The purpose of this article is to set out in broad terms, the risks of taxation and double taxation applying to personnel who spend considerable time in the UK. It is designed to give a flavour of the compliance obligations that arise from employees where they are working in two countries. It is meant as an overview of the general position and traders would need to consider the precise status of particular employees in consultation with their accountants and tax advisers.
Brexit will not make a direct difference to most direct tax issues. They are largely dealt with through double taxation treaties which will remain in place. However, the personal tax position of employees could be greatly affected by the way in which they trade in the UK. Trading through a UK company or forming a branch or inadvertently reaching the level of presence so as to be a branch may affect the availability of double taxation relief for trader’s employees.
Double taxation relief is generally available so that tax is paid on the higher of the effective rate in either the UK or Ireland. It would entail, however being specifically claimed. Tax returns would most likely be necessary in the UK and Ireland for the relevant employees.
Transborder Workers relief may be more beneficial in some cases and this is dealt with in an separate section.
Irish Tax Residence Rules
Each employee would need to look at his or her position directly to see if he is resident in Ireland or the United Kingdom or possibly both. As mentioned above, double taxation relief may apply in the latter case, as well as in cases where he may be resident in Ireland but may be exercising employment in the United Kingdom.
The general rule is that a person is a resident in the State (Ireland) if at any one time or several times in the year of assessment (the calendar year) is present for 183 days or more or is present for 280 days or more (cumulatively) in two successive years. However, in this latter case, the person is not resident under the second part of the rule if he spends less than 30 days in the State and these 30 days are ignored in relation to the 280-day test.
A person is deemed to be present in Ireland if he is present at any time during the day. The former rule which meant a person was only resident if he was in Ireland at the end of the day (the Cinderella rule) was removed several years ago. The above is the basic rule, and there are further twists and conditions which apply in less typical cases. The liability to income can be affected by the domicile (long-term home) or the nationality of the person concerned.
A person who is resident in Ireland and also domiciled (i.e. has his long-term home here) is liable to Irish income tax on his worldwide income. As indicated, he may obtain double tax relief in respect of tax in other countries and equally Ireland may afford him double taxation relief.
A person who is resident but not domiciled (Ireland is not his long-term home) is liable to Irish tax on income arising in Ireland and on foreign employment income to the extent he performs the duties of his employment in Ireland. Any other foreign employment income is liable to Irish tax to the extent that it is remitted into the State.
A person is deemed ordinarily resident in Ireland in a given tax year if he has been resident in each of the three years prior to that date. He remains ordinarily resident until he has been non-resident for three consecutive years of assessment so that he becomes non-ordinarily resident only from the fourth year.
A person who is ordinarily resident in Ireland is taxed on his worldwide income in the same way as a resident with the exception of income from a trade or profession no part of which is carried on in Ireland or an office or employment all of the duties of which are performed outside Ireland and other sources not exceeding €3810 per annum. When the non- ordinarily resident person has income exceeding this, the full amount of the other income may be taxed in Ireland.
There are tests and conditions on what constitutes employment all the duties which are performed outside the State.
A person who is not resident nor ordinarily resident in Ireland is liable to Irish income tax on income arising in the State (only).
This is the equal but opposite of the below mentioned UK rules whereby a person may have income from an employment which is exercised in the state to some extent but arises from employment in another country.
There are complex issues around the income tax implications of the grant and exercise of share options too detailed and technical to deal with the present context.
UK Income Tax Liability and Residence
UK resident individuals are taxed in the UK on their worldwide income. The concept of ordinary residence no longer applies in the UK. Instead, the test of residence is more complicated than in Ireland.
Broadly an individual is resident if he is present in the UK for a period of six months in any tax year or has sufficient ties. A person is automatically resident if he is present for more than 183 days. A person is automatically not resident if he spends less than 16 days in the UK, less than 46 days and not resident for the three previous years, or less than 91 days and less than 31 of those days working in the UK.
A person is automatically resident if he is not automatically resident (as above), but any of the following apply
- more than 182 days in the UK
- worked full time in the UK
- a home in the UK in which resided for more than 30 days with no home abroad.
