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Do I need to do anything about my employee’s Tax Presence?
An individual is subject to income tax if he is resident or carrying out employment duties in the UK. Just one day of work in the UK can result in a UK tax liability for the individual. It can also result in PAYE obligations for the employer. An employee may be sent to work overseas by their UK employer. If the employee remains under contract with the UK employer usual PAYE tax and NIC obligations would continue. The operation of PAYE will vary depending on the residence status of the employee after leaving the UK.
What are my requirements as an employer?
An employer is required to consider the status of any individual performing work on their behalf. If the individual is regarded as employee payments and are required to be made under the pay as you earn regulations.
When an assignment in the UK comes to an end the employer or host employer should issue a P45. The employer will though need to have a system in place to track any payments, for example bonuses or share options, paid after the employee has departed. Any amounts paid after leaving the UK may have continued UK tax liability.
Get in touch with us for more information around your employees’ tax presence
Are my employees eligible for Double Tax Relief?
If the employee will be in the UK for less than 183 days and will be able to claim relief under the appropriate double tax treaty it is possible to make payment without deduction of PAYE tax if either:
the employee applies for and receives a NT no tax code or,
the employer has an agreement with HMRC to operate the short-term business visitor scheme
If the employee is not a resident in the UK or is resident but not domiciled and entitled to overseas workday relief, and they work both in the UK and overseas, HMRC can issue a direction under ITEPA 2003, s690 advising how much of the payment of earnings should be subject to PAYE tax. An application for such a direction needs to be made by the employer.
What if my employee isn’t working overseas for a long time?
In some circumstances the employee will not be working overseas for sufficient time to acquire non residence status in the UK, so they remain taxable on their earnings. The earnings may also be taxed in the country in which the employee is working. Where HMRC is satisfied that the terms of an appropriate double tax treaty gives taxing rights to the overseas country a net of foreign tax agreement can be arranged.
The aim of this agreement is to give provisional relief for double taxation to employees who must pay both UK tax and foreign tax from the same payment of earnings. Final calculations are made on a self-assessment tax return together with the formal claim for double tax relief.
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What Global Mobility services do you offer?
We can provide support to the employer and the employee in dealing with the tax and social security issues related to cross border working. With the support of our extensive network of HLB International partner firms we can help to ensure tax and social security compliance for you and your employee in every jurisdiction that you operate in.
How does VAT work internationally?
International VAT rules are complex and managing the VAT elements of transactions across separate jurisdictions can be difficult.
Trading overseas can be overwhelming and complex. To help businesses to reduce their risks, our team of advisers can provide support, not only with VAT compliance, but also meeting their Customs’ requirements.
As a member of HLB International, Menzies has access to a global network of firms and is able to provide local VAT and Duty information from around the globe.
How do I plan my tax when relocating my employees?
For those relocating to the UK, it is key that UK tax advice is taken beforehand. This is because a great deal of the planning opportunities that are available cannot be implemented once you have become UK tax resident.
If you consider yourself non-UK resident for tax purposes, we recommend you consider the Statutory Residence Test (SRT). Your ties to the UK could bring you within the UK tax net, and careful consideration and planning is recommended. This needs to be kept under continuous review. In the event you are to leave the UK, or else come to the UK, speak to an advisor. For the internationally mobile, who have been awarded share options, give as much consideration to UK tax implications on vesting, exercise, or sale.