New UK Finance Bill in effect – Self Employed? Watch out!!

[Richard Browne]

Back to one of my other questions..Do you think HMRC will target all the overseas ROV pilots, who come to the UK to work in the north sea on tourist visas?…Probably not and these people will continue to work TAX FREE..,
as HMRC relies on scare mongering and they always go for the easy target..

[Roy Simson]

Speaking as a dinosaur this is nothing new as HMRC as been trying to close the loop hole since the early seventies .

I remember Comex ended up with a megger size tax bill when all the guys in sat claimed they were self employed and a few years later MHRC later made it mandatory for all divers to be PAYE and there tax office was moved to Aberdeen , This only lasted for just one year because most experienced guys just went to work into middle east .

Over the years when working for company’s they would ask for a letter from your accountant or your local tax office .For a few years we even worked using a Tax Exemption Certificate a 714 cert they use them in the building trade .However that lasted only a few years and then they forced people to go limited company or PAYE I think this must have been about 18 years ago because that’s the last time I worked in the UK .

So back to the present day my views for what its worth are the agency’s are going to have a megger size job on there hands keeping track of things .

Since your hired as temporary crew the agency your be put on emergency tax since since the agency does not know your tax code , So you can say bye bye to a very large amount of your day rate . As for the amount best go to http://www.hmrc.gov.uk/incometax/emergency-code.htm . Maybe in a few years time you might get a tax rebate.

So before I go one last thing , Yes Thailand is making it harder for foreigners to live in Thailand all this seem to start about 2006 when they limited the 30 day tourist visa . Many like myself went over to a " O " class then this was stopped unless you were married to a Thai or were over 65.

So they bought out a " OA ( Long Stay ) visa well its not new but to get hold of one of these you need a police check cert , Medical cert and bank statement plus all this had to be counter signed by a solicitor .

Plus you had to go in person to the Thai embassy as they don’t do the service by mail .

So after all that is said and done if you want to work in the UK HMRC wants there cut . I think it will go the same way as Norway or Denmark in the end there going to have a very hard time finding crew .

Cheers

Raptor

[Rob Pattenden]

In response to Echidna it is our understanding that HMRC will in the very near future be requiring all UK employers to report anybody of any nationality working on the whole of the UK continental shelf (not just within the 12 mile zone) so this will capture both UK and non UK tax residents. Apparently this should already be in place but there have been delays at HMRC’s end writing the software that would allow them to collect all of this information.

I hope this is useful!

Cheers
Rob

[Ian Jary]

Its definitely an interesting time for the relationship between Agencies & Off-shore guys !!
I have had a letter from a Well known UK agency explaining their new procedure since the changes. Name **** has been removed from the text:

Gross-paid contractors
Firstly, let’s look at gross-paid contractors through ****. Gross-paid implies self-employment. However, the circumstances under which you typically work would render this as false self-employment on applying the supervision, direction and control rules. **** advise us that, in future, they must operate PAYE; NIC or the foreign equivalent may be deducted, where applicable.

Umbrella company contractors
An umbrella company arrangement where PAYE and NIC is operated is OK, as it will fall outside the agency legislation. **** will need to establish the PAYE credentials of the arrangement relative to the individual concerned, in order to continue to enter into an agreement with such ‘employed’ PAYE umbrella company contractors.

Limited company contractors
Similarly, a limited company where PAYE and NIC is operated is OK, as it will fall outside the agency
legislation. Again, **** will need to establish that the company operates a PAYE payroll relative to
the individual concerned, in order to continue to enter into an agreement with such ‘employed’
limited company contractors.

]National insurance
The NI rules for mariners engaged through **** are determined by the vessel flag. UK Employee
NI contributions therefore apply only on UK flag vessels. We are advised by **** that your UK
PAYE pay slip will show UK income tax deductions but no Employee NI deductions unless you are on a
UK vessel.

Income tax liability by place of work
On the basis of your residence in the UK, we understand that you are liable for UK income tax on
your worldwide income. On some foreign placements (e.g. Norway, oil and gas), there is an income
tax liability also to that foreign jurisdiction. Such placements will only be handled on a PAYE-basis
(not umbrella or limited company) so that **** can ensure double taxation avoidance on your
behalf, through their arrangement with UK HMRC.