The alternative sufficient ties test may apply. In the case of an arriver or leaver in a tax year, the test depends on the number of days spent and the number of connecting factors which are
- family is resident
- available accommodation
- 40 days+ working
- 90 days+ in the last two tax years
- more time in the UK than in any other country (leavers).
Broadly for leavers and arrivers residence is determined by
- less than 16 days deemed not resident
- 16 to 45 days deemed resident if – 4+ connections
- 46 to 90 days deemed resident if – 3+ connections
- 91 to 120days deemed resident if – 2+ connections
- 121 to 182 days deemed resident if – 1+ connections
- 182+ days deemed resident
The concept of ordinary residence has been replaced by the above rules, so there is no equivalent to that applicable in Ireland.
Non-Resident Liable for Tax on Earnings for Duties in the UK
The general rule is that where a person is not resident in the UK, he is taxable only on earnings in respect of duties performed in the UK. There are further, complicated rules in respect of share options which can override even this basic principle. The question is whether the duties of the employment are in substance performed wholly abroad. Merely incidental duties performed in the United Kingdom are ignored.
The same general principle applies to deductions. Only deductions which the person wholly exclusively and necessarily incurs on the performance of duties are permitted. This is relevant in travel and hotel expenses. A non-resident taxpayer is charged to tax on employment where the duties are carried out in the United Kingdom.
The general principle is that Irish resident individuals would be entitled to the same personal tax allowance credits and reliefs as UK citizens who are not resident in the UK. The same applies to British citizens in respect of Irish income in reverse.
The general principle is that salaries, wages director fees and other remuneration derived by a resident individual of one country (Ireland) from an employment exercised in the other (United Kingdom) may be taxed in both. In this case, a computation is made which basically means that the tax is primarily paid where the employment is exercised (e.g. in the United Kingdom) and is paid at the higher effective rate of the two. In crude terms, this would mean that if the Irish effective rate (not the nominal tax rate but the actual percentage of tax applicable) was higher, then there could be Irish tax liability in respect of the excess.
In theory, a non-resident who does some work in the UK whose work is merely incidental to an overseas job may not be taxable in the UK (even without having to claim cross border or double taxation relief). However, this is not something that can be assumed. Generally incidental work should be non-core work.
UK Irish Double Tax Treaty
An Irish resident and domiciled person is liable to Irish tax on all his worldwide income regardless of where it arises. Depending on applicable rules in another country that individual may also be subject to income tax or another tax in that other country. Double taxation agreements and treaties entered by states generally give the primary taxing right to one state and facilitate relief against double taxation in the other state.
Technical issues can arise as to whether an employee qualifies for the benefit of the double taxation agreement. This requires that the persons be a resident of one country. A resident of one country under the agreement is a person who is taxed under that country’s rules by reason of his domicile residence or another criterion. Irish revenue takes the view that residence or ordinary residence will suffice. EU26 employees might thereby qualify if they are Irish tax resident.
It is possible for a person to be deemed resident in both countries under each of their respective tax laws. Where this happens, the rules in the treaty determine the country in which that person is deemed a resident for the purpose of the treaty. Under the UK Irish double taxation treaty, a person is deemed a resident of only one of the two countries under the following rules
- he is deemed resident country in which is a permanent home available to him
- if he has a permanent home available in both, he is deemed a resident of the state with which his personal and economic ties are closer (referred to as his centre of vital interests)
- if the country in which he has a centre of vital interest cannot be determined or he does not have a permanent home available in either country, he is deemed to be resident of the country in which he has a habitual abode
- If he has a habitual abode in both countries or in neither, he is deemed to be a resident of the country of which he is a national
- If he is a national of both countries or of neither the question of which country, he is considered resident of is decided by mutual agreement between the revenue authorities.
Double Tax Relief
The UK Ireland double taxation treaty which where it applies, can override the relevant UK or Irish rules to the defined extent.
The general principle is that income derived by a resident of one country (in this case Ireland) is taxable only in that country unless the individual exercises his employment in the other country (UK). In this latter, case the other country (UK) can tax so much of the earnings as is derived from the exercise of the employment in that country.
