Businesses planning to take on more staff to cover the Olympic and Paralympic Games have been told to check their 'gangmaster' by HMRC.

Labour agencies that provide temporary workers to cover seasonal and market demand are often known as gangmasters. HMRC claims that businesses using such agencies could unknowingly become involved in fraudulent supply chains if they fail to ask the right questions.

Risks posed include hiring workers that are in the UK illegally or earning below the National Minimum Wage, as well as fraud and unpaid taxes. Businesses affected include catering, food processing, construction, hotels, leisure and security.

Commenting, Marie-Claire Uhart, director of specialist investigations at HMRC said: "HMRC has found problems with fraud and unpaid taxes in the labour provider field and this might increase as companies employ more casual labour for the Games. HMRC routinely tackles attempts to defraud the Exchequer, including the use of false invoices and hijacked VAT registrations.

"Businesses that use labour providers can help prevent these forms of tax abuse - and avoid involvement in fraudulent supply chains - by being alert and asking the right questions."

According to HMRC, businesses should be checking whether the labour provider has or needs a Gangmaster Licensing Authority (GLA) licence, and whether it is a live company on the Companies House register, among other things.