DPNI Scheme Requirement

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Hi,

From the start of this tax year I have had a employment Contract with an Agency based out of Singapore for rotational offshore oil and gas work in Africa.

The Agency is a large multi national Agency.

I am paid gross and I am responsible for all UK taxes (I am told there are no foreign taxes due, and if they do arise my employer will pay them).

I am UK tax resident and my plan was that I pay all income tax on my worlwide income after I have completed my self assessment for the year.

I beleived that I was not liable for Class 1 NI, as I work abroad for a foreign employer.

However, I spoke to my accountanat today and got a bit of a fright;

I have never started working abroad as the rotational work keeps getting delayed.

In the meantime I have being getting paid to work from home in the UK, awaiting the start of my foreign rotation.

The accountant suspects that I might have to set up some kind DPNI scheme to pay taxes and NI for the UK element of this work.

The worst part was that he suggested that I might also be liable for the Employers class 1 NI contributions as well as my own employee NI contribution.

The problem is the accountant has now gone on holiday without clarifiying this and this is causing me a lot of stress.

Does anyone understand the likliehood of me being liable for the employers NI contributions?

Many Thanks

 

 

Replies (7)

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By Hugo Fair
07th Sep 2023 22:30

First, the bad news is that your accountant is right to say that you "might also be liable for the Employers class 1 NI contributions as well as my own employee NI contribution" IF there is indeed a need to register a DPNI.

But that's a very big 'if' ... it is a scheme designed primarily for some very specific groups of people (that don't sound likely to include you); plus, as an afterthought, cases where an employer has no UK presence (even by indirect association) but nevertheless has employed someone to do work based in the UK.

Not for the faint-hearted, but if you want to read up on DPNI then you can start at https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye20101 ... and keep following the links (there's a lot of them).

The scheme is NOT simple to set up (indeed you may have difficulty finding someone within HMRC that has even heard of it), so it would be much better if your employer were to sort out *their* responsibility (to operate a UK payroll until they deliver on their promise of work for you in a different jurisdiction).

Have you spoken to them about the issue?

Thanks (1)
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By drawingtheline
08th Sep 2023 04:31

Hi Hugo,

Many thanks for your response.

I spoke to my employer and they tell me they will not operate a UK payroll for me.

WRT me potentially being responsible for employee as well as employer NI contributions I do not doubt what you tell me.

However, I spent some time looking through the link you sent and I can’t find anywhere where it is stated that an employee can be responsible for NI Class 1 secondary contributions, do you know where this is stated within HMRC guides?

Thanks

James

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Replying to drawingtheline:
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By drawingtheline
08th Sep 2023 05:37

Hi Hugo,

This page in the manual only mentions the employee being responsible for primary Class 1 NI.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye20100

If you know where responsibility for secondary contributions are detailed then this would be much appreciated,

Thanks

James

Thanks (0)
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By taxdigital
08th Sep 2023 08:38

Your accountant is best placed to advise you on your query as they have all the relevant information. However, very briefly, employer's liability to NI doesn't kick in unless they meet the 'residence' or 'presence' condition (s.1(6)(a) SSCBA 1992).

Tax presence can be created, for example, where the employer has a permanent establishment in the UK:
"it has a fixed place of business in that territory through which the business of the company is wholly or partly carried on, or an agent acting on behalf of the company has the authority and habitually exercises in that territory that authority to do business on behalf of the company (s.1141 CTA 2010).

One also needs to look at the treaty provisions.
Moving on, HMRC's views on tax presence is here.
https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye81610

As usual, then there are some special rules as well (below) which don't appear to be relevant to your case though:
https://www.legislation.gov.uk/uksi/1978/1689/schedule/3

So, assuming your employer has nothing to do with the UK except having you as an employee here, I don't think they're liable to employer's NI.

Thanks (1)
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By drawingtheline
08th Sep 2023 09:17

Hi Taxdigital,

Thanks for your response.

I will of course follow the guidance of my accountant.

However, they are currently on holiday and in the meantime I am worrying a lot about the my potential liability for 15% employers NI, that up to this point I have been unaware of.

So in the meantime I am seeking to understand this as much as I can, awaiting their return.

You highlight the way in which my employer can become liable for the class 1 contributions.

Is there any where in the manual that specifies why/how/when the employee becomes liable for the employers NI contributions?

Or is this just some kind of general rule whereby employees are accountable for employers NI under a DPNI?

Many Thanks

James

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Replying to drawingtheline:
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By taxdigital
09th Sep 2023 09:08

drawingtheline wrote:

Or is this just some kind of general rule whereby employees are accountable for employers

James

No, the employee isn’t liable for employer’s liability. Of course the employee could deal with the admin part (e.g.with HMRC) though.

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By drawingtheline
09th Sep 2023 10:27

Thanks Taxdigital

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