Industry calls for a delay in the imposition of a 13.8% national insurance rate for North Sea workers has been rejected by the UK Government, according to KPMG in Aberdeen.
Only finalised on March 14, the regulations give rise to many uncertainties leaving little time to prepare.
Martin Findlay, KPMG’s tax partner in Aberdeen, said: “The government announcement last year of a new 13.8% NIC levy on the UKCS was understandable.
“It sought to level the playing field between onshore and offshore employment. But the complexity of the new regulations, and the significant impact on employment costs, comes at a time when the oil and gas supply chain is acutely cost conscious.”
The regulations, as finalised on March 14, contain significant changes to the previous drafts, leaving industry with only days to plan for them taking effect on April 6.
In addition HMRC is choosing to provide further details in the form of non-statutory guidance, delaying further the certainty that companies need.
On the positive side, certain mobile vessels such as cable-layers are confirmed as exempt. Also free from the charge are certain payments to seafarers with specific Merchant Shipping qualifications.
But many vessel owners will now need to create new systems to track vessel and people movements in order to decide and then prove which wage payments give rise to NIC.
Oil and gas licence holders will in some cases now be liable for NIC costs arising in their subcontractors.
Mr Findlay added: “The additional cost, estimated by UK Government to be £100million per annum, but widely believed to be higher, will ultimately fall on the oil and gas producers with a possible impact on future exploration.
“In the short term, some companies are unable to impose cost increases on the oil and gas companies, as some contracts do not permit this.
“This will put significant financial pressure on those providing personnel to the UKCS, until such time as contracts come up for renewal.”
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