Implications to you personally …

Gross-paid contractor
If you are currently engaged by **** under a gross-paid agreement, there is now a legal
requirement to operate PAYE and NIC. With effect from your first payment after 6 April 2014, we
are advised that **** will operate PAYE. Any subsequent engagement will be under a PAYE
agreement.

Umbrella company contractor
If you are currently engaged by **** under an umbrella agreement, then we are checking this out on
your behalf and will let you know the outcome.

Limited company contractor
If you are currently engaged by **** under a limited company agreement, then again we are checking
this out with you directly.

As I said ‘interesting times’. !!!

[liddelljohn]

i have had some interesting conversations with a few agencies about this issue over the last 2 days and also contacted a UK tax lawyer on his opinion .

The nub is that in future one may have to sever ties with all UK based agencies and not work in UK sector if one remains an expat , or agency freelancer ,,

Sounds drastic and with the most of the main agencies being UK based that could be devastating financially and career wise ……

However some of the UK Agencies i spoke to are now planning to open or actively considering opening offshore juristic offices ,where UK HMRC will have no power.
Its a counter to this new HMRC initiative as many of their contractors are foreigners or expats and the Tax lawyer who i consulted said that that would be what he would reccommend as it is now common in other industries which cover international sectors of contract employment , so ultimately little may change but a period of worrying uncertainty and legal grey areas will now ensue .

The Tax lawyer also mentioned that it would most likely have the effect of increasing companies employment costs and many agencies would fall by the wayside as happened in the Construction industry over the last 10 years which would probably increase direct employment and permanent roles for UK based personel in order to stabilise costs and keep workers in the UK sectors .

he told me that compliance costs will increase for both employers , agencies and agency contractors with Ltd companies to satisfy the HMRC in UK as they will be forced to document your employment , immigration, taxation and domicil status , so more bureucracy and costs of doing business in UK sectors . Over the last 10 years this has been very apparent in the UK construction & IT industry .

Juristictions for probable offshore offices he suggested would be outside UK and that also includes Jersey ,Guernsey ,IOM , but strangely Denmark is reccomended as is UAE ,Singapore ,Spain ,Portugal even USA as good places to put new international juristic offices even if Back room staff and the agents were still in the old UK offices , so for jobs outside UK areas for non UK domiciled personel contracts and payment would be issued not from UK office but from Offshore Juristic centre .

Complex issues and I hope i have , put all this down in a straightforward way,

80% of myROV work has been outside UK sector and i can take steps to increase that to 100% but maybe a little incovenience to myself ,,, in terms of contract length and conditions , but my expat status is secure from a domicil and taxation check . Others may have issues ..

The tax lawyer also mentioned another issue which is UK inheritance ,,, which in my case will be a problem some time in the future when my Dad dies , as i would inherit a few UK properties and UK financial business
responsibilities then new decisions would have to be made on my Tax and domicil status , again something that other expats may also have to consider in the future … and with elderly parents one might want to spend more time in UK as they age and one may wish to be nearby .

Again more complexity and thought provoking issues ,,,,

Maybe a UK staff job with SED might be worth it for a few years ?????

[T-Boy]

It doesn’t take a wizard to work out that working through a UK agency is no longer financially attractive.
That is of course unless you wish to pay your NI and tax at source and then try to claim it back.

HMRC will continue to tighten it’s purse strings and be more difficult to work in for people that are easy to tax. Work for or in the UK, then you’re reamed.
If you are an immigrant however, then you should be fine. The UK government will pay for pretty much everything, and HMRC won’t dare touch you for fear of reprisal.
What a crock of sh!te HMRC is.

If enough contract workers simply moved to agencies OUTSIDE the UK, then HMRC would have to rethink their approach…Sad, but true.

It’s very simple to do, and you may well be surprised at picking up new work in new areas.

Once the financial hurt has been felt, and HMRC withdraws it nonsensical, narrow minded approach, then jump back to the UK agency….simples!

Don’t consider loyalty here chaps, consider solidarity!

Those that chose to continue to work via UK agencies, are in fact, helping this new ‘rule’ to be passed! Think long and hard about that fact.

[Steve White]

After giving this some further thought….

I would suggest that, for those of you living outside the UK (no matter what nationality you are) and working in the North sea through an agency, you will either have to operated under a Ltd Co (This almost certainly means carrying your own UK employers liability insurance) or be taken on PAYE in the UK and have UK NIC’s and tax deducted at source.

