Employment Tax

Inbound employees ― payroll issues

Produced by Tolley in association with Paul Tew
  • 17 Nov 2021 16:40

The following Employment Tax guidance note Produced by Tolley in association with Paul Tew provides comprehensive and up to date tax information covering:

  • Inbound employees ― payroll issues
  • Eligible for work?
  • General principles
  • Direct pay arrangements
  • Modified payroll schemes: expatriate employees
  • Arrivals in the UK: tax coding
  • Restricted operation of PAYE
  • Overseas intermediaries
  • Exceptions
  • National insurance
  • More...

Inbound employees ― payroll issues

Eligible for work?

The employer must ensure that an employee coming from overseas is eligible to work in the UK. Failure to complete the right checks can trigger a civil penalty (fine) of up to £20,000 for each illegal worker. 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, where this is known. This should be sent once to HMRC, if held.

General principles

The general rule is that PAYE (tax and NIC) is operated in the normal way for employees coming to work in the UK. Even if an employee remains employed by their 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 operating PAYE (see the Real time information guidance note and other notes in the Mechanics of Payroll topic).

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

Access this article and thousands of others like it
free for 7 days with a trial of TolleyGuidance.

Think Tax.
Think Tolley.

Critical, comprehensive and up-to-date tax information


Popular Articles

Permanent establishment

IntroductionA company that is not resident in the UK will only be subject to UK corporation tax if it carries on a trade in the UK through a permanent establishment. Where it does so, it will be subject to UK corporation tax on all profits that are attributable to the UK permanent establishment.

03 Nov 2021 16:11 | Produced by Tolley in association with Anne Fairpo Read more Read more

Qualifying loan interest

Interest paid on qualifying loans is deducted from the taxpayer’s total income (ie a Step 2 deduction from total income). See the Proforma income tax calculation guidance note.Interest on qualifying loans is usually paid gross by the individual borrower; tax is not withheld at source. This includes

17 Nov 2021 12:07 | Produced by Tolley Read more Read more

Special rate pool and long life assets

Special rate poolExpenditure on some types of plant or machinery must, if neither annual investment allowance (AIA) nor first year allowances (FYAs) are available, be allocated to a ‘special rate pool’. Expenditure to be allocated to the special rate pool consists of expenditure incurred

25 Oct 2021 07:02 | Produced by Tolley Read more Read more