Under the UK Irish double taxation agreement, individuals can escape taxation in the country in which the employment is exercised provided that they fulfil all four of the following conditions
- they are not a resident of the other country for the purposes of the agreement under which the claim is made for the period of the claim,
- they are present in the other country (UK) for a period or periods not exceeding in the aggregate 183 days in any continuous period of twelve months (or in some cases in the financial/taxation year)
- their earnings are paid by an employer who is not a resident of that other country, and
- their earnings are not borne by a permanent establishment or fixed base which the employer has in the other country (UK).
A day or any part of the day is counted as a day for this purpose. The double taxation treaty provides for exceptions.
Conditions for Relief
The employee must be a resident of one or other country. The conditions are affected by whether the employer is resident, has a permanent establishment or fixed base in that other country (UK). Generally, a UK company would be deemed to be resident in the UK. Equally a permanent establishment or fixed base of the Irish company would bring the employees outside the potential scope of relief, if it was their employer or if their earnings were borne by it, which is a wider concept again
The taxpayer (trader’s employee) must show UK HMRC that he is resident of another country (e.g. Ireland) under the terms of the (UK Irish) double taxation agreement. The employee must be present in the United Kingdom for less than 183 days in the tax year concerned.
The remuneration the subject of the claim must be paid by or on behalf of an employer who is not United Kingdom resident. Remuneration must not be borne by a permanent establishment or fixed base which the employer has in the United Kingdom
A permanent establishment can arise by crossing a definitional line based on the degree of presence of the Irish company in the UK. The concept of a permanent establishment is very slippery and can involve judgements of degree. Basically, a permanent establishment is the presence of a company (say the Irish company) in another state (say the UK). This was often referred to as a branch. Basically, at a certain degree of presence of an Irish company in the UK, it becomes a permanent establishment.
Many of the guidance notes around permanent establishments deal with the sale of goods, but the concept also applies to the supply of services. The issue of whether a company has a permanent establishment, in this case, an Irish company in the United Kingdom is very important. Like many tax and legal questions, it can be that fuzzy around the edges and arguable. However, there is a risk that a tax authority could succeed in having the issue determined definitively, effectively with retrospective effect, with significant tax consequences.
A permanent establishment includes a branch place of management or an office. It does not include the maintenance of a fixed place of business solely for the purpose of purchasing goods and merchandise, collecting information advertising supplying information research and other activities which have a preparatory character for the business.
Where an entity resident in one country (say an Irish company) has an agent or representative resident in the other country (say the United Kingdom) who is not an independent agent, that representative can be a permanent establishment if he has or habitually exercises in the United Kingdom authority to enter contracts on behalf of trader’s company unless they are very limited.
UK HMRC Guidance on Double Tax Relief
Detailed guidance as set out below from HMRC.
From 6th April 2009 onwards, when counting to 183 days under Article 15(2)(a), any part of a day, day of arrival, day of departure, and all other days spent in the UK such as Saturdays, Sundays, national holidays, holidays before during and after the period of work, short breaks (training, strikes, lock-out, delay in supplies), days of sickness (unless they prevent the individual from leaving and he would otherwise have qualified for the exemption) and death and sickness in the family should be included in the calculation as a day the person is present in the country of activity.
Days spent in the UK in transit in the course of a trip between two non-UK points should be excluded from the computation.
Non-residents: UK income: Employments: Employment
Paragraph (1) of the OECD Model Article sets out the general principle that salaries, wages and other similar remuneration may be taxed in the country where the employment giving rise to that remuneration is exercised.
The words `salaries, wages and other similar remuneration’ should be understood in the broadest sense as covering all income from an employment, including benefits and share option gains chargeable under ICTA88/S135 (see DT1925).
It follows from the terms of Paragraph (1) that, in general, an individual can be taxed on the income arising from duties performed in the United Kingdom whether or not he is resident in the United Kingdom under our domestic law. Our double taxation agreements provide, however, that such income may, in certain circumstances, be exempted from United Kingdom tax.
Paragraph (2) of the OECD Model Article provides that, notwithstanding paragraph (1), employment income may, if certain conditions are fulfilled, be exempt from tax in the country where the employment is exercised. Consequently, it is this paragraph which forms the basis of most claims for exemption from United Kingdom tax under this Article. To qualify for exemption, the taxpayer has to demonstrate that he is a resident of the other country for the purposes of the agreement (see INTM154000) and three further conditions, explained at DT1921 – DT1923 below, must all be met.
