Globally Mobile Employees ... and UK Payroll

“Relax”, the manager told the HR team. “The guys coming in from Head Office in the USA to help on the project are only here for a few months, so they don’t need to go on the payroll. It’s less than 183 days, right? They pay tax in the USA, not here.”

This is the sort of scenario that plays out in businesses up and down the land on a regular basis.

But is it correct?

In tax, you’ll often be told, “It depends”. UK payroll legislation and tax legislation don’t fit together very well and so the situation often arises where an individual seconded temporarily to the UK by their employer may have no UK tax liability but their UK host employer does still need to operate PAYE income tax withholding on their overseas income, even though no tax is ultimately due!

There is a difference between an individual who is temporarily working in the UK for the benefit of the UK host employer, and an individual who is working remotely on a project for the overseas employer.

Let’s say that the UK business has a sudden skills gap, maybe because a new project has been won or a couple of senior employees suddenly decide to leave for a competitor; in this kind of situation it could be possible to cover the staffing gap by bringing somebody into the UK for a short period from an overseas group business, until a new employee has been recruited. In a situation like this, the secondee would be simply covering the UK business’s work that the departing employees would normally have done. In this sort of scenario, the income would be taxed via the UK payroll in the normal way.

If, on the other hand, the overseas business needed to send somebody to the UK temporarily to carry out some business development work wholly for the overseas business, there may be no requirement to run their income through a UK payroll at all. It is recommended that you take advice if you believe there to be no need to run an individual’s income through a UK payroll, to avoid any complications in your next HMRC review.

Gill Salmons, Global Tax Specialist

This article was kindly written by our trusted partner, Global Tax Specialist, Gill Salmons

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