Inbound employees ― payroll issues

By Tolley in association with Sarah Robert of James Cowper Kreston
Employment_tax_img

The following Employment Tax guidance note by Tolley in association with Sarah Robert of James Cowper Kreston provides comprehensive and up to date tax information covering:

  • Inbound employees ― payroll issues
  • Eligible for work?
  • National Insurance

Eligible for work?

The employer must ensure that an employee coming from overseas is eligible to work here. Failure to complete the right checks can trigger a civil penalty of up to £20,000. There is an online tool on GOV.UK  for these checks. See the Checking the employee’s right to work guidance note.

During these checks, the employer should review the employee’s passport and the passport number should be included in the first Full Payment Submission (FPS) that the employer makes.

General principles

The general rule is that PAYE tax and National Insurance contributions (NIC) is operated in the normal way for employees coming to work in the UK. Even if an employee maintains his overseas employer and is paid abroad whilst on secondment to a UK company, the UK company is treated as the employer and is therefore responsible for recording and reporting earnings under RTI as well as paying PAYE and NIC (see the Real time information guidance note and other notes in the Mechanics of Payroll topic).

ITEPA 2003, s 689

More information can be found on the GOV.UK website .

Direct pay arrangements

In some cases HMRC will agree to a PAYE direct payment arrangement, eg if there is only an overseas employer with no presence in the UK. This means that the employer is not required to set up and operate a payroll in the UK, but instead the employee is responsible for operating PAYE as appropriate, although the regulations make provisions for him to object and pay his tax under self assessment instead. The employee should also be set up as a self assessment case if the employee has failed to operate PAYE correctly.

PAYE75040
Modified payroll schemes: expatriate employees

Where foreign nationals are sent to work in the

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