Get international employments and deployments right

Many payroll specialists dread having to deal with international employments. For example, when the employee works for a UK employer and is paid outside the UK. Lee Hamilton, a partner in the Global Mobility Tax team at Blick Rothenberg, explains.

This feeling of dread is not surprising, given the complexities in this area and the fact that payroll teams are often only geared-up to deal with their domestic employees.

Over my 20 years working in international mobility tax, I have come across numerous instances of non-compliance. Organisations employ people to work in a territory overseas, send an employee to work overseas or host non-UK business visitors in the UK. Often this simply due to oversight and not recognising where action is required.

Such compliance failures often lead to unexpected - and sometimes substantial - underpayments of tax, as well as penalties and interest.

Common non-compliance issues

Below are some insights into common areas of non-compliance. This is by no means exhaustive, but will provide with a flavour of the type of issues that can occur, often unwittingly. 

  • When you employ people who are resident in an EU country outside the UK, you are likely to trigger an obligation to register for and operate non-UK social security in the overseas country. In one case, a UK employer was required to pay over Euro 100,000 in underpaid social security to a non-UK tax authority. Of course, Brexit may add further complexities.
  • When people come to the UK from overseas to undertake business visits at an organisation, they are likely to trigger UK PAYE reporting obligations. This is currently HMRC’s top area of non-compliance when it comes to expatriate tax.
  • When a director of a UK based company is resident outside of the UK and is paid from a non-UK payroll, they will normally trigger a UK tax and PAYE obligation when they attend board meetings (or any other duties related to the directorship) in the UK.
  • When organisations send people to work overseas and these people remain employed by a UK employer, in many cases (and depending on the country to which they are going) there will be an ongoing requirement to operate UK National Insurance contributions after the individual has departed the UK. This ongoing liability often gets missed, leading to underpayments.
  • When people who are based overseas, but are employed by the UK organisation perform ad hoc duties in the UK, these duties will in most cases trigger a PAYE obligation.

Often, these issues can be avoided with some up-front planning. However, identifying the issues in the first place can often be difficult.

As a general rule, it is important to review each situation when employees come to or go from the UK to work on a temporary or permanent basis. Equally, any employees who are employed by a UK company but live overseas should also be assessed.

Lee Hamilton 

Lee Hamilton is a partner in the Global Mobility Tax team at Blick Rothenberg. He is a trusted advisor on expatriate and employment tax matters. He has over 20 years’ experience on a wide range of issues including international payroll, international and UK share schemes, taxation of pensions for expatriates, UK employment tax (PAYE/NIC), employment status, international social security, international mobility policy and process development.