UK Res Employee / Non-Res Employer / Overseas Work / PAYE?

UK Res Employee / Non-Res Employer / Overseas...

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A UK Resident Employee is an employee of a Non-UK Resident employer and works for the employer wholly outside the UK. He receives employment income from the employer.

Should PAYE operate? (I would have thought not)

Does NI apply? (I feel pretty happy that er's NI would not but can't see how ee's NI would apply if there was no PAYE).

Presumably employee just puts it on his Tax Return with credit for foreign tax suffered?

Would your answer above differ if the employer was resident in, say France, or BVI?
jumpedup

Replies (4)

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By thehaggis
30th May 2008 20:14

Semantics?

UK based does not need to mean a permanent establishment. If the employer has any form of presence in the UK it would be regarded as UK based for PAYE & NIC purposes, but it must have a presence - an address to which HMRC can send documents.

This is different from a permanent establishment which would make it liable to all forms of taxation.

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By Euan MacLennan
29th May 2008 18:48

Please clarify
... how he works wholly outside the UK, but remains resident in the UK for tax purposes? Unless his overseas job is not expected to last for a complete tax year, he would be treated as non-resident from the day he leaves the UK to the day he returns after finishing the job and his earnings for the work done overseas between those dates would not be taxable in the UK (or subject to PAYE).

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By User deleted
30th May 2008 13:25

Not so
There does not have to be a UK based employer for PAYE and NIC to be applied.

An overseas non resident company with out a permanent establishment in the UK can have UK based employees who are liable to tax and NI

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By thehaggis
29th May 2008 18:53

No and No
There needs to be a UK based employer to operate PAYE and account for ERs contributions.

A Class 1 NIC liability arises from gainful employment in Great Britain. If the duties are overseas, there is no primary liability. Without a primary (EEs) liability there cannot be a secondary (ERs) liability, and anyway without a UK employer there is no secondary contributor.

In this day and age of electronic comunication, are all the duties oversaeas? Working from home, answering emails/telephone, could be construed as working in Great Britain. That would rise to a primary contribution liability which the employee would need to pay. A special NI only PAYE type scheme in the employee's name would be needed.

Euan, I envisaged him working abroad Monday to Friday, or even periodically when required. We would need to consider the Employment Article of any DTA (Article 15 of the OECD model) to establish taxing rights. The questioner only asked about PAYE which, as a collection method and not a tax in its own right, is not covered by any treaty.

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