Workers supplied via Offshore employment agencies
Legislation in the Finance Act 2014, strictly applies from 6 April 2014. However HMRC has adopted a so called ‘soft landing’ approach, so that the new rules will be more rigorously enforced from 6 April 2015.
What is the measure aimed at?
Targets payments to workers paid (often through a chain of intermediaries) via offshore companies, for work actually being undertaken in the UK, in situations where the offshore agency etc is able to sidestep some or all of the UK tax or NIC rules.
How does it operate?
Legislation puts the onus on ‘first intermediary’ in the engagement chain to confirm no such workers are being paid offshore.
NB: Personal Service Companies (PSCs) do not appear to be directly excluded from the rules; however payments made to the worker via a UK registered ‘one man band’ PSC are likely to be subject to UK tax and NIC rules anyway (the chances that payments are then made to the company directors etc, e.g. via contracts with other offshore businesses, may be more remote).
Separate and additional certification rules would apply for oil and gas workers working within the UK Continental Shelf; these allow a UK associate etc of an offshore employer to be responsible for the PAYE/NICs obligations..
What is the result?
PAYE/NIC applies in full in respect of payments to the worker, and the ‘first intermediary’ would be wholly responsible for accounting for any PAYE/NIC which has not already been paid (even if that intermediary does not actually pay the worker or control the payment arrangements).
For oil and gas workers in the UK continental shelf; where there is no associated company etc. in the UK, oil field licensees will be responsible for accounting for PAYE/NICs (unless the offshore employer fulfils these obligations on their behalf – the offshore employer can apply to be ‘certified’ by HMRC for this purpose).
Is there potential for duties to be transferred elsewhere?
As mentioned, the intention is to force the first intermediary in the engagement chain to confirm no payments are ultimately made offshore (for UK work), or to apply PAYE/NIC in full. If there is no such UK based ‘first intermediary’ in the engagement chain, these obligations would then fall on any UK based ‘end user’ of the service.
Separate considerations apply to oil and gas workers in the UK continental shelf, as above.
Other matters to consider
New quarterly reporting obligations have also been placed on the first intermediary and these will also apply from 2015/16 onwards. Whilst the final detail is still currently under discussion, the essence of the new reporting obligations is that the first intermediary must include details of sums paid (whether to an individual or another intermediary) that have not already had PAYE and NIC fully deducted.