ok, so there seems to be a few different things that need to be addressed here.

• Labor only sub contractor, this really rings alarm bells with me, there are a bunch of tests to determine if a worker is likely to be employed or self employed (in the eyes of the law and HMRC, not your determination as an employer, which is what ultimately matters). Its entirely possible that you are currently misclassifying your workers as self employed. I suggest reading https://www.gov.uk/government/publications/employment-status-manual and https://www.gov.uk/guidance/employment-status-indicator. If the employees are currently misclassified, you may be on the hook for unpaid income tax and NI contributions, as well as suddenly having minimum wage laws come into play, as well as working time regulations, sick pay, holiday pay etc..

If the workers are currently misclassified, moving over to 0 hours contracts may be the most appropriate solution moving forwards if you aren't in a position to offer regular work.

Its also worth noting that its likely that even if they do count as self employed, they may fall under the IR35 rules, and you may still need to have appropriate Statutory Employers liability insurance, even though they are not employees.

If The worker is correctly classified as self employed, and there is no contract in place, the worker will be entitled to compensation for work completed, but nothing further. if you refuse to pay then basically their remedy is going to be to take you to small claims court, which could lead to you getting a CCJ against yourself personally (basically, the small claims court makes a judgement saying you owe money, and that judgement can be taken to the county or high courts to be enforced by bailiffs).

• The Deposit seems to be kind of legally sketchy, although I can't think of a relevant law off the top of my head, its likely that unless there was a contract outlining the scope of purpose for the deposit, a judge would rule that the deposit needs to be returned in full (quite possibly with interest along the same lines as tenancy deposits). And as a general bit of advice, a lot of people won't take kindly to you charging people to work.

• Theres basically nothing you can do about them 'stealing' your client. If you had a contract in place, which had a term addressing the issue, then you may have been able to get some compensation, but as it stands, you haven't protected yourself, and the worker is under no obligation to you.