operatives to an event you need to understand which areas of the event are licensed premises. Is it only certain sections such as bars or is it the entire field, street, or building where the event is taking place? Usually the “licensable area” is explained on a plan supplied with any licensing application. For the purposes of SIA licensing security staff deployed in relation to this “licensable area” will require Door Supervisor licences at times when the premises are open to the public and alcohol is available for consumption or regulated entertainment is taking place.
Sub-contractors and labour provision
Sub-contracting and the use of labour are common practices within the private security industry. Ensure you know the difference between them and understand who is responsible for licensing checks in each case.
The differences between sub-contracting and the use of labour
Subcontracting is where:
‒ a business is responsible for delivering a contract given to them by another business who initially held the contract with the customer
Labour provision is where:
‒ a business uses labour provided to them by another business, to supplement their staff numbers, to enable them to deliver the contract for security.
You should be open with your client about which approach you are using. Put checks in place to guarantee that all the security operatives you deploy are correctly licensed.
Who is responsible for checking that everyone is correctly licensed?
If you are using a sub-contractor to deliver a customer contract that was given to you by another party:
‒ the sub-contractor is responsible for the screening and vetting checks of the operatives they use to fulfil the contractual arrangement
‒ you need to have a clear plan as to who will be managing the sub-contracted staff, during the shift(s) If you are using labour provided to you from another company to enable you to fulfil your contract for security, it is your responsibility to:
‒ ensure that the screening and vetting checks of the provided operatives have been carried out, or carry out your own checks
‒ agree who is going to manage the provided staff (including any self- employed staff)
‒ be aware that you may liable if unlicensed staff, or staff with no right to work, are found working at the contracted premises
The terms and conditions of a contract or agreement should clearly state the roles, responsibilities and liabilities between your company, any sub-contractors or labour providers, and the end client.
Labour supplied by a third party
If you use labour supplied by a third party, then you should consider how to safeguard your business from financial and reputational risk. You can read the advice from HMRC on due diligence on their website here: gov.uk/government/ publications/use-of-labour-providers.
SIA approved contractors
If your business is approved under the terms of our Approved Contractor Scheme (ACS), you may only subcontract to other SIA approved contractors, unless we have given you permission to do otherwise.
Due diligence checks
You must ensure that due diligence checks are carried out in respect of the individuals who will be deployed by your business to fulfil a contract to provide security to an event.
Before the event
You should:
‒ be able to supply on request a list of all the individuals your business will deploy to the event. The list should include the following:
the individual’s full name
date of birth
SIA licence number
their role at the event
their employer (if PAYE) or the labour provider
ensure you update this list regularly, including any changes
‒ create an online business account on the SIA’s website and register for the Licence Status Checker service. You will be able to create a watchlist for all event staff that hold an SIA licence and will be able to check the validity of that licence. If you find any individuals with suspended, revoked, or expired SIA licences they cannot work in a security role
‒ ensure you have a single point of contact for each sub-contractor or labour provider should you need to contact them in an emergency
‒ agree job descriptions and assignment instructions with the customer in advance of the event. Share them with every member of your staff as appropriate. Also ensure that you share them with any sub- contractors you are working with
‒ be aware of all the conditions on the premises licence, temporary event notice, or other licensing permission to ensure you comply with that licence
During the event
You should:
‒ on the day of the event, before it opens to the public check the watchlist you created of the staff you are deploying. Do not deploy any individuals who are no longer licensed into roles that require an SIA licence
‒ ensure all staff complete signing-in sheets
‒ check that the number of staff you have agreed to deploy matches the number on site
‒ ensure briefings are undertaken so that those who are SIA licensed are aware of the limitations of their role. Importantly, also ensure that any individual you are deploying into a non-licensable role is aware of the limitations of their role
After the event
You should:
‒ organise a debrief with your customer to review the event, including successes and areas to improve upon
‒ if necessary, debrief the local authority and police, either through safety advisory groups or one-to one meetings with regard to the successes and challenges of the event
‒ keep any signing-in sheets
Vulnerable groups
If the event is aimed at children or the vulnerable you should consider whether you need any enhanced screening and vetting checks. If vulnerable groups with a specific non-visible condition (e.g. Tourette’s, Asperger’s, or autism)
will be attending the event, brief your security staff in good time. They will need to be able to recognise the broad signs of the condition in question. You should also advise them to work with any accompanying support workers.
