Employer Payroll Requirements in the UK

Does an employer relocating employees or sending employees on secondment to the UK have an obligation to register as an employer and pay payroll taxes in the UK?  If so, what are the filing requirements?

PAYE must generally be operated in the UK for employees placed here by an Irish company if either:

1. The employee is working at a UK branch or office of the Irish company, or
2. The employee is working under the day-to-day control and management of a business in the UK (including a UK branch of the Irish company).

The branch / business in the UK using the services of the employee of the Irish company must operate UK PAYE as if it was the employer, regardless of whether the employee is paid by the Irish company or the UK concern.

If however the assignment is for no longer than six months, the employee is Irish resident under the UK/Ireland Double Tax Treaty, the remuneration is paid by the Irish company and is not borne by any permanent establishment the Irish company has in the UK, then it may be possible to ask HM Revenue & Customs (HMRC) to relax the strict PAYE requirements.

If there is a UK payroll obligation, the business operating UK payroll must provide information to HMRC online. The business is required to register as an employer with HMRC (if they are not already registered as such) and report pay details in “real time” i.e. to send details electronically to HMRC regarding each payment at or before the time the payment is made.

What are the income tax rates in the UK?

The current UK income tax rates are:

Income from £0 to £11,000                          0% provided the individual is entitled to the UK personal tax allowance*

Income from £11,001 to £32,000                20%

Income from £32,001 to £150,000             40%

Income in excess of £150,000                   45%

*Note that the UK personal allowance is reduced if income exceeds £100,000 and is fully abated if income exceeds £122,000.

How would travel and subsistence expenses from home country be treated if employee is required to be in the UK?

Under general UK tax rules, employees can claim tax relief for any costs incurred necessarily for the performance of their duties, excluding commuting from home to normal place of work and other private travel.

It should however be noted that travel to a “temporary workplace” would count as being for the performance of duties, rather than commuting to a permanent workplace. It is therefore important to establish whether the UK workplace counts as permanent (in which case travel to and from it would be disallowed) or temporary. This broadly means that if the UK assignment is not expected to last for two years then the UK workplace will be viewed as temporary, but the facts of each case need to be considered carefully. If the UK workplace counts as a temporary one, the employee can potentially claim a tax deduction for travel to and from that workplace, along with associated subsistence costs.

Further tax relief (assuming not already achievable by the rules above) may be available under special rules for people coming from Ireland to the UK to work if they meet the following criteria:

• They are not domiciled in the UK, and either
  • Were not UK resident in either of the two tax years prior to the tax year in which they arrived in the UK, OR
  • Were not in the UK at any time in the two years prior to arriving in the UK.

If they meet these criteria AND their employer pays for the costs, then they would be entitled to claim tax relief for up to five years on unlimited journeys between their Irish home and the UK to carry out their duties, and also claim tax relief for limited family visits to the UK in certain circumstances.

Are there any exemptions for workers coming from abroad to the UK?

Generally, employees would need to consider their domicile and residence statuses, the UK / Ireland Tax treaty and where they perform their employment duties to fully understand their UK tax obligations. It may be possible to exclude earnings relating to overseas duties from UK tax in some situations.

Relocation costs for an assignment of less than two years may well be covered by travel and subsistence claims, as above. If the assignment is to last longer than two years, relocation costs can usually be claimed up to a maximum of £8,000.

For further information, please contact Malcolm McGready, Ensors, UK:

E: malcolm.mcgready@ensors.co.uk

W: www.ensors.co.uk