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How to pay tax and nic

How to pay tax and nic

A client, british citizen, is returning to UK after 5 years working full time for a Foreign employer. He will continue to work for same employer on same contract which provides for hourly rates in euro's plus daily subsistence. He is paid in euro's by transfer to a UK bank account. The client is aware that the employer now has a UK base and is employing UK people on UK contracts and presumably operating PAYE.

He wants to get his UK tax position sorted and pay over tax and nic on a regular basis as an employee. Will he be taxed as an employee of the UK employer and what rates of subsistence can be claimed as tax free, if any? Can anyone help with the mechanics please if he has to pay by direct collection.


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24th Mar 2011 20:24

You need to register for Direct Payments

You will need to set up a new employer record with a DPNI scheme type where normal PAYE procedures are unsuitable. The employee will be responsible for the deduction of their own Income Tax and employee’s share of NI contributions. These circumstance apply when:                                                     ...

An individual, who is required to pay their own Tax and NI. These include employees of A foreign embassy or consulate which has refused to operate PAYE And
A foreign employer who has no address in the United Kingdom from which earnings are paid

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25th Mar 2011 11:10

I am not so sure

I would agree if it were not for the fact that the employer now has a UK base - presumably, a branch of the foreign company.  As the employer has a presence in the UK, I think that the branch might be required to operate an ordinary PAYE scheme in respect of all UK employees of the foreign company.

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25th Mar 2011 11:38

That's a bit of a leap isn't it?

Just because an employee lives in a foreign country and does some of his work at home doesn't automatically make it a branch.

I've got a Serbian guy who does the same thing from Belgrade. It doesn't mean we're suddenly running a branch in Belgrade. That would be madness.

It would in effect mean that companies like BP would be resident in every country in the world.

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By vince8
25th Mar 2011 13:36

Thanks for the replies

The client would be more than happy to be PAYE through the UK branch, as it will save him a lot of trouble dealing with a direct payment arrangement. However, if he were employed directly by the UK branch he believes he would have a different contract and probably lower hourly rates expressed in £'s. He is aware of other UK based employees who are paid less and wishes to retain his current agreement. As yet his employer has not mentioned anything and the client will return to UK around 15 April.

The client is also paid 50 euro's per day subsistence under his contract, wherever he is working. This rate is probably quite generous for some countries but not so in places like Finland and Australia where he has worked in the last 12 months. However, I suspect HMRC will want to tax some of this. Has anybody got on a view please on agreeing a tax free rate?

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25th Mar 2011 14:35


It depends on what you understand by:

"The client is aware that the employer now has a UK base and is employing UK people on UK contracts and presumably operating PAYE."

I took it to mean (and the OP has now confirmed) that the client in question is not the only employee of the foreign company who is working in the UK and that there is a properly established branch employing other employees under PAYE - not that the client himself is the "UK base".

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25th Mar 2011 15:16

Contract of employment

OP - your client's remuneration package depends on his contract with the foreign employer. I am not saying that the client must be employed by the UK branch, but only that the UK branch should calculate UK PAYE tax & NIC and pay it over to HMRC based on whatever remuneration the foreign company has agreed. The client can still be paid the resulting net pay by the foreign company in Euros direct into a UK bank account or he might prefer to arrange to be paid in £ Sterling via the UK branch which will presumably recharge the cost to the foreign company, along with the PAYE paid for your client.

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