In the 2013 Budget, the Government announced that it would introduce new legislative measures to ensure that correct tax and NICs are paid by offshore employment intermediaries, to combat a
In the 2013 Budget, the Government announced that it would introduce new legislative measures to ensure that correct tax and NICs are paid by offshore employment intermediaries, to combat a significant number of businesses using these structures to avoid paying employment taxes for their UK-based workers.
A consultation document was published in May this year. The proposal was for the offshore employer to hold responsibility for accounting for the tax and NICs of its UK-based workers. If the offshore employer were to default, the responsibility would pass to the intermediary business closest to the end user of the labour ("Intermediary 1"). If there was no Intermediary 1, or if Intermediary 1 were also to default, the responsibility would pass to the end user. Stringent record-keeping and return requirements would also be imposed on the relevant intermediaries.
The consultation period ended on 8 August. In light of the comments it received, the Government has announced a radically revised system to that originally proposed. The responses received raised a variety of concerns with how the proposals would work in practice. The three main concerns with the proposals were:
In response the Government has simplified the proposals; amending and strengthening the existing legislation to make it clearer and more effective rather than create new legislation. Intermediary 1 will now be made wholly and immediately responsible for accounting to HMRC for tax and NICs. The responsibility will not move, so there will be no recourse against the end user if Intermediary 1 were to default. The new proposals also reduce the administrative burden, as most businesses are now excluded from any record-keeping and return requirements. Intermediary 1 will have to account for any offshore workers using real time information ("RTI"), submitting simple quarterly returns covering payments for which information has not been supplied under RTI.
Separate rules will apply to the oil and gas sector, where the proposals were seen as almost unworkable. In short, the responsibility for tax and NICs will lie either with a UK-based associate of the offshore employer or, if none, with the licensee. The legislation will come into effect from 6 April 2014.
A consultation document was published in May this year. The proposal was for the offshore employer to hold responsibility for accounting for the tax and NICs of its UK-based workers. If the offshore employer were to default, the responsibility would pass to the intermediary business closest to the end user of the labour ("Intermediary 1"). If there was no Intermediary 1, or if Intermediary 1 were also to default, the responsibility would pass to the end user. Stringent record-keeping and return requirements would also be imposed on the relevant intermediaries.
The consultation period ended on 8 August. In light of the comments it received, the Government has announced a radically revised system to that originally proposed. The responses received raised a variety of concerns with how the proposals would work in practice. The three main concerns with the proposals were:
- They may encourage offshore employers not to comply with their tax responsibilities, knowing that they are outside UK jurisdiction and that their liability would pass to Intermediary 1 and/or the end user.
- The record-keeping and return requirements would impose a heavy administrative burden on all businesses.
- Rather than simplifying the legislation, they were, in effect, adding an additional layer of complexity on top of the existing legislation.
In response the Government has simplified the proposals; amending and strengthening the existing legislation to make it clearer and more effective rather than create new legislation. Intermediary 1 will now be made wholly and immediately responsible for accounting to HMRC for tax and NICs. The responsibility will not move, so there will be no recourse against the end user if Intermediary 1 were to default. The new proposals also reduce the administrative burden, as most businesses are now excluded from any record-keeping and return requirements. Intermediary 1 will have to account for any offshore workers using real time information ("RTI"), submitting simple quarterly returns covering payments for which information has not been supplied under RTI.
Separate rules will apply to the oil and gas sector, where the proposals were seen as almost unworkable. In short, the responsibility for tax and NICs will lie either with a UK-based associate of the offshore employer or, if none, with the licensee. The legislation will come into effect from 6 April 2014.