Offshore payroll firms may create NI liabilities

UK employers that use temporary workers who are employed by offshore payroll organisations must be aware they could be liable for employer national insurance contributions (NICs).

Offshore payroll companies do not need to pay NICs for their employees because the company is not resident in the UK. However, organisations that use temporary workers in the UK who are paid this way, such as supply teachers, could find that HM Revenue and Customs (HMRC) pursues them for these contributions.

Inez Anderson, tax partner at Smith and Williamson, said: “While the offshore employer itself may not be liable to NI, there is some complex anti-avoidance legislation which, in summary, means that if an individual employee is working in the UK for the benefit of a UK entity, that UK entity may be liable to pay PAYE on the proportion of that individual’s salary which relates to their work in the UK.”

Alistair Kendrick, director at MacIntyre Hudson, said: “HMRC has the right to deem [the UK organisation] the employer for tax purposes.”

To ensure that they do not face unexpected NIC liabilities, employers should put procedures in place to check if a temporary employee is paid by an offshore organisation when they are taken on.

Kendrick added that a number of schools and education authorities could face ‘significant liabilities’.