The following Employment Tax guidance note Produced by Tolley in association with Paul Tew provides comprehensive and up to date tax information covering:
An employee is subject to income tax if he is resident or carrying out employment duties in the UK. Just one day of work in the UK can result in a UK tax liability for the individual. It can also result in pay as you earn (PAYE) obligations for the employer. See the Setting up a payroll and Employees starting and leaving guidance notes.
Under normal procedures an employer is required to consider the status of any individual performing work on their behalf. See the Employment status ― why it matters guidance note. Payments to employees are required to be made under the PAYE regulations. However, registration is not required for an employer PAYE scheme if all employees are paid below the national insurance threshold (lower earnings limit) and do not have another job. Under real time information (RTI) reporting, an employer is required to operate PAYE, where at least one employee is earning at least the lower earnings limit, in which case all payments of earnings to all employees must be reported to HMRC, including those employees earning less than the lower earnings limit.
If an individual has a contract with an overseas employer it may not be possible for HMRC to enforce the operation of UK PAYE regulations. In order to be liable to operate a PAYE scheme an overseas employer must have a presence in the UK (see the Non-resident employers and liability to PAYE in the UK guidance note).
If the overseas employer does not have a tax presence in the UK, the PAYE obligation may fall on a UK business.
ITEPA 2003, s 689 can impose the PAYE obligation on:
any UK agency where a worker is employed by or engaged via a non-UK company and works for a UK company
any UK business for which an overseas employee works
From 6 April 2014, a UK intermediary who has made an ‘arrangement’ with a UK business for
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