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:-
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:-
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:-