Paying a Non UK Director through a UK payroll

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A Director of a UK Ltd co client went back to the US in April 2020 so I took her off the payroll and closed down the scheme.

Could I have kept her on the payroll and arranged an NT code? If the company pays her a salary then does it have to go through a payroll scheme if a non resident?

Thanks for any thoughts. I have no idea why I didn't look into this last April, I expect my mind was elsewhere. 

Replies (10)

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By janelm
04th Mar 2021 22:44

I had this for an employee in a tiny UK company (2 employees, 1 director), where he re-located back to the USA. I think the P85 allowed us to switch him to NT but I think we were obliged to continue deducting NI for 52 weeks after he left. I now still have him listed on the payroll as NT with no NI deductions but I think as we're running PAYE for the other two we still report his salary like this.
If you're dealing with a director then maybe the salary is below NI thresholds anyway.

https://www.gov.uk/guidance/paying-employees-working-abroad

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Replying to janelm:
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By Tax Dragon
05th Mar 2021 06:24

HMRC has a bad reputation in this forum, but it does produce some excellent guidance. Thank you for that link.

A sole director moving abroad (as in your case) could have consequences for the company. It might move with the director. Possibly no actual effect on UK taxes (there's still a PE in the UK; that PE maybe makes all the profits of the company, and does so in the UK), but it's something to be aware of. More problematic may be that the tax obligations in the overseas territory. Is the company resident there? If not, does it have a PE there? Are there payroll reporting obligations there for the person it's paying there?

Are these questions the UK accountant has any responsibility for answering? Raising? Disassociating him/herself from? I reckon our LoE would exclude us from advising. But we'd consider ourselves bound to make the client aware, so they could take advice locally if need be.

(All off topic. Sorry. Don't worry, I'm rebuking myself. No need for a further telling off.)

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Replying to Tax Dragon:
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By Matrix
05th Mar 2021 07:20

Thanks TD. It is a disregarded entity in the US but of course we are checking the local tax implications if a salary were paid. US adviser has advised that no PE and full credit for UK tax.

I just want the answer to the UK treatment since the client asked why I had stopped the salary.

If the company pays a Director does it have to go through the payroll? If there is no income tax and NI then can you put £30k through for example? Or I suppose up to the LEL given the payroll scheme is now closed.

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Replying to Matrix:
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By Tax Dragon
05th Mar 2021 07:23

Doesn't janelm's link answer that?

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Replying to Tax Dragon:
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By Matrix
05th Mar 2021 07:34

You mean about the P85 form?

So you think you get a new code and follow the usual rules for running a payroll?

I was hoping someone on here would have experience when only one non UK Director.

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By ireallyshouldknowthisbut
05th Mar 2021 09:18

If they are a director of a UK co I am pretty sure that still needs to run through the UK payroll as a NT longer term.

I don't recall where it says that but I know I looked it up around 12 months ago.

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Caroline
By accountantccole
05th Mar 2021 09:23

Isn't the issue, where are the duties performed? Surely if he is sitting at desk in the US, to do his work and not returning to the UK, then the UK company should be paying him through a US payroll?
This is certainly what we advise our Anglo / French clients.
We keep UK salaries running only where there is travel to the UK that can justify the UK salary.

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Replying to accountantccole:
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By Matrix
05th Mar 2021 14:58

If they are the Director of a UK company and the pay is for Director duties then do you just put the pay through the overseas payroll?

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Replying to Matrix:
Caroline
By accountantccole
05th Mar 2021 15:24

Depends on circumstances, we have lots with French businesses that make a cross charge for the work on the UK co, which is done in France.
We also run French payrolls for Uk cos where the employees are based in France.

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Replying to accountantccole:
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By Matrix
05th Mar 2021 17:14

Thanks. I am looking specifically at an overseas Director where there is no payroll scheme.

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