Beeb forces closure of offshore payroll loophole

cashLast November I wrote three articles about ISS and other offshore payroll companies. You can read them by pressing these three links.

I argued that agency workers were being tricked out of penssion contributions under the new Pension Reforms.

A previous Government  had created a loophole through which tens of thousands of contract workers – typically teachers were falling. In return for a marginally higher take home, contractors who elected to be paid from that employment hub – Sark (population a man and a goat) got a VAT and national insurance break but no pension entitlement under the new pension reforms till 2017.

It was the BBC who brought the issue to the public note.

The pension implications were not explored in their report but other reductions in UK benefit entitlements were. A good lawyer , Helen Powell looked into the pensions issues for me and confirmed what I had suspected, that those 24,000 teachers supposedly working for ISS, had tricked themselves out of up to five years of pension contributions to which they were entitled.

I was pleased to read this weekend, that all is not lost.

Three months later and it looks as if this prayer was answered

A tax loophole that allows firms to dodge £100m a year in National Insurance will be closed under a new scheme targeting offshore payroll services.

Chief Secretary to the Treasury Danny Alexander said the loophole allowed UK companies to avoid paying tax for thousands of workers.

English: Danny Alexander MP addressing a Liber...

Mr Alexander said British firms with British staff must pay British taxes.

He announced the move in a speech to the Scottish Lib Dem conference.

It is not just about the tax we get in, it is also the case that many employees will not know they are paid in this way”

Mr Alexander said around 100,000 employees – mostly teachers, nurses and oil and gas workers – were believed to be paid through offshore payroll services set up in tax havens such as Jersey and Guernsey and could be ineligible for statutory sick pay, but completely unaware of that status.

He said he was alerted to the loophole by one such worker who approached him at Inverness Airport. But he insisted he found it was already under investigation by officials.

“It is not just about the tax we get in, it is also the case that many employees will not know they are paid in this way,” he told BBC Radio 4’s Today programme.

Mr Alexander said the move had a direct consequence for workers.

“If their employer is not paying employers’ National Insurance, unbeknownst to them they may not then be entitled to statutory maternity pay if they become pregnant, they may not be entitled to statutory sick pay if they fall ill,” he said.

“This is not just something which has direct consequences to the Exchequer, costing us all hundreds of millions of pounds, it is also something that has a direct consequence for the workers concerned and that why it is so important we are taking this action.”

Patrick Stevens, tax partner at Ernst & Young, told BBC News the loophole needed to be closed.

He said: “This originates from the situation where British companies are sending their employees overseas, so if they’re working full-time overseas, it’s probably perfectly fair that they are not subjected to UK tax.

“But in some cases people are taking advantage of a bit of a loophole where British workers are being got into the same situation but this needs to be closed down.

“It’s the special rule around agency workers that I understand is allowing people to get into this loophole and take advantage of something that was really only meant for people working overseas.”

 

Again the article does not specifically mention but it looks pretty certain that if the loophole is closed, these teachers and other professionals will get their entitlement pretty much from day one. The onshore umbrella payroll companies are among the first to auto-enroll as they have huge numbers of UK workers on their books.

The news is not just good for the contractors, it’s good for the DWP andTreasury – who get their full share of National Insurace and VAT revenues.That’s good news for the rest of us who have been picking up the tab.

It is also good news for pension providers who are understandably nervous about receiving large amounts of cash from an offshore bank account (think money laundering). Indeed NEST have simply refused to take the money, so these offshore workers would not have been eligible for NEST.

Once again, the Beeb , in a very low-key way, have won an important battle. We are quick to launch attacks against the BBC but slow to acknowledge the quality of the Beeb’s journalism and its positive impact.

A good news story all round (except for the man and the goat on Sark).

man and a goat

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to Beeb forces closure of offshore payroll loophole

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