We recently gave advice to a UK Agency engaging a non UK worker to work in the UK through their own non UK Limited Company. Our advice had been that PAYE and NI need to be deducted on the basis that the OEI (Offshore) applied, but they received contradictory advice from their trade association. They sought clarification from HMRC who confirmed that we had been correct.
Question to HMRC.
“Dear Sirs In connection with the recently introduced intermediaries legislation and reporting, please can you guide us as to reporting requirements IF we contracted with a EU contractor who has his / her own Ltd Liability Company (PSC) in the EU country of residence but was placed for a short period (say 3 months) to a UK client and performed the duties on site, likewise if they performed duties remotely. What category would this be or should the contractors company be subjected to UK income tax / NI Thanks in advance”
Dear Sir, The contractor and their employer should apply to his/ her own Social Security scheme for a form A1 to exempt them from UK National Insurance and to continue to pay social security in their home scheme. They should present a copy of this form to any agency/ intermediary such as your business between the overseas employer and the client – or a NIC liability arises for that agency. Any agency/ intermediary such as your business between the overseas employer and the client must operate PAYE tax here in the UK and withhold tax from the worker in the UK.
I recommend: https://www.gov.uk/new-employee-coming-to-work-from-abroad The requirement is for the UK intermediary to put the person on the UK RTI scheme and deduct tax – not for an intermediary reporting information return. I trust this helps HMRC Personal Tax Product & Process (Employment Status Policy) Room 1E/10 100 Parliament Street London SW1 2BQ Conclusion If you are paying workers to work in the United Kingdom through a business based outside the United Kingdom then you must account for Income Tax through the UK PAYE system.
The agency must also account to the UK Tax Authorities (HMRC) for Employers and Employees National Insurance, unless an A1 certificate is held by the agency issued by the competent authority in the home country in which the worker is habitually resident. Unfortunately, ignorance is no defence and as the legislation was enacted on 6 April 2014 then we are already over twelve months in to the new regime.
Article provided by Paul Hughes from iPaye Ltd.