Employees Working Abroad
The employer is required to operate PAYE in respect of earnings paid to an employee even if the duties of the employment are performed wholly or partly outside the UK. National Insurance contributions will be payable in respect of the gross earnings.
The provisions of ITEPA 2003, s. 341, 342 and 376 provide relief for certain expenses incurred by employees working abroad. Briefly, relief is given for:-
- the cost of travelling from any place in the UK to take up an overseas employment, the duties of which are performed wholly or partly outside the UK, and the cost of returning to any place in the UK, on the termination of that employment;
- the cost of board and lodging outside the UK, whether provided at the employee’s own expense, or by the employer if such provision gives rise to a chargeable benefit;
- the cost of travel from and return to anywhere in the UK incurred by the employee’s spouse or children under 18 years of age either at the beginning of the period of absence or to visit him during that period, provided the period of absence extends to at least 60 continuous days. The relief is available for two trips per person per year but only where the employer bears the cost or reimburses it to the employee; and
- the cost of return visits between two or more places of employment provided the duties can only be performed at the places visited and any absence from the UK was occasioned wholly and exclusively for the purpose of performing the duties overseas. Relief will only be due where the cost is borne by the employer or where the employer reimburses the cost to the employee.
Employees from Abroad
Where an employee comes from abroad to work in the UK the operation of PAYE will depend on the precise circumstances.
If a person comes from abroad to work in the UK for a UK employer, the UK employer is responsible for operating PAYE on his remuneration.
If an employee of an overseas employer comes to the UK to work in the UK branch or agency of that employer, the UK branch or agency will be responsible for the operation of PAYE on the employee’s total pay whether it is paid by the branch or agency or by the overseas office.
If the employee who comes to the UK is under a contract of employment with an overseas employer, but his remuneration is paid by an employer in the UK, the UK employer is responsible for the operation of PAYE on the remuneration he pays.
If a UK employer has the benefit of services provided by an employee from abroad who continues to be remunerated by his overseas employer, the UK employer’s PAYE responsibilities depend on whether or not the employee works under his general control and management. If he does, the UK employer must operate PAYE. He should ascertain the total remuneration payable, calculate the tax and NIC due and advise the overseas employer of the deductions to be made from the remuneration. The overseas employer should then account for the tax and NIC, including the employer’s share, to the UK employer, who is responsible for remitting the payment to the collector. The UK employer will be responsible for the correct completion of the P14, P9D, P11D, P35, P45 and deductions working sheet, so he must keep the necessary records to enable him to do so.
If the employee is not under the control and management of the UK employer, PAYE is not applicable. However, the name and address of the employee may have to be returned on a form P39 at the end of the year, so the necessary records should be kept.
An employee who comes from abroad to work in the UK, and who is not domiciled (as distinct from resident) in the UK, may be able to claim a deduction for certain expenses under ITEPA 2003, s. 373 against any earnings chargeable on him in respect of duties performed in the UK. Relief will only be due if the cost is met by or on behalf of the employer and:-
- in the two years preceding the year of assessment in which he came to the UK he was not resident in the UK, or
- he was not in the UK for any purpose at any time during the two-year period ending with the day immediately preceding the day he came to the UK.
If relief is due it will only be due for a five-year period commencing on the date the employee arrives in the UK to commence his employment.
Relief will be due in respect of:-
- travel to any place in the UK from the place he normally lives to enable him to perform his duties in the UK and the return trips;
- the cost of his spouse and children visiting him in the UK provided the period of employment is for at least 60 continuous days, up to a maximum of two trips per person per tax year.