Non-residents: UK income: Employment
The second condition for exemption under Article 15(2) is that the remuneration which is the subject of the claim must be paid by, or on behalf of, an employer who is not United Kingdom resident.
What follows is guidance regarding when a claim can be accepted and when an enquiry into the claim may be required. It is not intended to replace or expand the commentary on the application of Article 15 in the OECD Model Tax Convention on Income and Capital.
The fact that an individual formally remains an employee of an overseas company does not on its own satisfy the test in Article 15(2)(b). Not only must the claimant remain an employee of the overseas company but the remuneration in respect of which the exemption is claimed must be paid by the overseas employer and not, for example, by a United Kingdom subsidiary company to whom the employee may have been seconded.
Cases where remuneration continues to be `paid by’ the overseas employer, but there is a recharge of the cost of that remuneration to the United Kingdom company to whom the employee has been seconded, are frequently a cause of difficulty. Claims should not be accepted where
- the employee remains formally employed by a company which is not resident in the United Kingdom and
- he is seconded to work for a United Kingdom resident company and
- the United Kingdom company for practical purposes functions as his employer during the United Kingdom assignment and
- the United Kingdom company bears the cost of the employee’s remuneration, either by a direct recharge or as part of a management charge made by the non-resident employer.
WHEN DOES A UNITED KINGDOM COMPANY FUNCTION AS AN EMPLOYER?
Where an employee works in the business of a United Kingdom company and that company obtains the benefits and bears any risks in relation to the work undertaken by the employee then that company is likely to be treated as his employer.
The mere fact that the United Kingdom company has borne the cost of the employee’s remuneration is not on its own sufficient for that company to be treated as the employer. A United Kingdom company would not be regarded as the employer where the employee continued to work in the business of a non-resident company even though working at the premises of the United Kingdom company – for instance, an employee sent to the United Kingdom company to service equipment supplied by a non-resident company. In this situation the services are being provided under a contract for services between the two companies and not under a contract of service with the United Kingdom company.
The following guidance may also be of assistance in practice. In the case of very short term secondees it is unlikely that an employee would be sufficiently integrated within the business of the United Kingdom company for that company to be regarded as his employer. For that reason it may be accepted that a United Kingdom company with whom an employee does not have a formal contract of employment should not be treated as the employer for the purposes of Article15 where that employee is in the United Kingdom for less than 60 days in a tax year and that period does not form part of a more substantial period when the taxpayer is present in the United Kingdom. The 60 days are to be counted using the “days of physical presence method” set out paragraph 5 of the Commentary. Basically, if a person is physically present in the United Kingdom during any part of a day then that counts as a day in the United Kingdom for the purposes of this rule.
Further details about how this 60-day rule is applied can be found in Tax Bulletin issue 68.
Claims should not be admitted where payment by an overseas company forms part of an arrangement to avoid United Kingdom tax. PAYE Technical will advise in cases where, for example, the overseas employer is based in a tax haven or the employee is nominally employed by a company which exists to provide his services to the United Kingdom user of those services. Cases where an employment which existed prior to the employee’s assignment to the United Kingdom continues during that assignment usually do not cause difficulty. Cases where the employee has taken up a new formal employment with an overseas company at the time of assignment should be reviewed critically.
`ON BEHALF OF’
Payments may be made `on behalf of’ a non-resident employer in cases where the payment is physically made by a United Kingdom company. It may be accepted that remuneration has been paid or benefits provided `on behalf of’ a non-resident employer if that non-resident ultimately bears the cost of such remuneration and benefits. Claims should not be admitted where a United Kingdom company pays remuneration or incurs the cost of benefits and does not receive reimbursement from the overseas employer. Such payments and costs are incurred in the interest of the United Kingdom company and not on behalf of the overseas employer.
Unless the claimant offers evidence that the United Kingdom company was reimbursed the cost of the taxpayer’s remuneration and benefits by the non-resident employer (and this can be checked with the relevant HMRC corporation tax specialist or Customer Compliance Manager dealing with the United Kingdom company’s Corporation Tax affairs) a claim under Article 15(2) should be resisted.
