Overseas Employers

If you are UK resident and employed to work in the UK, you will be subject to UK taxation on your earnings from that employment.  If your employer is UK resident they will be responsible for deducting tax and National Insurance Contributions from your pay through the PAYE scheme a when you are paid.

However, if your employer has no UK presence, they have no obligation to operate a payroll and take the necessary tax from your pay.  One of the following three options will apply, depending on the circumstances.

1 – If another UK business is benefitting from the work you undertake in the UK, that business may be deemed to be your employer for UK tax purposes. This is often the case where a person is seconded to a UK subsidiary, but remains legally employed in their home country. 

The deemed employer must pay HMRC for the tax and National Insurance that should be deducted from your pay by your employer.  Usually an arrangement is made between the businesses to compensate for these payments to HMRC.

2 –  For senior employees it is possible that their presence in the UK creates a presence in the UK for the employer.  This will be the case if the business can be said to be run from partially from the UK. 

In such cases the employee will be considered as an agent of the employer and the obligation to pay tax and NIC through PAYE deduction will rest with the employee.  Such a presence may create additional corporation tax obligations.

3 –  If no person in the UK is deemed to be the employer, then PAYE will not be operated on pay to the employee.  Instead they will be considered as being paid gross of tax and will have to complete a UK tax return and pay the tax themselves through the self assessment process.

 If necessary, the employee may also need to pay their National Insurance Contributions to HMRC through a ‘dummy’ payroll scheme.  In effect they will need to make quarterly payments to HMRC on their own behalf.