A UK resident from birth working for my UK employer client - so far so good - until some months ago the UK resident moved abroad to live permanently and has kept his job. He's performing the same office based job for my UK client but from abroad. So far I've not made any changes on the payroll but because the arrangement is becoming more definately permanent both employer and employee are wondering - what their status? Any pointers on what needs doing would be appreciated.
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Depends on where he is but I think the standard OECD tax treaty is wherever the duties are physically carried out which would mean operating the payroll in the country where they are living.
This comes up quite often. May I refer you to my comment on this thread only last Friday?
I think that if the employer decides to employ staff in other countries, the employer has an obligation to follow the employment and taxation law of that country. That may include operating the equivalent of PAYE (not to mention pension, maternity pay etc etc).
the employee may also have obligations under the law of that country too (for instance if there is an equivalent of self assessment to be submitted).
So 'tax being correctly dealt with' is a 2 part obligation. If the employer has sent the employee abroad, then they may want to contribute to the cost of getting local advice...
As Tickers says, the foreign country almost certainly has laws concerning the deduction of tax and social security contributions by an employer from earnings for work done in that country and the payment by the employer of social security contributions in the foreign country. These laws of the foreign country apply to the employer, regardless of where the employer might be based, and the employer has the responsibility to comply with them. You(r client) should research the situation and the client may well need to engage a local agent to calculate the "PAYE" on the earnings in the foreign country.
Form P85 may result in HMRC issuing a PAYE code of NT, but that only affects the UK tax position. It does not mena that the employee is not subject to income tax in the foreign country.