Employment Tax

Outbound employees ― payroll issues

Produced by Tolley in association with Annette Morley
  • 19 Oct 2021 23:25

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

  • Outbound employees ― payroll issues
  • Introduction
  • First steps
  • Continuing UK employer ― all duties overseas
  • Continuing UK employer ― some duties in the UK
  • Long-term employment overseas ― UK employers
  • NIC differences from income tax
  • Tax equalisation employees
  • Foreign nationals leaving UK employment

Outbound employees ― payroll issues

Introduction

When a UK employee leaves an employment, there are certain payroll practicalities which are the same whether he is going to a newUK position or an overseas one. UK employment responsibilities and compliance with UK employment tax legislation remain the same for all UK employers whether their employees are based in the UK or overseas.

This guidance note highlights those that are the same and provides detail on those that differ. Please see the Reporting requirements on leaving the UK and Foreign employment guidance notes for more information.

Payroll actions can differ based on employee factors including:

  1. will they continue to be employed by the same UK employer?

  2. will they be subject to UK tax and NIC?

  3. will they be subject to one of either UK tax or NIC but not the other?

First steps

UK payrolls have been subject to the Real Time Information (RTI) regime since 6 April 2013. Under these arrangements the requirement common to all individuals leaving an employment is for the employer to:

  1. include the date of leaving in the Full Payment Submission (FPS)

  2. provide the employee with a P45 form

Where a payment to an individual who has departed from the UK, but which relates to UK employment, is found to be due after an employee’s payroll record has been closed down, the record must be reopened to account for it under RTI with the payment after leaving indicator set and the original date of leaving entered in the date of leaving field.

See the Employees starting and leaving guidance note for details on the requirements for all UK payroll leavers for tax and NIC purposes, including payments made after leaving the employment.

HMRC’s CWG2 (updated annually) provides advice on RTI for employers. This includes the circumstance of an employee leaving to work outside the UK in full or in part but remaining employed by the UK entity. HMRC guidance on the GOV.UK website provides further practical assistance.

Where an employee

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