Employees looking to gain the maximum benefit from Umbrella Company services have been given a salutatory lesson about using offshore based PAYE companies.

A recent BBC investigation has discovered that ISS ltd, an offshore-based company, employs temporary agency workers amounting to greater than 24,000 individuals – with the vast majority drawn from the teaching profession.

ISS’s position as a company trading on the crown dependency of Sark on the Channel Islands means that it is not obliged to pay employer’s national insurance contributions on behalf of its staff, resulting in millions of pounds worth of lost revenue to the UK Exchequer.

HMRC are already looking into the possibility of treating the recruitment agencies or the local authorities that use the staff as the employer, meaning that responsibility for filling the tax black-hole could heap extra pressure on an already cash-strapped public service sector.

Despite ISS claiming that HMRC has no legitimate grounds to challenge its business practices or its partner companies, some experts are predicting that this situation may mean a tightening of the enforcement of rules around tax avoidance.

Speaking to BBC 5 Live radio, Crawford Temple, the director of Professional Passport – an advisory body that issues guidance to the recruitment industry – was adamant that more legislation would not be as effective as enforcement of existing rules. However he added that if the status quo was proving to be “too difficult to enforce”, then it should be “reviewed and amended as a priority.”

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