An offshore company employing thousands of teachers is avoiding the payment of millions of pounds in employer’s National Insurance contributions. ISS Ltd, based in the Channel Islands, employs more than 24,000 temporary agency workers across the UK, most of them working as supply teachers. This is from the BBC…
ISS says it is “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.
The BBC’s 5 live Investigates programme has discovered that thousands of supply teachers working in the UK are paid by Sark-based International Subcontracting Solutions Ltd (ISS).
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.
This raises the prospect of HMRC having to pursue other public sector bodies and employees for the lost revenue.
ISS told the BBC that HMRC had no grounds to challenge its employees or business partners.
But the consultancy firm Professional Passport, which advises the recruitment industry on tax issues, says a lack of enforcement has encouraged the growth of offshore umbrella companies.
“We don’t need more rules, or different rules, just effective enforcement of the existing rules,” Professional Passport director Crawford Temple told 5 live Investigates.
“If these are proving too difficult to enforce then they should be reviewed and amended as a priority,” he added.
Director of Tax Research UK Richard Murphy says the growth of umbrella companies is “the next big UK tax scandal”.
Mr Murphy told the BBC: “The UK can’t afford this tax loss and it can’t afford so many households being put at tax risk. This is a scandal waiting to break.”