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Non Res Employee & NI

Non Res Employee & NI

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Dear All, I shall be grateful for some help with the following:

UK Company - Employes Mr A - Mr A is non resident (Australian citizen) - Will perform duties in Australia for the UK company.

The tax issue is clear but am unsure of any NIC implications for the employer - both EE and ER.

Thanks.

T

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By hkfinancials
25th Jun 2014 12:45

Euan?

Euan any views? Being our resident PAYE expert.

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By rwb
25th Jun 2014 13:05

I believe...

He should be on a 'NT' tax code and no class 1 NI will be payable. I assume he will need to go on company payroll so may need to get a UK NI number too. Could be wrong though - only similar experience relates to an employee emigrating (so no longer UK dom or res) and continuing to work for his employer from abroad and that was the correct treatment confirmed by HMRC.

Why not call HMRC direct and ask them, could try asking for a techie on the agent line, or speak to an International Caseworker?

Surprised this is still unanswered - am interested to know the answer!

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By Steve Kesby
25th Jun 2014 13:11

If you're employing someone...

... outside the UK to perform duties wholly outside the UK, why does anyone think it need to be put through a UK payroll at all?

Have you considered the possibility that you might have employment tax responsibilities in Australia?

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By rwb
25th Jun 2014 13:30

Interesting point Steve

My understanding I that if a UK based company employs someone based and tax resident outside of the UK then they should be paid gross through a UK payroll.

Whether there is any responsibility to deduct Australian employment tax I don't know. I'd assume unless the company was active in Australia it would be the individuals responsibility to declare as untaxed foreign income. Of course I suppose you could argue that just employing someone in Australia means the company is present and active over there - which would depend on what the company does and what the employee's responsibilities are I'd have thought?

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By Steve Kesby
25th Jun 2014 14:09

Where does your understanding come from?

If a non-resident person performs any duties in the UK, then PAYE needs to be applied (ITEPA 2003, s. 690).

If you have a UK resident employee who becomes non-resident then NIC may still need to be accounted for under EEA or other reciprocal arrangements, which means you then have to use an NT code, so that the payroll doesn't deduct any tax incorrectly.

If you have somebody that's already non-resident, not performing any duties in the UK, there can't be any tax or NIC due in the UK to begin with. The issues are in Australia.

Class 1 NIC applies to employed earners, which are defined in SSCBA 1992, s. 2(1)(a) as "a person who is gainfully employed in Great Britain..."

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By rwb
25th Jun 2014 15:09

sorry steve...

Think my post has actually muddied the waters further! Reading it back that first paragraph does not actually say what I meant it to! Apologies, will stop trying to multitask.

My thinking is that no tax or NI should be deducted in the UK at all, so NT tax code and, presumably, an X code for NI. The question, as far as I see it, then becomes 'is the company responsible for making Australian deductions?'. Presumably the individual will be liable for tax so it either needs to go through an Australian payroll scheme or it could, theoretically, go on the UK payroll paid gross with the employee declaring the income through their tax return in Australia.

I may be way off base though...

 

 

 

 

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By hkfinancials
25th Jun 2014 15:11

Thanks guys

Thanks for the replies so far

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