Good for the economy? How EU migrants avoid tax in UK

Romanians and Bulgarians coming to work can avoid paying taxes in Britain because of a loophole. Instead they can pay taxes at home where basic rates are much lower.

The rules allow European workers “posted” to Britain for less than two years to pay national insurance and, in some cases, income tax in their own country.

Almost 100,000 EU immigrants already in Britain are taking advantage of the regulations.

The head of Romania’s biggest recruitment agency, which has just set up an office in London, said yesterday it was perfectly legitimate for workers coming to Britain to pay tax in their own country.

“If you are not becoming a tax resident because you are a temporary worker you can pay the tax in your country of origin,” said Andreas Cser, president of Tjobs Recruit. “If you don’t become resident in Britain then you can end up paying taxes in Romania and Bulgaria.” His company was yesterday advertising 4,500 jobs for Romanians in Britain including taxi drivers, care assistants, doctors and beauticians.

Bulgaria charges a flat rate of tax of just 10% on earnings while Romania levies just 16%, compared with a basic UK rate of tax of 32%, comprised of 20% income tax and National Insurance contributions at 12%.

Under EU rules, workers may be posted abroad for up to two years — and potentially longer — allowing them to pay the equivalent of national insurance in their home state. “Posted” workers’ contracts must respect the labour law of the host country, but social security charges remain those of the home state.

To qualify, migrant workers must not spend more than half the year in Britain. But with wages four and five times higher in the UK than in Romania or Bulgaria, a six-month job in Britain is equivalent to a salary of at least two years back home.

The Government admits that its data on the number of “posted” is patchy.

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