Share this content

Employee contract and PAYE scheme

Can the contract of employment and PAYE scheme be with different limited companies?

Didn't find your answer?

A Ltd co client of mine is a subsidiary of an Irish company (who is not a client). The UK company is registered for PAYE and has historically employed the UK based sales staff although they haven't had any staff for about a year.

They however have taken on a new staff member in the UK and want us to do the payroll. But they have written the contract of employment between the employee and the Irish company, not the UK entity. 

Can the UK subsidiary add her to their PAYE scheme or does the contract need to change to reflect the UK entity and not the Irish one? If the contract can't change does the Irish entity need a PAYE regsitration?



Replies (4)

Please login or register to join the discussion.

By paul.benny
14th Jan 2021 14:00

I think the issue is whether it is wise to have the contract of employment with the Irish entity:
- Is the contract consistent with UK employment law?
- Does direct employment of a person in the UK give rise to a Permanent Establishment?

Depending on the size of the entities, there may also be transfer pricing concerns in both UK and IE.

Thanks (1)
Replying to paul.benny:
By exceljockey
14th Jan 2021 18:29

The contract was completed by a UK employment law firm so hopefully, it is.

Noted re the Permanent Establishment risk - I have suggested that they get a PE risk review done.

Thanks (0)
Replying to exceljockey:
By paul.benny
15th Jan 2021 09:35

True, you would think that the law firm have got it right. On the other hand...
Might be worth mentioning it to the client, just in case.

Thanks (0)
By SteveHa
14th Jan 2021 16:26

PAYE is dependent upon the paying entity. For tax purposes (other than technical arguments) the contract is irrelevant.

Having said that, Paul's reply is very valid.

Thanks (1)
Share this content