Where it is argued that remuneration has been paid `on behalf of’ an overseas employer, even though a United Kingdom company has paid the individual’s remuneration and the overseas employer has not reimbursed the cost, it should be pointed out that it is unlikely that, in these circumstances, the cost of the remuneration could be regarded as wholly and exclusively incurred for the purposes of the United Kingdom company’s trade and that, therefore, no deduction should be claimed for the cost of the remuneration in computing the United Kingdom company’s taxable profit. Reference should be made to the tax case of Robinson v Scott Bader and Co Ltd (54TC757) which considers the inadmissibility of remuneration paid on behalf of another employer.
The decision in the Scott Bader case makes clear that the object of the person making the payment is decisive in determining whether or not a deduction is permissible in accordance with ICTA88/S74.
In relation to seconded employees there are three possible situations
the payment to the employee is made solely in the interests of the overseas company.
the payment is made partly in the interests of the United Kingdom company and partly in the interest of the overseas company or
the payment is made solely in the interests of the United Kingdom company.
Only in the third case is a deduction available to the United Kingdom company in computing its profits.
Even where basic remuneration continues to be paid by the overseas employer it is common for benefits (for example, the use of a flat) to be provided at the cost of the United Kingdom employer to whom the employee has been seconded. Subject to the other conditions in the Article, the basic remuneration may be exempt from United Kingdom tax but the condition in Article 15(2)(b) is not satisfied in relation to benefits in these circumstances because they are not `remuneration paid by, or on behalf of,’ the overseas employer (unless the cost of the benefits is borne by the overseas employer through a recharge).
Non-residents: UK income: Employment
The third condition for exemption under Article 15(2) is that the remuneration of the employee must not be borne by a permanent establishment or fixed base which the employer has in the United Kingdom – see DT1710 onwards and DT219 for general guidance concerning the meaning of these terms.
This condition should be considered carefully in all cases where the employee has not apparently been assigned to work in the United Kingdom for a United Kingdom-resident company. If an employee has simply been seconded by his overseas employer to work here for a United Kingdom-resident company, it will not usually be necessary to consider this condition.
A subsidiary company in the United Kingdom is not generally a permanent establishment of its overseas parent company (see DT1714). The subsidiary is not in law part of its parent company but is a distinct legal person. A permanent establishment is simply a part of an overseas company which is transplanted in the United Kingdom. Customers and employees all contract with the overseas company rather than with a separate legal person in the United Kingdom. Company letter-paper often indicates how the United Kingdom operations are organised; the registered number and place of registration of a United Kingdom company are often given at the head or foot of the paper.
If operations in the United Kingdom are carried out through a permanent establishment, it should be assumed in the absence of evidence to the contrary that the cost of remuneration of an employee seconded to the permanent establishment is a deduction in computing the profits of the permanent establishment. This will be the normal basis of allocating costs in accordance with international tax principles. The permanent establishment should therefore be regarded as bearing the cost of that individual’s remuneration unless there is evidence that the overseas Head Office continues to pay the employee and the cost is not allocated to the United Kingdom permanent establishment for United Kingdom tax purposes. A permanent establishment cannot be said to `bear the remuneration’ unless it is charged against its profits without a corresponding credit, for example by way of a management charge. In doubtful cases advice may be sought from the Inspector dealing with the accounts of the permanent establishment.
Sometimes dealing with the PAYE District may be the first contact which an overseas company has with the United Kingdom Revenue and it may not yet have been established whether or not the company has a permanent establishment in the United Kingdom. If the company has had no prior contact with the Revenue the Corporation Tax District which would have responsibility for the company (the District dealing with the area where the business premises of the company are located) should be asked to advise whether or not a permanent establishment exists in the United Kingdom (see DT1715 in cases of difficulty).
There are a significant number of conditions some of which are personal to the employee and to the circumstances of the employer, which apply before employees of a foreign company (trader’s Irish company) can work in the UK both without UK tax liability and without an obligation on them or on or some other entity to deduct PAYE and pay to HMRC.
