Bilfinger Salamis NICs case – Courts find in favour of HMRC
By Justine Riccomini, Head of Tax (Employment and Devolved Taxes)
19 September 2024
We explain how HMRC won their case on workers provided by an offshore entity to a UK business who then sent them to work on an oil platform in the North Sea.
An interesting case was decided at the First Tier Tribunal (FTT) in August.
Marathon Oil UK Ltd, which was operating oil rigs in the North Sea, sought to commission employees to undertake work using a model which didn’t incur employer national insurance contributions (NICs). This led to an offshore employer, Bilfinger Guernsey Ltd, providing workers through its parent company, Bilfinger UK Ltd, and on to Marathon Oil. Some of the workers were on permanent contracts and others were on short-term contracts.
HMRC raised assessments on the UK entity in respect of secondary NICs arrears as it deemed the UK host employer Bilfinger UK to be liable under the Social Security (Categorisation of Earners) Regulations 1978 (SI 1978/1689), Sch. 3.
They reached their conclusion because the personal services of the employees in question had been ‘made available’ to the UK entity by the offshore subsidiary. This meant that the “host employer” rules which were introduced by dint of SI 2001/1004 (The Social Security (Contributions) Regulations 2001) conferred a liability on to the UK employer with effect from 6 April 2014. Regulation 114 was amended to include an extension of liability to any associated company of the employer, if it has a presence or residence in Great Britain.
The FTT had to consider the meaning of the phrase “made available”. Did it mean that the host employer needed to control the activities of the workers (key to the Bilfinger argument because they did not control the employees’ activities)? Or was it irrelevant (HMRC claimed it was not relevant whether they controlled them or not. The fact the employees were available was sufficient to be caught by the legislation)?
The FTT agreed with HMRC that making employees available to the UK host employer didn’t require the host to directly control them.
The FTT concluded in dismissing the appeal and finding in favour of HMRC that that: “On the evidence before us the entirety of the personal service was put at the disposal of Bilfinger UK. The employees were placed on the platform. The very nature of their job, as scaffolders and riggers, meant that it was not possible for them to work remotely for another person.”
