HM Revenue & Customs announced last month that it would be appointing 100 extra inspectors to find agencies believed to be dodging £500m in tax payments.

Now the Revenue has confirmed it will be examining the tax status of workers as part of the campaign.

Union chiefs were delighted the net will be widened to include the problem of agencies wrongly applying employment status laws in order to avoid paying employers National Insurance contributions and other benefits such as holiday pay.

George Guy Acting General Secretary of Ucatt, said: “The confirmation that the HMRC is cracking down on false self-employment being undertaken by employment agencies is welcome news.

“False self-employment is endemic in agencies operating in construction and is costing the taxpayer millions of pounds every year in lost revenue.

“Employment agencies must realise that they can no longer get away with falsely self-employing workers and denying them the most basic employment rights.”

Representatives of the industry’s 500,000 self employed workers have vowed to help HMRC track-down the rip-off merchants who con builders out of their cash.

Freelance Builders spokesman Dave Simpson said: “We have plenty of first-hand experience of umbrella providers and gangmasters who make payments net of tax and then disappear without trace – neither we nor the Revenue ever see them again.

“It’s pretty easy to distinguish the rogues from the legitimate providers for freelance builders.  Those who do things properly have nothing to fear.  But we will certainly be happy to pass on details of those we suspect of fraud.”