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The Association of Professional Staffing Companies (APSCo) has expressed disappointment at the Government’s response and revised proposal with regard to offshore employment intermediaries.
APSCo has advised that it continues to support the Government in its commitment to reduce tax avoidance, however it says that the new proposals will place a very heavy administrative burden on employment businesses.
Samantha Hurley, Head of External Affairs for APSCo says: “The Government had originally proposed that the offshore employer would be responsible for accounting for the national insurance and income tax of the workers employed outside the UK but providing services in the UK. In the case of a default the employers’ obligations would move to the intermediary contracting directly with the end-user client (Intermediary 1) – i.e. an agency, neutral vendor or master vendor.”
“We felt that this would impose a heavy administrative burden on employment businesses and could, in some cases, encourage offshore employers to default knowing that they were outside UK legislation, leaving the recruitment business with unquantifiable risk. However the Government has now decided that obligations will fall immediately and wholly to Intermediary 1 and in the case of a default, the obligation will not be passed onto an end user.”
She continued: “While we obviously support any initiative to reduce tax avoidance, this proposal will mean not only a substantial increase in administration, but also significant contractual changes for employment businesses acting as intermediaries. If an employment business or umbrella further down the chain cannot prove to Intermediary 1’s satisfaction that a worker is being employed onshore then intermediary 1 will need the contractual right to deduct tax and national insurance at source.”
“We are disappointed in this outcome and are also seeking clarity on how this legislation will interact with existing IR35 and Personal Service Company (PSC) legislation as it is unclear at present which legislation would take precedence and whether offshore PSCs would even be affected,” Ms Hurley concluded.