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Payroll compliance requirements

19 April 2020 deadline

Amanda Chandler, Director, Global Mobility Services
13/03/2020
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With the end of the tax year 5 April 2020 approaching, we wanted to take the opportunity to remind you about UK payroll compliance requirements in respect of globally mobile employees.

UK companies with any form of globally mobile workforce (into or out of the UK) should be checking that they are fully compliant in terms of PAYE and NIC (social security) operation. The tax year end, i.e. month 12, is a good opportunity to review your globally mobile workforce to ensure you have taken the necessary steps to capture all data and take appropriate action in terms of operating PAYE and NIC.

Broadly, UK employees should have PAYE and NIC operated on 100% of their world-wide employment income unless you have agreed with HMRC to operate it on a reduced basis. Similarly for non-UK employees working in the UK, all compensation regardless for where paid needs to be reported for PAYE and NICs.

Outbounds

For UK employees who are on secondment overseas you could be operating PAYE on a reduced basis if you have in place:
  • Section 690 agreement; where HMRC have agreed that not all of the employee’s employment income is liable to UK tax. Usually where the employee if not resident in the UK but continues to have UK taxable workdays during the secondment
  • an NT tax code; where HMRC have agreed that the employee is not liable to UK tax. Usually where an employee is not resident in the UK and does not anticipate any UK taxable workdays during the secondment
  • an Appendix 5 – Net of Foreign Tax Credit agreement; where HMRC recognises that withholding tax is due in another country simultaneously so will allow for a foreign tax credit to be take via the UK payroll thus reducing the PAYE tax due. This is where an employee remains resident in the UK, and therefore liable to UK tax, during the period of secondment.

Inbounds

For non-UK employees who are seconded to, or working, in the UK you could be operating PAYE on a reduced basis if you have in place:
  • Section 690 agreement; where HMRC have agreed that not all of the employee’s employment income is liable to UK tax. Usually where an employee is either not resident, or resident but not domiciled, in the UK and continues to spend some of their time working outside of the UK
  • an Appendix 6 – Modified Payroll arrangement; where the employee is tax equalised and HMRC have agreed the set-up of a modified payroll so that it can utilise certain tax reliefs not normally given in a standard payroll, e.g. temporary workplaces expenses, overseas workdays, foreign pension contributions.

Applicable to both inbounds and outbounds is PAYE and NIC operation on 100% of world-wide employment income meaning exactly that, examples of employment income that is often missed from UK payrolls:

  • bonus payments not paid in, or by, the UK
  • equity income not paid in, or by, the UK
  • cash allowances not paid in, or by, the UK, e.g. housing, relocation, schooling, cost of living.

There is also associated expenses and benefits reporting to consider.

Action required

The topic of PAYE and NIC non-compliance in respect of a globally mobile workforce is high on every HRMC PAYE/NIC audit agenda. Non-compliance will mean the employer is exposed to interest and penalties on unpaid PAYE/NIC and these penalties can be up to 100% of the unpaid PAYE/NIC. In terms of next steps, employers should ask themselves the following questions:

  • do you know which employees make up your globally mobile workforce and need special review and consideration in terms of PAYE/NIC operation? 
  • do you know if you have any employees with an HMRC agreement or arrangement in place, e.g. S690, NT tax code, Net of Foreign Tax, Modified Payroll? 
  • can you verify that any agreements or arrangements in place are still valid, either in terms of tax year or in terms of employee circumstances, and are being operated correctly in the UK payroll?

Have you taken steps to confirm that world-wide employment income has been captured and put through the UK payroll?

How can we help?

Our Global Mobility Services team can help employers to understand their obligations regarding PAYE and NIC, provide assistance in reviewing existing HMRC agreements and provide assistance in making applications to HMRC for agreements to reduce PAYE operation.

Whilst we are considering UK PAYE and NIC compliance here and now, it is possible that there will be a simultaneous payroll withholding obligation in the other country where the employee is working, or where they are from. The timeline is likely to be different in terms of year end but if you would like more information in this respect please let us know.

If you would like to have a conversation to discuss this further, please do not hesitate to contact Amanda Chandler or your usual Crowe contact.

Contact us

Dinesh Jangra
Dinesh Jangra
Partner, Head of Global Mobility
London