On 5 December 2013, the British government published upcoming changes to the UK tax regime. These upcoming changes will be of particular importance to the employers of expats, as they will target dual contract arrangements and offshore intermediary employment structures.
United Kingdom: Upcoming tax policy
On 5 December 2013, the British government published upcoming changes to the UK tax regime. These upcoming changes will be of particular importance to the employers of expats, as they target the following:
- Dual contract arrangements
At this time, a relatively small group of high earning non-UK domiciled taxpayers avoid British taxes by 'artificially' dividing their income between employment contracts in the UK and abroad. As a result of this salary split, these taxpayers benefit from taxation rate benefits and tax credits and exemptions in multiple countries. Furthermore, dividing their income between different countries results in a lower taxable income in each country. That way, there is not enough income in any country to pay the highest rate of personal income tax.
Measures will be implemented to counter these artificial salary splits. Furthermore, the UK Tax Authorities may assess which employer ultimately benefits from the employee’s work.
- Offshore employment intermediaries
As of 6 April 2014, new provisions to enforce the payment of employment tax and national insurance contributions related to the employment of employees at UK companies via a chain of intermediaries will enter into force. As a result of these new provisions, it is most likely that the intermediary closest in the chain to the company using the employees will become liable for the payment of the employment taxes and national insurance contributions.