Advice requested on how to pay a NED who is a Swiss national (for a UK company).
Her agreement states that her fee should be paid net of PAYE and NI. I understand HMRC are quite "hot" on picking up where NEDS are paid gross.
My questions:
Should I just pay the fee gross.
If the correct thing to do is pay net of PAYE and/or NI, how should I go about doing this?
Thanks.
Replies (6)
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Apart from what the agreement says, on what basis, on first principles, do you think you could justify paying her gross?
Uk income
Assuming your NED has an employment contract then the duties are performed in the UK and are subject to UK PAYE as normal. The position for NICs will depend on the status of the NED and you will need to ask them what their status is. If they have other employment income in Switzerland then they are likely to be required to pay Swiss Social Security contributions and your company will have to register with the Swiss tax authority to pay this. The contributions are similar to NICs and so you would withhold UK PAYE and then either UK NICs or Swiss Social security contributions.
registering
Firstly you should speak to your NED to establish whether or not it is appropriate to register. If they are already paying Swiss Social Security on earnings in Switzerland then that would be a good indication that you need to register. If they have income from a number of NE Directorships and no regular employment in any one country then you may need to take further advice to establish which country has the appropriate taxing rights.
If you do need to register with the Swiss authority then I would suggest contacting a local firm for assistance. You will need to register with the appropriate Canton. I have had to do the same for a Swiss NED - but left it to the local Swiss office of our UK advisers to deal with!
There are circumstances where gross payment would be correct, or where PAYE may be due but not NIC , but the information given in the Original Post does not give enough detail to arrive at an informed judgement.
As an example of the matters that need to be considered if youre NED is also a partner in a Iegal or accounting practice and the fees are ultimately passed to the practice this would be payable gross. The situation is different again if there is a Personal Service Company (PSC) and the residnce status of the NED may mean that No NIC is due even though PAYE is.
On general principles an NED is an office holder and as duties are in UK (unless the board meetings attended are not in the UK) the provisions of Section 5 ITEPA 2003 and Section 3 SSCBA 1992 would require deduction of PAYE and NIC
These issues always turn on the exact details of the arrangements