A contractor for HS2 has sacked one of its suppliers following an investigation prompted by claims of “large-scale” tax fraud.
Balfour Beatty, which is leading the construction of the West Midlands section of the high-speed rail route, says it has terminated “all agreements” with the sub-contractor Danny Sullivan Group.
It follows reporting from The i Paper that Danny Sullivan Group, a family firm of more than 30 years based in London, was facing allegations that some staff had been falsely declaring self-employed workers as PAYE (Pay as You Earn) salaried staff on a section of HS2, and charging an inflated rate for them.
In a letter sent to HS2 Ltd, and shared with The i Paper, an anonymous whistleblower wrote: “This is fraud on a large scale which the public have a right to be informed of”.
An internal investigation, overseen by HS2 Ltd’s central fraud team, was launched by Balfour Beatty.
In a statement, Balfour Beatty said that its “independent investigation” has now concluded and found that “Danny Sullivan Group had misinformed us about the provision of Construction Industry Scheme (CIS) workers instead of PAYE employees, in breach of their agreements”. Balfour Beatty, however, made no mention of the previous allegations of “tax fraud”.
A spokesperson for HS2 Ltd said: “HS2’s West Midlands construction partner, Balfour Beatty VINCI, is terminating its labour supply agreement with Danny Sullivan Group following an independent investigation into the status of workers.
“HS2 Ltd takes its responsibility for managing public money seriously. Unethical behaviour will not be tolerated, and we fully support our supply chain partners in rooting it out.
“HS2 Ltd is continuing to conduct further investigations into labour supply contracts across the supply chain.
“A formal referral has already been made to HMRC, and we encourage anyone who believes they may have relevant information, which could support our enquiries, to report it in confidence via HS2’s Speak Out channels.”
It is understood around 500 Danny Sullivan Group workers on the HS2 project were informed of the move on Friday afternoon.
Balfour Beatty says it has taken steps to make sure employees are either transferred to alternative labour suppliers or direct to Balfour Beatty “to ensure operational continuity and continuous employment for the workforce.”
It is understood HS2 believes this transition will mean the removal of Danny Sullivan Group is likely to cause any further delays in construction.
Danny Sullivan Group continues to supply labour on other parts of the HS2 route.
Rishi Sunak axed HS2 north of Birmingham in 2023The i Paper understands HS2 Ltd has written to its other contractors “requesting urgent reassurance with regard to any continued employment of Danny Sullivan Group.”
Balfour Beatty added: “Balfour Beatty is committed to the highest standards of ethical conduct.
“Enhanced controls and governance measures have been implemented to mitigate the risk of future compliance issues. ”
Danny Sullivan Group has been contacted for comment, but the business has previously told The i Paper that it was taking the allegations “extremely seriously” and was “co-operating fully” with the investigation.
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Last month, it emerged that HS2 Ltd had referred the alleged fraud matter to the tax authorities at HMRC.
It came as Transport Secretary Heidi Alexander told MPs that HS2’s final cost is likely to increase and that the Phase One completion date will be delayed beyond the 2033 originally planned.
She said allegations of tax fraud in the supply chain would be investigated “rapidly and rigorously” adding: “If fraud is proven, the consequences will be felt by all involved.”
HMRC has said it “cannot confirm nor deny investigations and we cannot comment on identifiable taxpayers or businesses.”
A Department for Transport spokesperson said: “The Transport Secretary has made it clear that any allegation of fraud in the HS2 supply chain would be investigated rapidly and rigorously, and serious consequences would follow for all those involved if wrongdoing was proven.
“We’re drawing a line in the sand after years of mismanagement of HS2 to restore the public’s trust in major infrastructure delivery, and that includes a zero-tolerance approach to fraud, corruption and bribery.
“The Government will use every tool at its disposal to recoup taxpayers’ money and hold those responsible to account.”
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