PROPOSED changes to employer taxation could threaten future investment by the oil and gas industry, according to business advisers BDO.
HM Revenue & Customs is planning legislation next April which will challenge the use of offshore intermediaries to keep employees off the payroll.This will threaten some companies with a "significant bill for income tax and national insurance contributions", BDO says.
"At present the UK oil and gas sector arguably enjoys a 13.8% tax advantage as no employer's NIC is being paid. But this could end next spring as the Government cracks down on tax loopholes," the adviser adds.
BDO notes that while the North Sea sector has been booming, it is sensitive to oil prices and to any change in financial viability.
Brian Lovie, director of employment taxes with BDO, said: "Although the proposals could impact any UK business using employment agencies or outsourcing services involving UK-resident employees where an offshore intermediary is involved, the oil and gas industry is expected to be a major target for HMRC."
He went on: "A dip in oil price, or new technologies such as fracking, which can offer greater flexibility and increased profitability, may make the oil and gas exploration companies think again about the viability of the North Sea if they have to add 13.8% to their UK employment costs.
"It is worth at least considering whether the potential increase in tax revenue for the Treasury from this latest challenge to perceived UK tax avoidance will be worth it if companies reduce their investment in the sector."
A survey of oil and gas executives by Ernst & Young published this week found 79% expect that a "yes" vote in the independence referendum would lead to higher taxes on the industry.
More than half of the business leaders supported lowering corporate tax rates to stimulate investment.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article