VAT on salary recharge

Group cross charge

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We are taking on an employee who will be employed directly by the UK entity but will spend 50% of their time working for a Group entity who are based in the EU. We will be recharging 50% of the salary and NI & pension each month, am I correct in thinking that the recharge will attract VAT?

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By David Ex
21st May 2024 18:18

You ask a lot of questions about VAT. Any reason you don’t want to pay for professional advice? Would have thought it was a sensible investment for a multi-national business.

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Replying to David Ex:
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By fcbmq
21st May 2024 18:23

David Ex wrote:

You ask a lot of questions about VAT. Any reason you don’t want to pay for professional advice? Would have thought it was a sensible investment for a multi-national business.

I have paid for advice and have always felt like it was extortiante. We are not a big business at all.

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Replying to fcbmq:
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By TheTaxMan_
21st May 2024 19:24

fcbmq wrote:

David Ex wrote:

You ask a lot of questions about VAT. Any reason you don’t want to pay for professional advice? Would have thought it was a sensible investment for a multi-national business.

I have paid for advice and have always felt like it was extortiante. We are not a big business at all.

You should consider whether it'll cost you more than making a mistake, potentially multiple times, potentially over multiple years.

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Replying to TheTaxMan_:
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By David Ex
21st May 2024 19:56

TheTaxMan_ wrote:

You should consider whether it'll cost you more than making a mistake, potentially multiple times, potentially over multiple years.

Yes. As a rule of thumb, if you can’t afford to do things properly (ie including any necessary professional advice), you shouldn’t be doing them at all.

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Replying to fcbmq:
Melchett
By thestudyman
23rd May 2024 23:26

I think your business should consider the need to employ or utilise an accountant with an expertise with VAT. The cost will be small money compared to mistakes which can be unraveled by HMRC.

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By FactChecker
21st May 2024 20:28

I'm not going to attempt to provide a simple answer because, as usual, there's so much missing info.

"We are taking on an employee who will be employed directly by the UK entity but will spend 50% of their time working for a Group entity who are based in the EU. We will be recharging 50% of the salary and NI & pension each month."

1. Are you sure they will be employed by the UK company if the idea is that 50% of the time/effort/output will be spent working for another company? And for whom is this beneficial?
2. If so, UK co is supplying a resource (just like an employment agency does) and the relevant tax rules will apply for the relevant circumstances.
3. In that case, UK co isn't strictly "recharging 50% of the salary and NI & pension each month" - if only because there is no mechanism for recharging statutory taxes (let alone to an overseas entity).
But charging a Fee that happens to cover total costs of employment (by the way what happened to Tax in that list) is fine - usually with something on top to cover UK co's administration costs.
4. Unrelated to your direct question (but connected to some of my points), but who is responsible for EE's sick pay if he falls ills during his overseas stint and under which national regime?
[Same for holidays and training plus a host of other employment issues.]

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Replying to FactChecker:
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By fcbmq
22nd May 2024 08:39

FactChecker wrote:

I'm not going to attempt to provide a simple answer because, as usual, there's so much missing info.

"We are taking on an employee who will be employed directly by the UK entity but will spend 50% of their time working for a Group entity who are based in the EU. We will be recharging 50% of the salary and NI & pension each month."

1. Are you sure they will be employed by the UK company if the idea is that 50% of the time/effort/output will be spent working for another company? And for whom is this beneficial?
2. If so, UK co is supplying a resource (just like an employment agency does) and the relevant tax rules will apply for the relevant circumstances.
3. In that case, UK co isn't strictly "recharging 50% of the salary and NI & pension each month" - if only because there is no mechanism for recharging statutory taxes (let alone to an overseas entity).
But charging a Fee that happens to cover total costs of employment (by the way what happened to Tax in that list) is fine - usually with something on top to cover UK co's administration costs.
4. Unrelated to your direct question (but connected to some of my points), but who is responsible for EE's sick pay if he falls ills during his overseas stint and under which national regime?
[Same for holidays and training plus a host of other employment issues.]

1. They will be employed by the UK entity and it is beneficial for both companies, there will also be sales generated for the UK company by virtue of the work for the foreign company.
2. They will be payrolled the same as any other UK employee
3. The plan is to charge 50% of gross salary, employers NI and employers pension contributions each month
4. The UK company will be responsible for all those areas

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Replying to fcbmq:
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By paul.benny
22nd May 2024 09:54

I think you maybe missed the point of FactChecker's questions. These are (some of) the relevant considerations, not things that will get you a definitive answer here.

I don't know how much the "extortionate" fee you've previously paid was. But this is specialist expertise to which the simple answer is often that "it depends". And a good adviser will go beyond the immediate question. For instance there may be better ways of structuring your EU activity than having a legal entity; how are you handling tax and VAT compliance in the other country; etc.

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paddle steamer
By DJKL
22nd May 2024 09:39

Have you considered joint employment contracts?

Are paymaster services on point?

Are they on point given cross border issues?

Some professional advice is advisable.

https://www.gov.uk/guidance/companies-that-supply-staff-and-staff-bureau...

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