Contingency planning
Event organisers use risk assessments and tabletop exercises to run through the event from initial preparation of the site through to its conclusion. This helps to clarify how they will use the different security operatives on site both in a business-as-usual capacity or in an emergency situation.
Contingency planning, or stress-testing, hypothetical scenarios will help illustrate how to use security operatives in an emergency situation. It’s usual to plan responses to incidents such as terrorism, serious crime, natural disaster, medical emergency, missing persons, equipment failure or loss of communications.
For most events it is unlikely there will be the opportunity to have a “live” contingency exercise to train security staff. However, this pre-planning will ensure there are sufficient numbers, clearly defined roles and responsibilities, and procedures in place.
We recommend that anyone supplying security operatives to events should give every member of their staff a clear job description. This should detail the activities they should do as part of their role, and the purpose of those activities. We also suggest that you include the licensable status of the individual and the location(s) where they will be working.
Counter terrorism
The UK has seen a number of terrorist attacks in crowded public places. The National Counter Terrorism Security Office (NaCTSO) have produced a number of publications to offer guidance to event organisers and security staff regarding protective security to prevent future attacks. You can find the most recent publications on the NaCTSO website.
NaCTSO’s Action Counters Terrorism (ACT) programme of training aims to increase public safety by raising security industry awareness of how best to reduce and respond to the most likely types of terrorist activities. The aim of ACT is to:
‒ help understand the threat of terrorism to the UK
‒ guide individuals on what to do if they find themselves involved in a terrorist incident or event that leads up to a planned attack
‒ enable people to recognise and report suspicious activity
We require SIA approved contractors to ensure that their staff are appropriately trained in counter-terrorism awareness. We recommend that anyone supplying security operatives to events similarly ensures that their security staff have undertaken counter-terrorism awareness training.
Appendix A:
Definition of ‘Licensed Premises’
For the purpose of the Private Security Industry Act 2001 the definition of ‘licensed premises’ is:
‒ premises in respect of which a premises licence or temporary event notice has effect under the Licensing Act 2003 to authorise the supply of alcohol (within the meaning of section 14 of that Act) for consumption on the premises
‒ premises in respect of which a premises licence or temporary event notice has effect under that Act to authorise the provision of regulated entertainment
‒ premises in respect of which a licence of a prescribed description under any prescribed local statutory provision is for the time being in force
‒ any premises within the meaning given to “licensed premises” in section 147(1) of the Licensing (Scotland)
Act 2005
‒ premises comprised in a place or class of place for the time being specified by resolution under section 9(5)(b) of the Civic Government (Scotland) Act 1982 (resolution specifying place or class of place falling to be licensed if to be used as place of public entertainment)
‒ premises comprised in a place where an activity for the time being designated under section 44(1) of the 1982 Act (additional activities for which a licence is required) is carried on provided that, in the case of an activity designated under paragraph
(a) of that section, the requisite resolution under section 9 of that Act has been obtained
‒ premises in respect of which a licence, or an occasional licence, under the Licensing (Northern Ireland) Order 1996 is in force
‒ any place in respect of which an entertainments licence within the meaning of Schedule 1 to the Local Government (Miscellaneous Provisions) (Northern Ireland) Order 1985 is in force
For the purposes of the Private Security Industry Act 2001 premises are NOT licensed premises:
‒ if there is in force in respect of the premises a premises licence which authorises regulated entertainment within paragraph 2(1)(a) or (b) of Schedule 1 to the Licensing Act 2003 (plays and films)
‒ in relation to any occasion on which the premises are being used – exclusively for the purposes of a club which holds a club premises certificate in respect of the premises, or – for regulated entertainment of the kind mentioned in paragraph 2(1)(a) of Schedule 1 to the Licensing Act 2003 (plays and films), in circumstances where that use is a permitted temporary activity by virtue of Part 5 of the 2003 Act
‒ in relation to any occasion on which a casino premises licence or a bingo premises licence is in force in respect of the premises under the Gambling Act 2005, and the premises are being used wholly or mainly for the purposes for which such a licence is required
‒ for Scotland, in relation to any occasion on which a licence is in force in respect of the premises under the Theatres Act 1968 or the Cinemas Act 1985, and the premises are being used wholly or mainly for the purposes for which the licence is required
‒ in relation to any occasion on which the premises are being used exclusively for the purposes of a registered club within the meaning
of the Registration of Clubs (Northern Ireland) Order 1996
‒ in relation to any occasion on which a bingo club licence within the meaning of the Betting, Gaming,
Lotteries and Amusements (Northern Ireland) Order 1985 is in force in respect of the premises, and the premises are being used wholly or mainly for the purposes for which the licence is required
Appendix B:
SIA licences and use of bodycams
If you are using a bodycam or a headcam for security purposes then you may need an SIA licence.
