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UK employer with UK employee living abroad

What should employer and employee do?

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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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By Tickers
28th Mar 2017 09:58

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.

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Euan's picture
By Euan MacLennan
28th Mar 2017 10:25

This comes up quite often. May I refer you to my comment on this thread only last Friday?

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Replying to Euan MacLennan:
By chewmac
28th Mar 2017 11:07

They've moved within EU.

Thanks Euan for the link. Would you therefore agree that whilst I can point employer to form P85 for them to inform employee that my agent responsibility stops there?

I suppose I'm wondering also how much responsibility my client - the employer - has to ensure employee's tax is correctly dealt with.

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Replying to chewmac:
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By WhichTyler
28th Mar 2017 14:31

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...

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Replying to chewmac:
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By Euan MacLennan
28th Mar 2017 14:36

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.

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By chewmac
28th Mar 2017 14:41

Thanks both WT & EM.

The employer has not sent the employee but allowed him to live abroad and retain his employment.

The issues you both mentioned were exactly what I was wondering about. Thanks very much, very helpful replies.

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