The closing of a tax loophole could cost North Sea firms nearly £700million a year, an industry expert claimed yesterday.
Colin Pearson, oil and gas tax partner at Ernst and Young’s Aberdeen office, was addressing business leaders at a post-Budget breakfast in the Granite City.
Reforms, to be consulted on this year, will limit the ability of companies to employ staff through offshore intermediaries and avoid paying national insurance (NI) contributions.
Mr Pearson said the UK Government calculated that the changes would bring in a £100million in additional tax every year.
However, Ernst and Young’s own rough calculation, based on the change affecting 100,000 people working in the North Sea and earning about £50,000 a year, for which companies would have to pay 13.8% NI contributions, would put the extra cost to companies at £690million, he said.
Mr Pearson said: “This is an increased cost to the North Sea supply chain. This is a potential dark cloud on the horizon.”
Frank Doran, Labour MP for Aberdeen North, said the use of offshore intermediaries was “nothing more than a tax evasion”.
Alison Woods, of legal-services firm CMS Cameron McKenna, said: “The use of offshore employing vehicles is now very common within the oil and gas industry, with many organisations having been pushed towards adopting this approach to remain competitive.”