The legislation aims to close a loophole through which offshore employment intermediaries, often based in the Isle of Man and Jersey, are able to avoid deducting PAYE tax and National Insurance Contributions (NICs) from workers in the UK, because technically they are employed outside the country.

The government believes the solution is to make such workers subject to UK PAYE and NICs, and to pass the responsibility for compliance up the supply chain to staffing businesses, and ultimately to end users.  The legislation will also allow liability for any unpaid tax or NICs to pass up the supply chain. 

Chaplin says proving compliance would cause real administrative difficulties for agencies and umbrella service providers. “To be absolutely 100% compliant, you need to be able to show that 100% of the money that is being paid to the workers is going via PAYE/NICs 100% of the time. It is a 100% test; you can’t just show a show just a sample of payments made,” he says. 

In addition, he says agencies will have to understand whether any of their workers are engaged via offshore intermediaries. Where an offshore provider is involved, the agency will be responsible for filing a quarterly return containing names, national insurance numbers, length of assignments and details of the offshore employers. 

Chaplin says the administrative burden involved will be particularly heavy on UK-based service providers, which will need to prove to the agencies they work with that they operate UK PAYE and NICs fully. Agencies will also be under pressure to prove this to their clients, he explained. 

Crawford Temple, managing director of supply chain compliance solutions provider Professional Passport, tells Recruiter: “You have to be able to demonstrate and understand how each worker is paid – it doesn’t matter whether they are onshore or offshore.”  

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