The government are concerned that the use of offshore employers to employ UK workers who are working for UK based companies is primarily set up to avoid paying employment taxes including NIC. In May 2013, a consultation document was published which contained proposals to strengthen obligations to ensure the correct income tax and NICs are paid by offshore employment intermediaries.
In essence, the proposals will ensure that the offshore employer will be liable in the first instance for deducting income tax and NICs from the worker and employers’ NICs. If the offshore employer fails to account for and remit to HMRC the tax and NICs due the employer’s responsibilities move to the intermediary business contracting with the end client/end user. Where there is no intermediary business, or the intermediary defaults on its new tax and NICs obligations, this responsibility will move to the end user.
Existing legislation will be amended to take effect from April 2014 with the government looking to strengthen this following further consultation. With less than four months to go before these new rules apply, intermediaries and agencies will need to carry out the appropriate due diligence and make sure procedures are put in place to account for tax and NICs. The proposals create new risks for end users and they will want assurances from offshore employers that such procedures are in place.
For more information or to discuss the proposed changes contact our TaxDesk on 0845 4900 509 and ask for Martin Mann.