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Combating offshore employment tax avoidance: consultation launched

The government proposes new measures to ensure correct employment taxes are being paid by offshore employment intermediaries

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Money under a magnifying glass

A consultation has been launched on plans to tackle the use of offshore employment intermediaries to avoid employment taxes, mainly employer National Insurance Contributions (NICs).

The plans follow an announcement by the Chief Secretary at budget 2013 that the government would strengthen obligations to ensure the correct income tax and NICs are paid by offshore employment intermediaries – a structure that is put in place between a worker and a business using their labour.

Recent years have seen a growing use of offshore employers to employ UK workers who are working for UK based companies. This can be for legitimate commercial reasons but some businesses are using these structures to avoid paying employment taxes including National Insurance for their UK-based workers.

Often the workers and the business using the labour are unaware that these arrangements are in place. The government is proposing to create an income tax and NICs charge levied on the offshore intermediaries of those workers engaged in the UK.

In the case of default by the offshore intermediary, the income tax and NICs responsibilities will fall to the employment business contracting with the end user of the labour. Where there is no intermediary, responsibilities will transfer to the end user.

Chief Secretary to the Treasury, Danny Alexander, said:

As announced at budget, the government is clamping down on those companies that seek to avoid paying the taxes they owe, by moving their payrolls offshore. We want to create a level playing field so that UK businesses that play by the rules aren’t undercut by those who wrongly think they can get away without paying.

We are consulting on the design and implementation of these arrangements and will ensure that, where someone is working in the UK, their employer can’t dodge paying the right amount of tax and National Insurance on their behalf.

The consultation period lasts for 10 weeks, closing on 8 August 2013. It is envisaged that the new measures will come into force in April 2014.

Photo by Images_of_Money on Flickr. Used under Creative Commons.

Published 30 May 2013