This is certainly the best way forward. I have been contacted by 3 agencies in the past week to provide services to self-employed contractors, either to help them manage a LTD company or to provide an umbrella company service.

[Steve White]

How will or could this affect the SED please?

SED only works for employed seafarers. Self-employed seafarers are now being pushed to be employed, one way or another. In fact, being pushed to find solutions could benefit currently self-employed seafarers where they has simply accepted their position of being unable to claim SED.

[Richard Browne]

My god this is beyond confusing..Steve when I used to be based in the UK, I did not operate as a Ltd company and I was not an employee as I was paid by the agencies and companies I worked for gross by invoice or sometimes not, this was a few years back mind…According to my accountant I was also not classed as self employed as I didnt provide my own tools, pay for my own airfares etc..So to this day I still dont really know what I was, but anyway I qualified for SED according to my accountant at that time..I was considering relocating back to the UK if I can qualify for SED, as I work offshore outside of the UK always..I have been in contact with another seatax accountant and they have told me, even though I work for various companies/agencies I could still qualify for SED…depending on how my contract is worded it seems…so I keep hearing that you must be an EMPLOYEE of a company to benefit from SED, but then apparently this is not necessarily the case as loads of ROV guys that I know who live in the UK, claim SED and they are not an employee of one company…Also I was told by another seatax accountant that even if you are paid in gross by a company/agency you may well still qualify for SED, depending on how the contract of employment is worded..??…

[Steve White]

My god this is beyond confusing..Steve when I used to be based in the UK, I did not operate as a Ltd company and I was not an employee as I was paid by the agencies and companies I worked for gross by invoice or sometimes not, this was a few years back mind…According to my accountant I was also not classed as self employed as I didnt provide my own tools, pay for my own airfares etc..So to this day I still dont really know what I was, but anyway I qualified for SED according to my accountant at that time..I was considering relocating back to the UK if I can qualify for SED, as I work offshore outside of the UK always..I have been in contact with another seatax accountant and they have told me, even though I work for various companies/agencies I could still qualify for SED…depending on how my contract is worded it seems…so I keep hearing that you must be an EMPLOYEE of a company to benefit from SED, but then apparently this is not necessarily the case as loads of ROV guys that I know who live in the UK, claim SED and they are not an employee of one company…Also I was told by another seatax accountant that even if you are paid in gross by a company/agency you may well still qualify for SED, depending on how the contract of employment is worded..??…

It can be very confusing, I agree. Under the current SED rules you can have multiple ’employments’ within a qualifying year. The question is, as you rightly say, ‘what constitutes employment ?’. The contract as well as the work pattern and management of your work all go towards determining this and if HMRC challenge an SED claim, these and other criteria must be satisfied. Failure to do so will result in a failure of an SED claim plus payment of Class 1 NIC’s (where applicable). The new legislation goes some way to push the point and to force a review of the individual’s real or perceived employment status. Agencies are now very wary as they will become liable for employment taxes should the contractor be seem as ’employed’ by them, if determined by HMRC under this new legislation.

[T-Boy]

See post below.

[Steve White]

After giving this some further thought….

I would suggest that, for those of you living outside the UK (no matter what nationality you are) and working in the North sea through an agency, you will either have to operated under a Ltd Co (This almost certainly means carrying your own UK employers liability insurance) or be taken on PAYE in the UK and have UK NIC’s and tax deducted at source.

This is certainly the best way forward. I have been contacted by 3 agencies in the past week to provide services to self-employed contractors, either to help them manage a LTD company or to provide an umbrella company service.

Don’t be naive, they are closing in on Umbrellas as well.

I would suggest that any person living in or out of the UK, working within the North sea for example, uses an agency outside of the UK.
An agency outside of the UK jurisdiction does not have PAYE or NIC responsibilities. Or have I missed something?

If you work inside UK waters then you are liable for UK tax and NIC’s irrespective of what agency you work for. Whether you can claim tax reliefs is another matter. That would depend on who pays you, where they are based, what type of vessel you work on, etc, etc, etc – nothing is as simple thinking that using offshore agencies or offshore anything is going to exempt taxation legally.

[T-Boy]

I was editing the post when you posted your reply Steve….

