I have commented before on the need to close the tax loopholes that allow companies to employ people without paying employer’s national insurance contributions by registering offshore.
The latest company to have been named and shamed in this immoral act is a company called ISS Ltd. Based in the Channel Islands it employs more than 24,000 temporary agency workers across the UK, most of them working as supply teachers. The company, which has been caught out under the crackdown on such companies which Liberal Democratin Government are leading, claims that it “meticulous in complying with HMRC codes on taxes and expenses”.
HM Revenue & Customs says schools, councils or employment agencies could be liable for the shortfall.
ISS is a payroll company – sometimes known as an “umbrella” company – which pays the salaries and expenses of workers who find jobs through recruitment agencies in the UK. The arrangement means that temporary workers, such as supply teachers, are the employees of ISS.
Because ISS is based offshore it does not pay employer’s National Insurance contributions – but neither do the UK-based recruitment agencies that find the jobs for staff paid by ISS.
This could add up to many millions of pounds in unpaid tax. For example, for a supply teacher on a daily rate of £160, around £90 per week is not being paid to HMRC in employer’s National Insurance contributions.
HMRC says that the UK-based employment agency through which the workers are supplied, or alternatively the end-user company, such as the school or local education authority, could be treated as the employer and therefore be liable for the unpaid National Insurance contributions.
The lack of enforcement by the last Labour Government has encouraged the growth of offshore umbrella companies but as Lib Dem Chief Secretary to the Treasury, Danny Alexander, is showing we don’t need more rules or different rules, we just need effective enforcement of the existing rules.