Payroll compliance requirements

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

• 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

• 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.

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.