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PAYE Scheme or Direct Collection Scheme?

How do I determine if a foreign employer has a UK presence for payroll purposes

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Hi everyone

I have a client who was a UK company, employing a CEO and two employees, all of whom are UK citizens and remain resident in the UK. The company has been bought out by it's Canadian partner due to floating on the Canadian stock market, and the UK company has closed down. The two UK employees are now seasonal employees and not currently working, and the CEO remains employed. She is in charge of UK operations but is employed by the Canadian company. They have no office as such in the UK. The CEO works from home permanently. The two employees, when they work, will also work from their own homes. I understand that there's a possiblity the tax and NIC should be accounted for through a direct collection system, which the employees will themselves be responsible for, rather than the traditional PAYE scheme, but it depends on whether the Canadian company is considered to have a UK presence or not. I can't find anything online to help me determine whether this is the case. Does anyone know how to make the assessment as to whether a direct collection is appropriate, or whether I can go ahead with a UK PAYE Scheme? Thanks

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By Matrix
27th Aug 2020 12:28

You say there is a CEO who is in charge of UK operations so there could be a permanent establishment for tax purposes.

I would go back to the head office tax department and ask if there is a branch in the UK or not. Are you just running UK payroll?

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Replying to Matrix:
Matthew Coates
By justme
27th Aug 2020 12:50

Thanks for the reply. According to HMRC, individuals operating from private residencies doesn't qualify as a tax presence. I've asked the Canadian company what their tax on the UK tax presence is, and apparently they're having the same debate over there. They don't know. I think it's going to end up being down to either us or the UK CEO contacting HMRC for a direct answer.

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Replying to justme:
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By Matrix
27th Aug 2020 13:08

The Canadian company needs to engage a UK international tax adviser to provide a tax opinion on whether there is a permanent establishment in the UK to which the profits should be attributed. The operation of the UK payroll is a secondary issue.

They must have UK advisers if they have just bought a UK company.

You won’t get a view from HMRC on which you can rely.

In the meantime maybe make an assumption and set up the scheme as if there is no UK presence with big disclaimers that this is to the best of your knowledge etc.

I don’t know the definition of a branch for payroll purposes so you may be right that if there is no UK presence there is no branch.

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