Consultation has started on proposed tax changes which could have a big financial impact on firms in the UK North Sea oil industry.
There has been a growing use of offshore companies to employ UK workers and thus avoid paying national insurance (NI), but HM Revenue and Customs has given firms until August 8 to provide input into plans to close the tax loophole.
Martin Findlay, head of tax at KPMG Aberdeen said: “HMRC’s estimate that there is £90million of tax at stake here is just the tip of the iceberg.
“The changes have potentially sweeping and wide-ranging effects across a whole raft of employers, most notably in the oil and gas sector, as well as in health and education.”
After the chancellor announced the move to close the loophole in this year’s Budget, oil and gas tax partner Colin Pearson at Ernst and Young’s Aberdeen office, said the extra cost to North Sea firms could be as high as £690million annually.
Mr Findlay added: “The prospect of the addition of a 13.8% national insurance levy to labour costs from April 1, 2014, will be a headache for many contractors and ultimately for the oil producers.
“It is crucial that companies urgently review their staff supply and commercial arrangements to gauge their exposure and in some cases, determine who will pay these increased costs.”
HMRC noted that the practice could be for legitimate commercial reasons; for example, workers on international secondment.
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