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Government to target offshore employment companies

21 March 2013

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.”

Ends

Notes to editors:
About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities.

Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited

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