How to avoid Employers NI?

How to avoid Employers NI?

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Apparently it is perfectly legal to set up an offshore company in, say the Channel Islands, and have all of your employees transferred to the employ of the offshore entity. Naturally the offshore entity will require a monthly agency fee for supplying the staff and payment will be made gross to them but by doing this the offshore entity escapes liability for employer's NIC and simply has to pay the tax and E'EE nic of the employees...... or at least so my client is being told

The UK company directors/shareholders would have no stake in the offshore entity.

They say it is as easy as that and is legal and are very persuasive with their argument (they would be for a fee in excess of £70k).

I have serious reservations not least of which is the likelihood of HMRC spotting the monthly PAYE payment reducing from £100k + down to around £5k and asking why.....

The client shares the reservations but we're trying to seek more info about whether this has ever worked in practice.

Has anyone else come across such a scheme and known it to successfully operate for a long period of time - or better still be challenged and hold up to scrutiny?

Surely it would be an invitation for a status check and the risk would be that one of the labourers if asked do you work for XYZ (Jersey) Ltd would reply "no mate I work for XYZ in London"

Ths risk of it running nicely for 2 years and then falling down with end result of having to pay employers NIC + interest + penalties and losing the £70k (non refundable) fee is somewhat off putting but the client, fair enough, says "yes but what if it works we can save millions......"
Anon

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By thehaggis
01st Aug 2008 00:56

Doesn't work
Social Security (Categorisation of Earners) Regulations 1978

Where an employee is posted to work in GB on or after 6 April 1994 :

by an employer who does not have a place of business in GB ; and

to work for a GB employer

the GB employer is treated as the liable secondary contributor for the payment of Class 1 secondary contributions .

It's the same for tax under s689 ITEPA 2003. The host employer in the UK - the company for whom the employees are working (regardlees of who the legal employer is) - has a responsibilty to account for PAYE tax and both primary and seconday NIC.

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By User deleted
01st Aug 2008 13:58

Who is touting this scheme ?
I would be interested in who is touting this scheme - charge £70k with no guarantee that the scheme works.

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By User deleted
01st Aug 2008 12:57

Conflicting information
I have always found it a hard concept to consider anyone who receives work via an employment agency and exclusively works via an employment agency can be considered to be self employed. It seems to go against the grain of being in business on your own account. Surely one of the tenents in such an arrangement is finding your own work and agreeing your fee with the client. The employment agency takes these steps away from you.
For the last contributor, for the agency to make such a bold statement on their website takes bottle. Now they have thrown down the gauntlet to HMRC, then surely HMRC will let battle commence.
For the original query on this posting, should it not have said, once upon a time, in a land far far away, and ended up with and they all lived happily ever after esp the external consultant who received £70k for providing naff advice. The advice was so wrong on many a level...

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By JonWright-ConceptAccounts
01st Aug 2008 08:05

Are employees in construction industry
Are the employees in the construction industry?

If so we have a client that uses a company called Husons Contract Services Ltd see http://www.hudsoncontract.co.uk/Html/lawfully.htm they seem to boast that they "Facilitate Self Employment status for EVERY subbie on ANY site"

We were not involved in advising on this so have no idea how it works - let me know if anybody finds out!


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By mikewhit
31st Jul 2008 18:06

Better yet ...
put the question to Mr. R. Murphy - I'm sure he will have something to say on the matter !

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By geoffwolf
31st Jul 2008 16:49

nic record
Why not put the question to HMRC NI Contributions office and confirm that the NIC sickness, unemployment and state pension records and entitlements of all the employees be kept up to date.

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