A tax loophole is denying British youth and unemployed workers the chance to earn a living or to be trained in a new career.
The sneaky technicality, which is fully supported by the European Union, is predominantly used when projects are funded from ‘European regional funds’ such as roads and schools. But it can also be used for large scale housing projects or schemes such as the Olympic Village for London 2012.
This clause allows foreign agency workers to live and work in the UK whilst paying taxes in their country of origin where, especially in Eastern Europe, the wages and taxes are considerably lower than in Britain.
This is making more loyal British firms who pay their staff PAYE tax in the UK and train up apprentices or retrain older, unemployed workers, uncompetitive against the companies who are happy to use the aggressive tax avoidance scheme which have been attacked by politicians of all parties.
Furthermore, at the last voting session in Strasbourg, MEPs even set up a committee to look into cross border tax avoidance despite approving legislation which overrides domestic law to help lower youth unemployment.
The EU continues to justify the rules, which means that employers’ national insurance contributions and income tax is not paid into the Treasury to assist with services such as the NHS which the foreign workers are entitled to use.
One official told Breitbart London: “If foreign workers are prepared to work for the equivalent of the minimum wage and in-work benefits and British people are not, then that is the UK’s problem, not the EU’s.”
A construction worker insider who has been meeting with HMRC to discuss the situation, which he views as a huge missed opportunity to train up young Brits, said that the companies were using generous in-work benefits provided by the government and paid for by National Insurance Payments and tax to top up the low wages.
In reality, he said, the foreign workers are paid less than the minimum wage since the were contracted only for a few hours but really work for ten to twelve.
The scheme being used on most new-build construction sites is being supported by local councils to cut costs for developers despite government guidelines which request authorities to use every available opportunity to use local workers and local resources.
These rules state projects by councils and government departments should have 20 percent of workers and materials sourced from the local area. But councils and Highways Agencies are scared of not using the loophole as they say they would lose money for projects funded by the EU.
‘Section 106’ and ‘KPI’ agreements can include contributions to ensure that developments complement and benefit the local labour market and economy, by raising skills and enabling local people to compete for the jobs generated. Specific measures can include training (pre-employment and vocational), apprenticeships, employment advice, interview guarantees, work placements, transport arrangements and childcare.
Some councils, including Kent County Council and Medway, say the guidelines are illegal under EU law as they discriminate on the grounds of nationality by encouraging British workers to be employed over Eastern European workers even though the money comes from council tax or EU repayments.
The scheme has come to the attention of the Treasury following work by investigators in the industry who are disgusted at the way cheap foreign labour is being exploited and our own workforce passed over despite high unemployment.
“The government are not happy, but there is nothing they can do as it is up to the local council procurement team to award contracts not central government. However if foreign workers are prepared to work for minimum wage and in work benefits why should British people not,” says one industry expert.
Steve Lukacs has been a project manager in the construction industry and says this loop hole has been used on every scheme he has been involved in for the past seven years.
And he says it is up to politicians to deal with the loophole – just as they try to make out they are doing with large multinational companies, as developers and contractors can’t afford to lose work.
“They all say the same: Why spend money and waste time training young and British unemployed people when we have an abundance of very cheap foreign labour from Eastern Europe?”
And he said there as no legal way of stopping this tax loophole whilst it is supported by Councils and local MP’s
UKIP Cllr Chris Hoare has been raising the subject since he was elected in 2013 but says that Kent County Council simply responded by saying that giving any preference to companies meeting government targets would be illegal.
“KCC show on paper that there is a contractual legal requirement for upskilling and training for local youths and unemployed, however, under EU laws this is illegal and therefore KCC and their contractors claim it is unenforceable,” he told Breitbart London.
“They do not want to risk funding for projects from EU appearing racist and not employing the cheapest companies and labour which use tax loophole that benefit worse off EU companies.”
A spokesman for HMRC told Brietbart London that “there is no loophole.”
“PAYE and NIC should be operated in relation to EU nationals and others working in the UK – there are very few exceptions to this rule and those are tightly controlled. People entering into contracts with foreign agencies need to bear in mind that the tax obligations in relation to the workers usually fall on the client here in the UK, not on the foreign agency. That may be reflected in the price. HMRC takes non-compliance with PAYE and NIC very seriously and interest and penalties may be charged.”
However, when asked to detail how tax could be paid on a specific scenario taking place within the single market, they declined to comment further.
Kent County Council declined to explain why they had ruled government guidelines were illegal under EU law.
Does the British company send over to the German inland revenue the UK PAYE tax whist he is working in Germany. If so how is that done?