Global employment and Tax

The workplace has changed, particularly since COVID created lockdowns across the world. For most of us working from home it didn't affect our tax returns, but now we're dealing with people who are not employed by companies in the same country as the one in which they are living.

In our practice we've had three cases recently where individuals who are now resident in the UK are employed by companies in various countries around the world. 

They are full-time employees, but their employers are not tax resident in the UK, and don't have a UK presence. However, the employees are required to pay income tax and national insurance, on their duties performed in the UK.

There are two ways that this can be done, firstly via a DPNI scheme, this is a PAYE scheme set up by the employee on behalf of the employer, confirming that the employer has no UK presence and processing their own monthly payroll accordingly. They will pay income tax and employees national insurance but no employers national insurance is due from the employer.

Not every overseas based company is comfortable with being 'registered' with HMRC via a DPNI scheme, which leaves the employees in a difficult situation.

There is a second option, which entails additional paperwork and has costs attached, but it's the solution that all three of our clients have elected to use.

This is to set up a limited company. The individual's overseas employer is invoiced for and then pays their gross salary into that company and the employee – is technically now employed by their limited company and pays their tax, national insurance and themselves through that, via the calculations laid out in the IR35 regulations.

They will of course have additional administration to deal with, they will need to submit company accounts, a company tax return as well as a personal one and that may incur additional fees if they require the services of an accountant. However, as there should be little money sitting in the company after the salary and tax, etc. have been paid, there will usually be little or no Corporation Tax to pay.

While we are not international tax specialists, we are experts in UK tax and our focus is to ensure our clients are compliant using the best solution for them.