Much of the work in industries such as hospitality & leisure is seasonal, short-term and often low skilled. To meet these demands requires a flexible workforce often made up of people working under various forms of casual, temporary and seasonal contracts. More than half of the workers in these industries are reported to come from overseas.
If you are currently or intending to recruit from overseas what action do you as an employer need to take? And what action does the worker need to take to be tax compliant in the UK?
If you are looking to employ workers from outside the UK there are some things that as an employer you must ensure you do:
1 – Ensure the worker has the right to work in the UK. With penalties at £20,000 per worker and the risk of custodial sentences this is not something any business would want to get wrong.
There is a useful guide on HMRC website which can help.
2 – Add them to your PAYE scheme. This is a requirement even if they earn below the tax threshold or are working for you on a temporary basis.
3 – Operate the code determined by HMRC. If the worker believes they should not have any tax liability but tax is deducted it is the worker that must take this up with HMRC.
4 – Consider whether national insurance contributions are due. This will depend on whether the worker is from an EU, reciprocal agreement country or rest of the world country.
5 – If you pay expenses such as travel and accommodation ensure these are correctly returned to HMRC. This type of expense will generally need to be included in the payroll as additional salary.
If you are using workers from an agency your responsibility will depend on whether you are using a UK or non-UK agency. If you use a non-UK agency you will remain responsible for operating the PAYE regulations if you are using the worker in the UK. The non-UK agency rules apply equally if you use a worker employed by another company overseas i.e. a personal company.
The tax position of the worker will depend on the length of time they spend in the UK. A UK tax resident will be subject to tax on worldwide income (subject to utilising the non domiciled remittance basis) whereas a non resident person will only be taxed on their UK source income. Tax residence is determined under the statutory residence test.
Inclusion in the PAYE system does not exempt the worker from the need to register for a Self Assessment tax return if they have other reportable income.
The worker may need to apply for a national insurance number. To do this they will need to contact 0345 600 0643 and may be asked to attend a job centre plus office for interview and provide documents to prove their identity.
If the worker works both inside and outside the UK and is a EU national, they may need to obtain a EU social security certificate A1 to exempt them from UK national insurance costs.
If you are using workers from other EU countries, you should start to consider how dependent your business is on this source of workers. The position after the UK leaves the EU is still unclear but there is a real possibility of some immigration control. We would recommend considering your business exposure with a view to implementing a plan to meet the needs of your business.
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