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Overseas Director and PAYE

Overseas Director and PAYE

UK resident Co has a single employee / Directors working in Algeria but resident in Thailand.

UK Company pays him a salary under NT tax code - What is the NI charge ? - How is this affected by a (large) end of year bonus?

Any directions as to where I could get the answer to this one welcome?

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31st Jan 2010 10:21

What is the problem?

If the company has been given a PAYE code of NT (or even if it had not, but the director was neither resident nor working in the UK and hence, not subject to UK income tax in the first place), UK income tax is not deducted from any of the director's remuneration whether in the form of salary or bonus.

If the director is a Thai national working abroad, he is not subject to ee's NIc in the UK on his salary or bonus, large or otherwise, and the company is not subject to er's NIC.  I am no expert on the social security regulations applicable in Algeria or Thailand, if any.

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31st Jan 2010 14:08

Thanks for the propmpt reply Euan

Thatnks for the prompt reply Euan. What do you think is the liability for Employers and Employee's NI. I'm clear on the income tax isue at the code is NT. However, does absenmce from the UK need to be afor a full 52 weeks before the company ceases to deduct NI from the salary?

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01st Feb 2010 10:11

The 52 week rule

... only applies if the employee was ordinarily resident in the UK and was actually resident in the UK before leaving.

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By Anonymous
01st Feb 2010 11:01

What about the bonus?

Hi Euan

Assuming the employee was UK resident before he left , I take it that the salary paid to him for m52 weeks after his leaving date would attract Employers and employees NI charge?  Howver what about an end of year bonus paid to him after the 52 week period had expired? Would this escape the NI charge?

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By Anonymous
10th Feb 2010 11:45

Waterangelica

I'm no expert but should he really have a one man limited company UK registered if he a) he isn't a UK resident and b) he isn't working in the UK ?? What about dual taxation and residency of the company if the care and control is outside the UK ??

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By qad999
27th Feb 2010 00:13

NI ER

isnt liability to ni'er based on the company's location... ?

so if its a Uk ltd co. its presumably still liable to nier ? ...even if emloyee non-resident and has no tax /niee liability

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10th Mar 2010 17:02

NI on overseas employment

NI would be payable where

The employer has a place of buisness in the UK and

The employee is ordinarily resident in the Uk and

The employee was resident in the UK immediately before taking up the employment

Contributions are payable for the first 52 weeks unless employment is within the EC or in a country with which there is a reciprical agreement

Important to note that NI defination of resident and ordinarily resident is not the same as the tax defination.

More information can be found in guidance booklet NI38

 

 

 

 

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26th Mar 2010 17:17

director and overseas residency

1/3rd shareholder of small uk ltd company who is long term resident and domicile in usa. visits to britain are within the accepted residency rules.

how does this effect the director's salary, tax, nhi, pension contributions etc that are anticipated, etc. is uk tax, reclaimable under uk/us tax treaties.

he has no abode of his own in the uk.

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By taxvat
07th Aug 2010 07:52

Non-resident in UK and director of UK company with overseas duti

I believe that the NT code has no income tax and employee Ni if worked in UK and then left for 52 weeks after leaving UK. This does not seem to apply to your case. 

Employer's NI at 12.8% applies on the salary and needs to be paid to HMRC.

 

 

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29th Aug 2010 00:45

Nonsense

 There can only be a liability to Secondary (employers) NI if there is a liability to Primary (employee) contributions.

For there to be any liability to NI the residence conditions need to be met .. and the first one is that the employee needs to be employed in the UK.

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By deep
12th Sep 2010 01:01

Bonus

Yes, you are right that no NIC would be payable whatever payment are paid to the employee 52 weeks after he/ she left the UK, providing that he was ordinarily resident in the UK before leaving and that the employment abroad is not temporary. If temporary, it would be assumed that he would resume the UK residency at any point in time and hence the NIC being applicable.

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19th Oct 2010 15:12

None.

CWG2(2010).pdf

www.hmrc.gov.uk/guidance/cwg2.pdf

Chapter 4

Para 123

from page 76 (pdf page 122

123 Coding for payroll purposes for non-resident employees
Where a business in the UK or the UK branch or office of an overseas business employs an employee who is non-resident, and:
•    the employee is working wholly outside the UK

•    the employee has not been resident in the UK before

•    the employee does not intend to and will not perform any duties in the UK
code ‘NT’ may be used for payroll purposes if the paying system demands a code number.

 

from page 77 (pdf page 123)

No P14 or entry on the P35 is required and there is no liability for NICs.

If the residency position of the employee or the place the duties are performed change so that the employee becomes liable to UK tax, you should immediately stop using code 'NT' and follow the P46 procedure, as if the employee is a new employee with no P45.

-------------------------------------------

aha, I see we have further and better particulars further down, seems our man was resident in the UK, but was it Ordinary?

And from NI138 page 6 (pdf page 9) Social Security Abroad

http://www.hmrc.gov.uk/pdfs/nico/ni38.pdf

When you must pay clas 1NICs

If you are employed abroad
When you are employed abroad Class 1 NICs must be paid for the first 52 weeks you are there, if you meet the following conditions:

• your employer has a place of business in the UK, and

• you are ‘ordinarily resident’ in the UK (see below), and

• immediately before starting the employment abroad you were resident in the UK.

Ordinarily resident
You are ordinarily resident in a particular country if you:

• normally live there, apart from temporary or occasional
absences, and

• have a settled and regular mode of life there.

You may be ordinarily resident in:

• a place from which you are temporarily absent (SUCH AS THAILAND?), or

• two places at once, in some circumstance (ouch)

Also:

 http://www.hmrc.gov.uk/manuals/pommanual/PAYE81670.htm

# Using code NT ensures that the earnings for work abroad are paid gross of tax but not of National Insurance contributions.

That clears up whether NICs have anything to do with code NT. They don't. I always wondered about that.

 

Now then, I was confusing "temporary" in terms of  arrival for residence purposes.

http://www.hmrc.gov.uk/manuals/nimmanual/nim33021.htm

NIM33021- Special Cases: Class 1: Workers Going to and Coming from Abroad – ROW - Conditions as to residence and presence in GB - employees

edit: Nigeria = Rest of World

Regulation 145(1)(a) SSCR 2001

Employees are liable to pay primary Class 1 NICs if :

residentpresent (but for any temporary absence) ; orordinarily resident in GB

A person will be treated as being present even if they leave GB for a temporary period for example, where the GB employment requires them to leave GB for a time, for example, to attend meetings abroad.
Edit: So that's a different kind of temporary as compared to residence issues.

For meaning of ordinary residence see NIM33031

So that just leaves ascertaining his departure does indeed stop his ordinary residence if indeed he had such to start with.

My highly edited first post so I hope it is on the mark!

I found this exercise particularly helpful in understanding that code NT (no tax) is not at all related to "no NIC", it is the underlying facts that may align, but the decisions have to be made separately. I had long wondered but was afraid to ask. Thanks for such a focussed question.

Can't help wondering whether waterangelica has put finger on a migration issue or at least DTT matter, though someone will have to notice for there to be an actual impact and if there are no profits because it all disappears in deductible salary then no one is going to be interested in collecting zero tax. Methinks.

Anthony

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