A call to the HMRC (anonymous, if you like) will make him vulnerable to all kinds of hassle/possible prosecution (and you can bet that his 'arrangement' with you isn't the only dodgy practice he's engaged in). As I said earlier, you should have basic employment rights even without a paper contract so, as suggested above, speak to the CAB (assuming they haven't manged to shut them all down yet). Sounds like you'll be doing a massive favour for the next poor sod that takes his bait too.
I know it's a bitch but this latest twist is the entirely predictable outcome of what sounded like a horribly unfair situation and, in that sense, may just be the push you've been looking for to move on to better things.