A problematic question
Published:
WHO is your employer?
For most people this is an easy question to answer, but where an offshore employment company is implemented in connection with manning arrangements in the North Sea or beyond, the answer may be more problematic, especially where the question is being asked by HM Revenue and Customs (HMRC).
For businesses to remain competitive with operators in other taxing jurisdictions, arrangements may be set in place that mean no employer’s national insurance contributions are payable in Great Britain (GB).
This can result in a significant cost saving of 12.8% on payroll costs. While HMRC has said it is unlikely to challenge offshore manning arrangements if the employer has no place of business in GB, its commentary does make clear that the offshore employing entity must have real substance as an employer. The main concern is usually in establishing that there is an employer who has no place of business in GB. HMRC will pay particular attention to the GB companies receiving the services of the personnel concerned to see if they may be regarded as the real employer.
If they so conclude, then the GB company concerned will be held liable for the employer’s NIC.
However, this should not affect situations involving mariners, where specific legislation applies.
To date, many offshore employment companies have been accepted by HMRC, but the number of HMRC inquiries appears to be growing in order to check who is the real employer.
Gordon Robertson is an employment tax specialist at Anderson Anderson & Brown
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