You should seek independent legal advice if you are still not sure whether you need a licence after reading this page.
When you need a front line licence
Video from a bodycam or headcam is usually watched live by someone in another location, or is recorded and then watched later.
If you watch video footage captured by a bodycam or a headcam as part of your job then you are likely to fall within the definition of public space surveillance (CCTV) activity.
You need a Public Space Surveillance (CCTV) licence if all of the following statements are true:
You use CCTV to watch members of the public or to identify particular individuals
You use CCTV to guard against disorder or to protect individuals from assault – this includes the use of CCTV to try to prevent these things from happening, or to provide information about them if they do happen
Your services are supplied under contract to a client
You need a Public Space Surveillance (CCTV), Close Protection, Door Supervision or Security Guard licence if all of the following statements are true:
You use CCTV to watch members of the public or to identify particular individuals
You use CCTV to identify a trespasser or protect property – this includes the use of CCTV to try to prevent these things from happening, or to provide information about them if they do happen
Your services are supplied under contract to a client
You still need an SIA licence even if the CCTV footage you are viewing is from a bodycam or a headcam.
When you need a non-front line licence
You need a non-front line licence if:
‒ you will not personally be doing the activity described above, but will be managing or supervising people who will
‒ you are a partner or director in a company that uses bodycams or headcams for such purposes ‘Director’ includes executive and non- executive directors, shadow directors, parent company directors, and corporate entities holding a directorship.
When you do not need a licence
You do not need an SIA licence if you wear a bodycam or headcam but do not watch any of the footage from that device.
Appendix C:
SIA licences and use of drones
If you are using a drone (unmanned aerial vehicle) to watch or record video for security purposes, then you may need an SIA licence.
You should seek independent legal advice if you are still not sure whether you need a licence after reading this page.
When you need a front line licence
A drone will usually produce a video feed that is watched live by someone in another location, or is recorded and then watched later.
If you watch footage captured by a drone as part of your job then you are likely to fall within the definition of public space surveillance (CCTV) activity.
You need a Public Space Surveillance (CCTV) licence if all of the following statements are true:
You use CCTV to watch members of the public or to identify particular individuals
You use CCTV to guard against disorder or to protect individuals from assault – this includes the use of CCTV to try to prevent these things from happening, or to provide information about them if they do happen
Your services are supplied under contract to a client
You need a Public Space Surveillance (CCTV), Close Protection, Door Supervision or Security Guard licence if all of the following statements are true:
You use CCTV to watch members of the public or to identify particular individuals
You use CCTV to identify a trespasser or protect property – this includes the use of CCTV to try to prevent these things from happening, or to provide information about them if they do happen
Your services are supplied under contract to a client
You still need an SIA licence even if the CCTV footage you are viewing is from a camera mounted on a drone.
When you need a non-front line licence
You need a non-front line licence if:
‒ you will not personally be doing the activity described above, but will be managing or supervising people who will
‒ you are a partner or director in a company using drones for such purposes ‘Director’ includes executive and non- executive directors, shadow directors, parent company directors, and corporate entities holding a directorship.
When you do not need a licence
You do not need an SIA licence if you are using a drone and:
‒ you do not watch the footage from the drone
‒ you only watch footage from the drone in order to pilot it
Appendix D:
Resources
‒ Security Industry Authority (SIA) gov.uk/sia
‒ National Counter Terrorism Security Office (NaCTSO) gov.uk/government/organisations/ national-counter-terrorism-security- office
‒ HM Revenue and Customs (HMRC) gov.uk/government/organisations/ hm-revenue-customs
‒ Association of Labour Providers labourproviders.org.uk
‒ Home Office Immigration Enforcement (HOIE) gov.uk/government/organisations/ immigration-enforcement
‒ Institute of Licensing (loL) instituteoflicensing.org
‒ Health and Safety Executive (HSE) hse.gov.uk
Why you need to assure your labour supply chain
Failing to take reasonable action to make sure that your supply of labour is legitimate can lead to significant legal, financial and reputational risks to your business. It could even stop your business from operating entirely.
