Today's Budget confirmed an announcement made by the chief
secretary to the Treasury, Danny Alexander, that the Government
would end the use of offshore employment companies in tax havens
such as Jersey and Guernsey from April 2014.
Mark Groom, tax partner at Deloitte, said: "Unless an offshore
employer has a place of business in the UK or is required to
account for tax or National Insurance contributions (NIC) under a
treaty, it won't usually be liable for UK tax or NIC in respect
of amounts paid to its employees."
The government is concerned by the impact on the benefit
entitlements of individuals working in the UK but employed by
offshore companies, as well as the potential loss of tax and NIC,
estimated at c.£100m a year.
As well as teachers and nurses, oil and gas workers are also under the spotlight but the rules relating to workers on the UK continental shelf are more complex. It has long been accepted by HMRC that no liability arises in many of those cases.
Groom continued: "We'll have to wait for the detail to be announced in a consultation document in May. It seems likely that the Government will want to consider ways to give the existing rules a bigger bite. Currently, those businesses in the UK engaging workers (the "end users") supplied by offshore employment companies can be liable for UK tax and NIC, but only in certain circumstances.
"Widening the scope and impact of those rules to make UK end users more clearly liable would be one possibility. However, any new legislation should not impact workers employed and working overseas. Although oil and gas workers were specifically mentioned, the treatment of workers in the North Sea is more complex and remains unclear."
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