Intra-Company Transfers (ICT) - Jobs
and skills lost to migrant workers and upwards of £250 million in lost revenue.
When is a salary not a salary?
As Bill Clinton once said it depends on what you mean by ‘is’ is. The UKBA policy
of the last 10 years continues unchanged under the new administration and we
are paying for it with our taxes and jobs, it is an issue which particularly
affects the IT services industry.
It seems inconceivable that
this administration could take the existing work permit rules inherited from
Labour and bring forward proposals which will actually do more harm than the
ones being replaced. However, that is what the £24K salary limit for ICT
workers entering the UK will do to resident workers in the IT services industry
in this country.
According to IT Jobs watch over the past 12 months of the
2505 permanent job titles advertised 2292 had a salary greater than £24K
(actual numbers may vary slightly as these are rolling figures). Government proposals will therefore allow
91.5% of IT service jobs to be undercut by migrant workers. They will not
even have to be paid a salary just a ‘salary package’.
ICT Allowances - A Worked Example put to the UKBA
This example shows just how
much tax and NI is lost when a foreign service company
brings in a migrant worker using the UKBA ‘salary package’ concept rather than
employing a resident.
The full FOI Request EFM 3136
can be accessed here When is a
salary not a salary? The replies to this FOI request are revealing for the insight
into the thinking within this organisation as much as anything else.
This FOI request and example
was handled by a senior member of the UKBA Immigration policy team. In it the
UKBA confirms that it didn’t even bother to stress test its policy with HMRC to
confirm the revenue implications to the UK Exchequer and this was also
confirmed in the reply to FOI
request 2693/10 by
HMRC
One wonders who actually
drives policy in the UKBA on this issue is it the government?
Even with only partial data
available from the UKBA from 2009 through to October 2010 nearly 38,000 IT
workers came to the UK using Intra-Company
Transfers. None of these IT roles are on the skills shortage
occupation list
In an interview in the Daily
Telegraph on 28th August 2010 the head of Indian IT services company
Wipro Amzin Premji says
How likely do you think it is
that when Wipro brings ICT staff into the UK from India their taxable earnings
are increased to that $45,000 average level? That $45,000 average only tells
part of the story because as people in the IT services industry know it is not
just the role but the product combination which determines pay rates. In the
article Azim Premji mentions Morrissons supermarkets. Over the past few years
Morrissons supermarkets have been implementing a Peoplesoft Financials and HR
system in Bradford and Wipro have had a very large team of ICT workers brought
into the UK and working onsite on this implementation. If you want to get an
idea of the pay for such skills in the UK you can see here Salary rates for
PeopleSoft skills.
One would have thought that
making such a check would be standard procedure when vetting ICT visa
applications by the UKBA. Certainly Salary Services Limited which provides salary data to the UKBA could
provide this level of detail as well. Unfortunately the UKBA only looks at the generic job role for salary
comparison purposes, using the lowest quartile
rate.
They then allow the inclusion of tax free allowances to be treated as part of a
‘salary package’ to ensure the correct rate for the job is being paid. Is it
any wonder then that companies claim that there is a skills shortage in the UK
and Europe which luckily it can be addressed from outside of the EU. If you
were in a position to take advantage of such rules wouldn’t you?
When I first started working
in IT in 1984 I worked for Hewlett-Packard. I worked on their internal systems
used by their support engineers when servicing and supporting HP hardware and
systems on customer sites. This system was jointly developed in the US and UK
and didn’t require people from the US working on the system in the UK. There
would be very occasional short visits by some US colleagues and UK colleagues
to the US but that would be for a few days or weeks at most. When HP needed
local resources they recruited them and trained them as necessary just as they
did with me.
Why is it such a problem now?
Well the answer is it is not, the UKBA rules actually act as an incentive for
companies to use ICT migrant workers in this way. This was recognised by the Migration Advisory
Committee in a recent report to the Home
Secretary where they were specific in how allowances should be treated.
“In
the context of limits on work related migration, consideration should also be
given to awarding zero points for
allowances under the PBS.
Our
suggestion to alter the recognition given under the PBS to often tax-free allowances used by intra-company transferees will
help to ensure that such migrants make a full contribution to the UK
Exchequer.”
You can read the full MAC advice on excluding allowances and expenses
here Migration Advisory
Committee Limits on Migration Nov 2010 paragraph 9.166
Why has the Government decided
to ignore the MAC on this issue? When these people offer their advice it is
very considered, economists like central bankers use very calm language, all
the more reason to listen. If the Government chooses to ignore this advice I
believe they have an obligation to voters to clearly spell out the reasons why.
Maybe other organisations had the
Governments ear instead?
Where next?
How many facts do ministers
need to be confronted with before they actually address this problem and govern
for the people of this country and not vested interest?
Companies should be able to
bring key staff through ICT’s into the UK. However, when that route is used to
bring in thousands of normal workers who displace resident workers and the UKBA
rules on allowances mean they do it at tax payers
expense then there is a problem.
The Government should ensure
that from the start of the new tax year companies which have brought in ICT
workers using the ‘salary package’ definition of the UKBA should pay tax and NI
on the whole package. In my example above company B will end up paying the same
as the company A does for its resident worker in
Reading. Of course companies which have been taking advantage of the UKBA rules
like this for the past 10 years will complain loudly but so what, it will focus
their attention on employing and training resident workers. For those companies
which use ICT’s and pay a proper taxable salary for the job they will not be
affected.
The Government should also
recognise that the £24K & £40K limits if applied to the IT services sector
will cause great damage and treat it separately. I have shown how easy it is to
look at the job role and product combination to ensure the correct salary is
used to ensure migrant workers and ICT’s do not undercut resident workers and
their employers. The UKBA should include this in its new policy so that the
correct ‘salary’ rates are paid by companies using migrant workers.
I believe the £250m headline I
have estimated understates the true scale of the loss of revenue. The
Government however, can find out exactly what that figure is, we just need the
UKBA to work with HMRC, you could call it joined up
government.
What ever the words VOTERS hear from politicians on this
issue what really counts is the implementation of policy. This policy should be
subject to what I would call the P11D / End of year return test. If the numbers
put into the test produce different results for a migrant worker to that of the
equivalent resident worker then the issue has not been addressed by this
Government.
As a country in financial
terms, in the retention and development of key skills and in jobs for resident
workers, can we afford for it to be anything different?
You can write to your MP and find out how much they know and what they
think on this issue here www.writetothem.com
