HMRC recently announced the results and conclusion of its consultation into the practice of paying UK workers via overseas employment agencies. Not surprisingly HMRC is seeking to eradicate these arrangements, which it sees as aggressive tax/NIC planning at best. One of the main issues is that these dubious practices may be largely ‘invisible’ to everyone in the contractual supply chain other than the offshore entity itself.
Under the revised proposals, the ‘first intermediary’ (i.e. closest to the end-user) in the supply chain would (from April 2014) be obliged to either itself apply PAYE/NIC, or identify any payments via offshore entities that it has not deducted PAYE/NIC from and report these quarterly to HMRC.
The revision is not as severe as was originally proposed (the Government no longer wishes to transfer unpaid debts all the way up the supply chain to the end-user of the service). However for the first intermediary in a supply chain (typically a ‘legitimate’ UK employment business or agency) this may necessitate a thorough and rapid review of all such arrangements, to identify any cases where offshore entities may be included at any later point in the contractual supply chain.
If you require further details please contact the ET4B team.