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UK Ltd company overseas Rep Office employees

UK Ltd company overseas Representative Office employees PAYE and salary payment

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Hi,

I have a couple of questions regarding hiring staff to work overseas for a UK company's Representative Office i.e. a non revenue generating office established overseas solely for the purposes of gathering information or finding suppliers etc. in that region.

Firstly, does anyone know if UK non tax resident employees (regardless of nationally) hired locally to work in that territory, for that Rep Office, need to be registered as employees of the UK head office and/or registered for PAYE in the UK? In the region in question (Taiwan), the local laws present no requirement that employees hired to work for a Rep Office must be dispatched from the company's head office. Also, as the employees are non UK tax residents that are hired directly to work for the overseas office and are not seconded from the head office, they would have no UK Tax or NI liabilities. In this case would UK PAYE registration still be required for them? 

Secondly, the region in question also has no restrictions on how salary should be paid to Rep office employees, meaning that, from their point of view, the following 3 options are all acceptable:

1) UK head office sends money to the Rep Office annually or monthly to cover expenses employees' salary, office rental etc. expenses. Salaries are then charged and paid through that local office.

2) UK head office directly pays Rep Office employees into employee bank accounts set up in the UK. The only current employee of the Rep Office is a non UK tax resident British citizen that would prefer this.

3) UK head office directly pays Rep Office employees into employee bank accounts set up in the other region. This would work better for future employees that are nationals of that region.

Option 1 is, as far as I know, the norm when it comes to remitting expenses to a Rep Office. However, If the company goes with options 2 or 3, from the point of view of HMRC, doesn't paying the employees directly from the head office make them employees of the head office for PAYE purposes? Or is there another way to classify these expenses when reporting the company financials?

Thanks for your help.

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08th Oct 2018 16:31

Firstly, No & No.
An employee who is not resident in the UK and who does none of his employment duties in the UK is not subject to UK income tax. An employee who is not present in the UK is not subject to UK NIC. Hence, he cannot be subject to PAYE, which is merely an administrative procedure for collecting UK income tax and NIC.

Secondly, the non-UK resident employees working in Taiwan will need to be taxed and to pay social security contributions in accordance with Taiwanese law. Unless you know the requirements, you should leave it to a local to run the payroll in Taiwan. If you then want to send the net pay from the UK (Options 2 & 3 - it is irrelevant whether it is to a UK or Taiwanese bank account), you can (without any need to register them for UK PAYE), but it would probably be easier to leave it to whoever has run the payroll in Taiwan (Option 1).

I don't understand your problem with "reporting the company financials". As it is a "Rep Office", rather than a separate subsidiary company, the figures will be combined with the UK payroll figures anyhow.

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By Chris T
to Euan MacLennan
09th Oct 2018 18:18

Thank you for taking time to leave such a detailed and helpful response.

Firstly, as you correctly pointed out, the employee would in his capacity as Rep Office manager be located in Taiwan and therefore would be subject only to tax and social security (labour insurance, health insurance, pension) deductions in Taiwan. HMRC would only charge for time spent working in the UK (persuant to the Double Taxation Agreement between the two countries). I guess my question was is there any legal requirement for a UK company to register employees (regardless of which office they work in) with HMRC or any authority in the UK, even if it's not for PAYE? My instincts told me no, but I was still not 100% sure. Thanks for clearing that up.

Also, if there is no requirement to register overseas employees regardless of if they are paid from the UK or not, the salary question, as you mentioned, becomes a lot simpler.

Regarding the accounting, I wasn't sure if payroll figures for head office and Rep Office employees all needed to be included when filing the company accounts in the UK. I thought that maybe this would only be the case if we went with options 2 or 3 and not if we went option 1. With Option 1, I assumed that we would just state as a expense the money remitted to the Rep Office from the head office for handling expenses without a need to provide a breakdown of how exactly the Rep. Office used that money to pay salary, rent etc. The Rep office would provide this itemised breakdown when filing annual accounts in Taiwan - a legal requirement there.

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