Offshore Employment Intermediaries
11 April 2014
Where there is a UK agency in the contractual chain, they will be responsible for operating PAYE and NIC under new rules which take effect from 6 April.
At Budget 2013 the government launched a consultation on changing the rules on Offshore Employment Intermediaries in order to deter PAYE and NIC avoidance schemes.
Following consultation to reform the rules to make enforcement easier and simpler, the government has introduced new NIC (National Insurance contribution) rules which take effect from 6 April 2014.
National Insurance regulations have been published covering:
- Offshore Intermediaries - The Social Security (Categorisation of Earners) (Contributions) (Amendment) Regulations 2014
- UK Continental Shelf (UKCS) - The Social Security (Contributions) (Amendment No. 2) Regulations 2014.
Similar Income Tax rules have been published in the Finance Bill 2014.
The rules where an agency or UK host business involved have been strengthened. Compliant UK host businesses who have been deducting PAYE and NIC should notice no change - the idea is to enable HMRC to be able to more easily prove the facts in cases where PAYE and NIC have not been deducted.
There are new rules where an employee is employed by or through an offshore intermediary:
- where there is a UK agency in the contractual chain, the UK agency is responsible for operating PAYE and NIC
- if there is more than one UK agency in the contractual chain, the UK agency that contracts with the end client is responsible for operating PAYE and NIC
- where there is no UK agency in the contractual chain the client the employed person works for is responsible for operating PAYE and NIC
- there is a special rule that applies the secondary NIC obligation to a UK agency that is involved in supplying workers overseas, where the worker is in Class 1 National Insurance when working abroad.
The new legislation also simplifies the agency rules so that a worker is subject to Class 1 National Insurance and PAYE when they work through an agency and:
- the worker personally provides or is personally involved in the provision of services, to the client
- there is a contract between client and an agency under or in consequence of which the services are provided or the client provides consideration for the services, and remuneration is receivable by the worker.
The agency worker rule does not apply to those workers where it can be shown that the worker is not subject to (or the right of) supervision, direction or control by any person.
UK Continental Shelf
Special rules have been introduced where a person is employed on the UKCS in the oil and gas industry by or through an offshore employer:
- where the offshore employer has an onshore associate company, the associate is responsible for operating PAYE and NIC, including secondary NIC
- if there is no onshore associate company, then the licensee of the oil and gas field is made responsible for operating PAYE and NIC, including secondary NIC
- a certification system is being introduced, under which, the licensee can be exempt, if HMRC issues a certificate, showing that the offshore employer is meeting all the PAYE and NIC obligations, including secondary NIC.
If the offshore employer is correctly meeting all PAYE and NICs obligations on behalf of the licensee, then HMRC will issue a certificate exempting the licensee from their PAYE and NICs obligations. As long as this certificate is in force, the licensee cannot be pursued for any PAYE or NICs obligations.