You may be liable for unpaid taxes and National Insurance contributions. You may be unable to recover VAT payments and you could be criminally prosecuted with an unlimited fine if someone acting on your behalf facilitates tax evasion.
Proper checks are also important for protecting workers and preventing modern slavery.
How to assure your labour supply chain
You should perform due diligence to enable you to make a judgement on transactions and the integrity of your supply chain.
Protect your business by testing the credibility, legitimacy, legal and tax compliance of your suppliers, supplies, customers, employees and labour supply.
Exploitation, fraud and avoidance are easier to hide below the surface of a supply chain when effective due diligence is not performed by all parties, therefore checks done purely in relation to your immediate suppliers and customers may not be sufficient.
It is also important to consider the credibility of the supply, payment arrangements and other surrounding circumstances.
Using supply chain due diligence principles of check, act and review will help you apply effective risk management and robust due diligence to assure the integrity of your supply chains, minimising your exposure to risks.
Supply chain due diligence principles
The Principles are not a definitive checklist but are good practice examples of what businesses can do to minimise risks in their supply chains.
Check
Know your own risk – legal, financial, tax and social obligations, and those of your suppliers. You can check:
your risks by performing risk assessments to understand what they are and how to mitigate them
your own compliance with legal, financial and social obligations to safeguard against risks within business supply chains
your suppliers’ tax and legal compliance, for example, submitting their tax returns and payments on time, complying with legal and social responsibilities, and having reasonable procedures to prevent the criminal facilitation of UK and foreign tax evasion, as per the Corporate Criminal Offences brought in by the Criminal Finance Act 2017
for modern slavery and exploitation risks, for example, check for published slavery and human trafficking statements and for indicators of modern slavery and exploitation
Act
Carry out robust due diligence on your suppliers. If risks are identified do not ignore them, act to mitigate or remove the risk completely by:
acting on your risk assessment by setting up effective systems and processes for due diligence
knowing your suppliers – do not assume tax compliance, be vigilant for previous business failures or possible criminal intent. Check the credibility of directors and verify signatories of contract negotiations and documents are accountable office holders
knowing your suppliers workforce – understand what the relationship is between the workers and the provider of the labour, for example:
who provides the workers
who the workers are
what their employment status is
who is responsible for making sure how they are paid and how much
if there is any indication of exploitation including modern slavery
are they allowed to work in the UK
knowing how long your supply chain is – margins become tighter with every layer of subcontracting and opportunities increase for fraudulent infiltration of supply chains so be vigilant – check that the supplier actually exists (for example, by looking for commercial features) and check details of any onward subcontracting
knowing their suppliers – due diligence applies throughout supply chains – one aim of due diligence and risk assessment is to enable the taxable person to make a judgement on the integrity of their supply chain and the suppliers, customers and goods within it, for example, you may lose the right to recover the tax paid on transactions connected with the fraudulent evasion of VAT if you failed to carry out appropriate check
Review
Effective due diligence needs continuous monitoring and review which includes:
due diligence procedures – these should be risk-based, relevant, reasonable, proportionate and most importantly, ongoing live risk management – this can stop or prevent harm before it occurs, for example it will provide added protection against denial of input tax
It is recommended that you carry out due diligence checks to help safeguard your business from financial, operational and reputational risks. You must decide what checks are relevant, reasonable and proportionate for your own business – when you’ll carry them out, and how often. However, these checks will need to be more extensive in business sectors where there are greater commercial risks or vulnerability to fraud and other criminality.
Completing these checks will also help satisfy a number of your legal obligations.
This is particularly important if your business uses labour supplied by a third party such as an agency, contractor or sub-contractor, or if you outsource your payroll service.
Guidelines to help you check, act and review
The examples given are guidelines to help you avoid getting involved with high-risk businesses and individuals.
You can also find useful pointers in 10 things about due diligence.
Make sure you keep a detailed record of all the checks you do.
