Contractor pay changes could retain North Sea skills, say AGCC

The North Sea oil and gas sector is thought to be among the industries most drastically impacted by the IR35 rules.
The North Sea oil and gas sector is thought to be among the industries most drastically impacted by the IR35 rules.

Incoming changes to contractor rules could help retain skilled workers in the North Sea, the Aberdeen and Grampian Chamber of Commerce (AGCC) has said.

New legislation, known as IR35, comes into effect in April next year, stopping contractors who are effectively employees of a company “disguising” themselves as freelancers to pay less tax.

The North Sea is thought to be among the industries to be most drastically affected by the changes, as many individual contractors operate through intermediaries, such as personal service firms.

Tax experts have warned of the impact it will have on the North Sea, and that firms need to get their houses in order to avoid harsh penalties.

However, Shane Taylor, responsible for policy and government affairs at the AGCC, said it could also bring potential benefits to the sector.

It could lead to firms identifying contractors in key roles and hiring them permanently and therefore retaining skills in the industry.

Mr Taylor said: “People have to look at the make-up of contractors within their businesses.

“How many of them are long-term contractors? There might be some impacts in terms of how you then, looking at your business, say ‘this contractor is a key position for us, we want to retain that’.

“So I think there’s some potential benefits in terms of skills retention in the region with how that structure changes.

“There’s potential by bringing some of these people into the organisation that you actually make them more connected with it.”

Aberdeen and Grampian Chamber of Commerce coming in to our offices to discuss Brexit for our Energy supplement. Pictured are from left Girts Greiskalns cor the chambers head of international trade and Shane Taylor the chambers research and policy manager. CR0006207 Pic by Chris Sumner Taken 19/2/19
Shane Taylor (right), the chamber’s policy and research manger, pictured at the Aberdeen Journal offices with Girts Greiskalns, the chamber’s new head of international trade.

The IR35 rules are expected to be a major revenue booster for the Treasury, making sure that contractors deemed to be employees pay the right amount of taxes, as opposed to those who offer services via their own private companies.

Factors such as overtime pay, hours worked and whether the firm provides equipment will need to be considered, and firms who don’t meet the rules will be subject to penalties.

Similar legislation has already been put in place for the public sector and it is estimated the private sector shift will bring in almost £3billon in additional taxes to the Treasury by 2024.

Mr Taylor is confident firms will work hard to comply.

He added: “It is a complex compliance issue, there’s a lot to look at on the admin side.

“It is basically a mixed picture I think.

“As with something like Brexit, businesses just need to be clear on what the path is and they will become compliant with it.”

The AGCC’s next oil and gas industry survey, which will launch to businesses “imminently”, includes questions on the impact of IR35.

The results are expected to be released in May.