Oil And Gas Contractors Face Tax Hikes And Job Losses
British oil and gas contractors are amid a huge financial upheaval as a combination of job cuts and tax changes threaten their well-paid lifestyle.
Thousands of contractors in the oil and gas industry worldwide have lost their jobs as companies look to protect their cash by sacking staff.
The oil and gas industry is in disarray as lower prices mean projects are mothballed and managers look to make savings.
The latest estimates reckon at least 20,000 jobs will go in the North Sea oil fields over the next five years and more in the US, Canada and Middle East.
Expats are among the worst hit because although they often live in low cost of living places such as The Philippines and Thailand, once they leave these financial bubbles, day to day spending goes up and if they can manage to land a job, rates are going down and governments want a bigger slice of income as tax.
Tax crackdown on contractor companies
British oil and gas contractors working through personal service companies will feel the effect of this from April 2016.
From the start of the new financial year, controversial IR35 rules go out the window and new laws demanding employers deduct income tax and national insurance at source come in, coupled with a new way to pay tax on dividends.
Oil and gas contractor specialists have already arranged conferences to help workers cope with a changing tax and employment landscape.
British expats with offshore accounts and investments are also likely to find their financial affairs come under scrutiny from September 2017, when the Common Reporting Standard (CRS) takes effect and countries start automatically tipping each other off about assets held by foreign citizens.
Pensions under fire
Pensions are also under attack, with the lifetime allowance dropping to £1 million from April 2016.
Any high earning contractor who believes their pension fund will exceed this amount before retirement needs to take action to avoid paying hefty tax penalties on breaching the threshold.
One way to avoid lifetime allowance penalties is to switch a UK onshore pension into a Qualifying Recognised Overseas Pension Scheme (QROPS).
Providing the fund is valued at less than £1.25 million (the current allowance) or £1 million after April 2016, no tax penalties will apply to further fund growth.