Offshore Employment Intermediaries Consultation Sarah Radford HMRC UNCLASSIFIED

Offshore Employment Intermediaries Consultation Sarah Radford HMRC UNCLASSIFIED

Introduction • We want to hear your views, concerns and thoughts on the proposal and the legislation. • The consultation closes on 8 August. • The discussion today will cover: – Context – Background and Existing Legislation – The Government’s proposal – Legislation – Record Keeping Requirements – Scenarios and Discussion – Next steps UNCLASSIFIED

Context • Autumn Statement 2012: a review of offshore employment intermediaries was announced • Budget 2013: the Government announced that it would strengthen obligations to ensure the correct income tax and NICs are paid for offshore employment intermediaries with consultation on the details. • May 2013: consultation published outlining the Government’s detailed proposals. • July 2013: draft legislation published for comment • September/October 2013: first reading on the NICs bill • Autumn Event – Draft record keeping legislation published, Response Document and Guidance published UNCLASSIFIED

Background and Existing Legislation • There are legitimate reasons why an employer of a worker who is worker for a UK based company is employed by an offshore company. • However, since the 1990’s there has been an increase in the number of companies set up as offshore employers in an attempt to avoid primarily employer NICs but also other employment taxes. • Existing legislation: – Section 689 Income Tax (Earnings and Pensions) Act 2003 – Paragraph 9 of Schedule 3 to the Social Security (Categorisation of Earners) Regulations 1978, known as the ‘host regs’ • Difficulties with the existing legislation UNCLASSIFIED

Overview of the Proposal and Record Keeping Requirements UNCLASSIFIED

The Government’s Proposal UNCLASSIFIED

Legislation • Draft NICs legislation was published 16 July as part of the draft NICs Bill. • The legislation follows quite closely the proposal in the consultation. • The biggest change is that HMRC can move the secondary contributor 30 days follow the due date if there is non-payment • The tax legislation follows the NICs but we are currently in the process of finalising this, we hope to be able to publish it soon. • We would welcome your comments on the draft legislation these would be best in writing to paye. policy@hmrc. gsi. gov. uk UNCLASSIFIED

Record Keeping and Return Requirements • The proposal is that intermediary 1 (as per the diagram) will need to know how all of the workers that they supply are ultimately paid • Where the workers that intermediary 1 is placing are employed offshore intermediary 1 will be required to make a quarterly return to HMRC • If there is no intermediary then it will be the end client who has the return requirement to HMRC • Balance on regularity of reporting • Light touch reporting where the onshore business is paying the tax and NICs in full UNCLASSIFIED

Scenarios and Discussion UNCLASSIFIED

Scenario One – International Assignments UK Parent Company (C) Offshore Group Company Employer (A) Employee (B) UNCLASSIFIED

Scenario Two – Offshore Umbrella Company UK End Client (C) UK Employment Business (Relevant Intermediary) Offshore Umbrella (A) Employee (B) UNCLASSIFIED

Scenario Three – Group Agency Contracts UK Group Company 2 UK Group Company 1 Contracting entity UK Employment Business (Relevant Intermediary) Offshore Umbrella (A) Employee (B) UNCLASSIFIED UK Group Company 3

Scenario Four – Personal Service Companies and IR 35 End Client (C) Personal Service Company (A) Employee (B) UNCLASSIFIED

Scenario Five – Services from Unrelated Companies UK Business (C) Offshore Company Employer (A) Employee (B) UNCLASSIFIED

Specific Sector UNCLASSIFIED

Mariners • For Mariners working outside of oil and gas (case B) the status quo will be maintained • There is a power within the new legislation (at new section 1 A (8)) which will allow us to exclude through regulations anyone from this measure. • We intend to use this power to exclude Mariners outside of category A, B, C and D waters

Oil and Gas • Oleochem decision in 2008 • Inconsistent treatment between those working on fixed and floating platforms • We made some proposal in the consultation document. However, you may have noticed that there is nothing in the legislation. • This is because we want to hear views on this ahead of drafting the legislation and we will be making changes specific to oil and gas in regulations

Next Steps UNCLASSIFIED

Next steps • The measure will take effect from 6 April 2014. • The consultation formally closes on 8 August, although we will accept responses until 12 August • Draft legislation for record keeping requirements and the consultation response document will be published at the Autumn Event • Please contact Sarah Radford on 020 7174 2414 or email paye. policy@hmrc. gsi. gov. uk for any further information UNCLASSIFIED