Outbound secondment ― payroll issues

By Tolley in association with Paul Tew

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

  • Outbound secondment ― payroll issues
  • Working in the UK and overseas
  • Application of Double Taxation Treaties
  • Applying a Foreign Tax Credit (FTC)
  • Issue of No Tax (NT) PAYE coding
  • NIC position working overseas
  • Importance of payroll record keeping
  • Brexit

The collection of income tax and social charges (Class 1 NIC in the UK) from employees is normally the responsibility of the employer’s payroll operation. The UK comprises England, Wales, Scotland and Northern Ireland, including territorial waters within 12 nautical miles of the shore. It does not include the Isle of Man or the Channel Islands. The UK also includes the UK sector of the Continental Shelf, as designated under the Continental Shelf Act 1964, s 1(7) (subscription sensitive).

Working in the UK and overseas

Where a UK based employee is seconded to work in another country the income tax and social charges that arise in the host country may be payable on earnings from the overseas duties performed, as well as there being a continuing PAYE and NIC liability in the UK. For example, this will normally be the case where an employee leaves the UK and spends more than 183 days (but less than a complete tax year) in a host country, such that the employee remains UK tax resident and may be a tax resident of both countries (for more on residence, see the Residence and domicile ― effect on tax liability guidance note). HMRC seeks, as far as is practicable, to have any UK tax due collected via PAYE. Therefore, the UK payroll will need to deduct PAYE using the employee’s existing tax code.

Residence is just one determinant of liability to UK tax. An employee based in the UK may be seconded to work in an area, eg Western Europe, where there is a requirement to perform duties in not just one, but in a number of countries during the UK tax year and the relevant host countries’ tax years. The short periods of time spent in each country may be insufficient to establish residency for tax purposes in any one country. However, this does not mean

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