Some of the posts are confusing!

Quite simply….

Any contractor living in or out of the UK, working within the North sea for example, needs to use an agency outside of the UK.
An agency outside of the UK jurisdiction does not have PAYE or NIC responsibilities. Or have I missed something?

I would strongly disagree about confusion – it is not confusing at all. In actual fact if you spend a little time to work out how the system works, it’s relatively simple. Most folks though, just can’t be bothered which I understand.

Regarding employment – Once you accept a job via an agency, you receive a temporary workers contract. Bingo, you are now employed. Work via an agency outside of the UK and Bingo once again, you can receive Gross pay, maintain your own NIC contributions, and are employed…Simple Idea

If anyone can see a flaw in my understanding and proposal then please shout.

[Steve White]

I was editing the post when you posted your reply Steve….

Some of the posts are confusing!

Quite simply….

Any contractor living in or out of the UK, working within the North sea for example, needs to use an agency outside of the UK.
An agency outside of the UK jurisdiction does not have PAYE or NIC responsibilities. Or have I missed something?

I would strongly disagree about confusion – it is not confusing at all. In actual fact if you spend a little time to work out how the system works, it’s relatively simple. Most folks though, just can’t be bothered which I understand.

Regarding employment – Once you accept a job via an agency, you receive a temporary workers contract. Bingo, you are now employed. Work via an agency outside of the UK and Bingo once again, you can receive Gross pay, maintain your own NIC contributions, and are employed…Simple Idea

If anyone can see a flaw in my understanding and proposal then please shout.

Well, if you think it’s not confusing then you should listen to the ever-increasing phone calls I am receiving ! People are confused, that is a fact. I don’t think we should belittle the anxieties that people have just because they can’t get their heads around taxation issues.

This legislation does not exclude non-UK agencies. HMRC will want them to deal with UK tax residents in the same way as any other ’employer’. Just take Technip Singapore as an example of an offshore employer that administers a UK PAYE scheme. I do concede however that HMRC may find it harder to impose their will on non-UK based agencies. It may well be that most non-UK agencies would not be liable for PAYE & NIC’s however I think it is not sensible just to assume this as a blanket approach to the situation.

[James McLauchlan]

The crux of this is…. The HMRC noose is tightening as far as offshore work goes.

I suggest that, soon enough, UK based companies might not feel comfortable accepting personnel supplied by an overseas agency for work in the UKCS in case they (the UK based company) find themselves deemed liable for the individuals taxes by HMRC.
There may come a time when they will insist that you are an employee of a Ltd Co in all instances. It seems clear to me that HMRC want their cut and see the way forward as doing their best to ensure that those working in the UK are employees of a Ltd company, with both the employee and the employer making contributions to the revenue system. I kind of see their point.

If you are an ex-pat (Especially a UK ex-pat) but expect to continue to work in the UKCS but not pay tax on that income, and still live overseas and not pay tax there either, then you might have to have a rethink on how you might be seen by HMRC. I’m reasonably sure that all companies, be they agency or operator, will soon need to report to HMRC whom they have used throughout the year and where/how many days they worked in the UKCS. That’s if they are not doing it already!
Denmark forces companies to do this. I know that for a fact as I had Danish revenue onto my company in Portugal because one of our employees had worked a trip for a well known Aberdeen based offshore company in the Danish sector. The the Danish tax person was like a terriers on steroids!!

Of course there is nothing wrong with living overseas and working overseas as an individual. How the country you hang out in deals with that can be quite beneficial from a tax aspect 😉 Been there before 🙂

From past experience I know that UK based companies will take the path of least resistance when to comes to dealing with HMRC. If, today, that means only taking on those employed by a Ltd company then that’s what they’ll do.

Initially, there will be a panic style shuffle of contracts of service, coupled with a fair smattering of confusion. For next year we will see that things will have shifted somewhat to compensate for the new legislation. I also assume the playing field will change somewhat on the agency front. A lot will simply vanish. We’ll also start seeing job adverts along the lines of: ‘Must be employee of Ltd co only’!

I feel self employed, as we knew it offshore in the UK, is pretty much dead in the water, as will be any individuals being paid gross for work in the UKCS and skipping out no taxes paid.

Steve.. feel free to correct any of the above!

[Author]

Posts