You must make sure you understand and can approve the supply chain by considering:
adding a clause to the contract requiring your authorisation before further sub-contracting to a third party, and check that this is adhered to
adding a clause in the contract that travel and subsistence arrangements between the workers and the labour supplier comply with HMRC requirements
adding a clause in the contract stopping the use of off-shore intermediaries
where workers supplied by agencies are being treated as self-employed, decide if the Agency Rules apply – agency rules mean that you need to operate PAYE as if the workers you supply are your employees
making sure the agency has complied with employment intermediary reporting requirements and get evidence of submitted reports to HMRC where they do not operate PAYE (this includes where they use an umbrella company)
where an individual works through their own intermediary (usually a limited company, or personal service company) and you are a public sector body you will need to decide if the off-payroll working rules apply and if PAYE needs to be operated on payments to the individual’s intermediary – if you are a medium or large-sized private or voluntary sector organisation, from 6 April 2021 you will also need to check whether the off-payroll working rules apply and take action accordingly
whether the workforce has been repositioned into ‘mini umbrella companies’ to enable fraudulent abuse of government incentives aimed at small businesses (such as the VAT Flat Rate Scheme and Employment Allowance) – Mini umbrella company fraud can result in reputational and financial damage to your business, and workers not receiving all they’re entitled to whether the supply chain is unnecessarily long, leaving those further down little scope for profit or meeting statutory tax obligations
You must make sure workers are paid properly by considering:
checking workers are actually paid their contractual rate and that it complies with the National Minimum Wage or the National Living Wage – failure to comply with minimum wage legislation is largely driven by a series of common errors – support is available through help and support for employing people checking the Association of Labour Providers (ALP) or Gangmasters Labour Abuse Authority (GLAA) for the latest suggested hourly rates for the supply of labour – any business charging less suggests unsustainable practices taking a sample check of agency worker’s pay slips to understand who is responsible for paying your workers – check whether it is who you expected checking that the PAYE reference is the right one for the business you consider to be the employer – check if your actual supplier of labour is linked to the business you hold a contract with
Make sure your supplier is legitimate and previously compliant by considering:
whether commercial features can be demonstrated and are as expected
checking the credibility of the directors and establishing who is in control of the business
checking the history of the labour supply business – if a previous business failed due to tax debts, see what has changed to prevent this happening again, and check if the supplier is now commercially sustainable
adding a clause in the contract requiring labour suppliers to show evidence of the VAT and PAYE returns filed and payments made to HMRC
checking that appropriate licences are held and in order, for example, a Gangmasters and Labour Abuse Authority (GLAA) licence or a Security Industry Authority (SIA) licence
verifying the suppliers VAT registration details with HMRC before you use them and making regular checks of all VAT registration numbers afterwards (see ‘Verifying VAT registration details’)
telling HMRC about your payroll or staffing outsourcing arrangements (see ‘Tell HMRC about your payroll outsourcing’)
If you do not do checks or take appropriate action afterwards
You need to know that if HMRC finds non-compliance or fraud in your supply chain it is likely to cost you more.
HMRC is committed to tackling non-compliance, fraud and illegal working practices in labour supply chains across business sectors so that we can:
fund essential UK services
stop modern slavery
create a level playing field for those businesses who do comply
The right to claim input tax could be denied to anyone in a supply chain if they knew or should have known that their transactions were connected with VAT fraud.
You can be fined if your tax return or other tax document is inaccurate and tax has been unpaid or paid incorrectly as a result. For example, those businesses denied input tax under Kittel may face a section 69C fine which is 30% of the VAT denial.
You may be liable for unpaid taxes and National Insurance contributions
If you use agency or temporary workers or are an agency providing workers, you or one of the other parties in the labour supply chain may need to operate PAYE on the workers’ earnings – you should check who needs to do this.
HMRC can ask you to account for unpaid tax and National Insurance contributions. For example, if an offshore agency supplies you with workers and they do not account for tax and National Insurance contributions payable through the PAYE system, then you may have to.
To increase compliance with the off-payroll working rules in the private and voluntary sectors, organisations receiving an individual’s services (where the individual works through their own intermediary, most commonly their own limited company) will become responsible for assessing that individual’s employment status and determining whether the rules apply from April 2021. This reform already applies in the public sector where an individual works through their own intermediary.
The off-payroll working reform from April 2021 will also provide HMRC with the power to recover unpaid tax and National Insurance contributions from you, or the agency you contract with in some circumstances – if for example a UK-based agency lower down in your labour supply chain fails to account for tax and National Insurance contributions payable through the PAYE system under the off-payroll working rules and there is no realistic prospect of recovering the tax and National Insurance contributions from them. This change will apply to the public, private and voluntary sectors. See understanding the off-payroll working (IR35) rules for more information.
National Minimum and National Living Wage and falsified payment records
It’s a criminal offence if HMRC finds that an employer has not been paying workers the correct rate or falsifying payment records. Arrears have to be paid back immediately. There’ll also be a fine of up to 200% and offenders can be named in a government press release.
