A second major rail project has launched an internal investigation into the supply of labour after allegations of “large-scale” tax fraud at HS2, The i Paper can reveal.
The TransPennine Route Upgrade (TRU), an £11.5bn programme of rail improvements between York and Manchester via Leeds, is conducting an internal probe over the conduct of Danny Sullivan Group, a sub-contractor that supplies construction workers for the project.
Network Rail has said “no evidence of impropriety has been brought to the attention of TRU” to date and that “any allegations would be fully investigated”.
The internal investigation at the TRU only concerns labour supply, not the entire project. Danny Sullivan Group declined to comment.
The i Paper revealed last month that whistle-blowers had come forward with claims that Danny Sullivan Group 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.
The family business of over 30 years, based in London, is suspended from working on the West Midlands section of the high-speed project, between Birmingham and London, while an internal investigation is carried out.
The company said it takes the allegations of PAYE fraud on HS2 “extremely seriously” and is “co-operating fully” with the ongoing internal investigation.
Chancellor Rachel Reeves visiting the TransPennine Route Upgrade with Andy Burnham last November (Photo: Danny Lawson/PA Wire)Over the weekend, HS2 revealed it had formally reported whistle-blower allegations to HM Revenue & Customs (HMRC). The firm said it encouraged anyone with relevant information to report it via confidential internal channels.
Those allegations at HS2 have now triggered an internal investigation into the TransPennine Route Upgrade, another flagship rail project that has been hit by repeated delays and cost increases, as it also employs workers supplied by Danny Sullivan Group.
The firm supplies labour to BAM, the construction firm leading the TransPennine Route Upgrade.
A spokesperson for Network Rail confirmed the rail body has asked BAM to “look into these allegations and report back”.
Network Rail said that “no evidence of impropriety has been brought to the attention of TRU” to date and that “any allegations would be fully investigated”.
Danny Sullivan Group remains part of the BAM supply chain delivering the TRU programme, the spokesperson added.
A spokesperson for BAM UK & Ireland also confirmed the probe and said: “BAM is aware of the media coverage regarding alleged irregularities with contingent labour suppliers.
“We take allegations of this seriously and are carrying out our own internal investigation.”
The Department for Transport said it takes all whistleblower allegations “extremely seriously” and has a “zero-tolerance attitude towards fraud, bribery and corruption.”
The Government is aware of the internal investigation launched by BAM and “will not hesitate to take action if necessary”.
‘This is fraud on a large scale’
HS2 workers at the Birmingham section of the high speed rail project (Photo: Ryan Jenkinson/Getty Images)Last month, The i Paper revealed how HS2 has been approached by two separate whistleblowers since the start of the year.
On 11 April, a HS2 employee sent an anonymous email to HS2’s chief executive Mark Wild and the entire HS2 board concerning Danny Sullivan Group.
In the email, shared with The i Paper, the employee claims that during an audit “it was discovered that Danny Sullivan Group had around 70 operatives working under CIS [the Construction Industry Scheme].”
The CIS allows contractors to deduct payments from subcontractors to count towards their tax and national insurance contributions.
The previous Conservative government announced new rules in 2024 to tighten up the scheme amid concerns it was open to manipulation. HMRC had discovered abuses relating to CIS deductions, including but not limited to deductions being claimed by subcontractor companies that did not operate in construction.
The whistle-blower email claimed that when questioned, staff at Danny Sullivan Group “submitted fake PAYE payslips in an attempt to mislead auditors”.
They added: “I find it deeply concerning that our taxes are being wasted through ongoing fraudulent activity.”
A second whistle-blower also shared their concerns about the alleged PAYE fraud in an anonymous letter sent to The i Paper as well as HS2 Ltd.
“This is fraud on a large scale which the public have a right to be informed of,” the letter said.
At the time, Danny Sullivan Group said it was taking allegations of PAYE fraud on HS2 “extremely seriously” and was “cooperating fully” with the ongoing internal investigation.
Government will promise to ‘learn lessons’ from HS2
The TransPennine Route Upgrade was first announced by the Conservative-led coalition government in 2011 but the full scope of the project was only agreed by Boris Johnson in 2021.
Chancellor Rachel Reeves announced a fresh cash injection of £3.5bn for the TRU in last week’s Spending Review.
Rishi Sunak axed HS2 north of BirminghamThe 76-mile-long project was originally supposed to cost £2.9bn in 2018.
It comes as the Government is expected to publish its 10-year infrastructure strategy which will see a raft of new investments signed off, including rail projects.
Labour’s Transport Secretary Heidi Alexander is due to make a speech on Wednesday in which she will offer a scathing assessment of how HS2 has been run to date and promise that lessons have been learned for future projects.
New chief executive Mark Wild recently admitted that the ‘civil engineering’ phase of HS2 is running well behind schedule, with only a third of works complete when it should be between 70 to 80 per cent.
More than 3,000 UK businesses are involved in the supply chain on the route which runs from London to Birmingham.
More than £32bn has been spent on HS2 so far, including almost £600m on buying land and around 1,000 properties for Phase Two which was cancelled by Rishi Sunak in 2023.
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