PAYE obligations may apply in the United Kingdom on a non-resident employer. Agents and intermediaries can also be obliged to deduct PAYE. Any kind of tax presence can make a non-resident employer liable to deduct PAYE. Tax presence in this context can be very minimal and less presence than the overseas company (in this case Irish company) being resident or having a branch or otherwise caught l by the UK tax system. It is a much more minimal test
The issue of having to deduct UK PAYE does not necessarily coincide with the issue of whether the employees are subject to UK income tax although it usually will do so. PAYE is not so much a tax as a mechanism for charging and collecting tax by which an employer an in some cases other entities, are obliged to deduct and remit tax. Broadly speaking PAYE in the United Kingdom and PAYE in the Republic of Ireland are similar, although the details differ significantly.
It possible that the employer might be obliged to deduct PAYE and that the employees will ultimately be entitled to claim this back fully when the end of year tax position is settled following filing a tax return. Equally, it might be the case that the employer is not obliged to apply PAYE but that the employees are obliged as a matter of tax law to account for tax on the income to the UK revenue (HMRC).
The circumstances as to the applicability of the double taxation agreement are complex and depend on the individuals concerned qualifying. It is possible that persons may not qualify because of the personal residence circumstances, and the matter is potentially very complex.
We should emphasise that this obligation is separate to the obligation to pay Irish tax and deduct Irish PAYE. Basically, if there is an issue whereby both obligations apply, the situation needs to be looked at very carefully. There may ultimately be double taxation relief, but traders need to consider the trigger points and the reliefs.
The HMRC manual is here
UK HMRC PAYE Guidance on Sufficient Presence for PAYE
However, we would not regard an overseas employer as having a tax presence in the UK simply because there are employees in the UK. For example, an overseas concern may employ sales staff in the UK who simply travel around from their private residences to seek orders. We would not say that there was an employer tax presence at the private address. An overseas employer may also use professional services in the UK, for example banking or legal services. Again, we would not say that this was a tax presence in the UK.
For there to be a tax presence, we need to show there is something in the UK similar to a branch or agency, office or establishment. Essentially, we need a UK address where we can contact the employer, send PAYE literature and, if necessary, enforce compliance.
Cases where doubt exists as to whether PAYE is appropriate should be referred to Personal Tax Customer, Product & Process, PAYE Technical, Shipley, for advice before it is agreed that Direct Collection procedures can be applied.
Once we can show a tax presence, we can look to that presence to operate PAYE even if payments to employees in the UK are not made from the UK. For example, even if the UK employees of a UK branch or agency are paid by a part of the organisation outside the UK, we would still require the branch to operate PAYE.
In some cases where employees are on secondment, the so-called UK “concern” concerned may be obliged to deduct PAYE. Therefore, a case of secondment of even a short-term business visitor employed by paid by or working for a UK company would trigger an obligation to charge PAYE. There are some exceptions which must be applied for.
Under certain circumstances the UK revenue, HMRC may require someone who is not the employer from the employee works to account for PAYE on the employee’s earnings.
PAYE operation: international employments: employee’s earning paid for by overseas employer: double taxation relief
UK HMRC Guidance Double Tax Relief and PAYE
Arrivals in the UK
Where a new arrival’s UK earnings are paid by an overseas employer, Double Taxation relief might be due. If so, traders may be able to issue code NT to the UK employer. But before traders do so, ensure that a claim has been made. It is up to the employee to make a claim for Double Taxation relief and prove this claim. The Double Taxation Manual has further guidance at DT1920 onwards.
Arrivals in the UK
By effectively accepting, provisionally, advance claims under the Dependent Personal Service article of a Double Taxation Convention and agreeing to minimise the strict consequences of our immediate rights under that DTC and domestic legislation, we also need to ensure that by doing so the appropriate treaty partner is able to enforce its rights under the agreement.
An employer, therefore, wishing to reduce the administrative impact of the full operation of PAYE by advancing claims under the Dependent Personal Service article of a DTC must be prepared to supply or cause to be supplied, sufficient information to enable HMRC to ensure domestic obligations and treaty terms are met.
Whilst some conditions may seem particularly onerous and ungenerous, they are intended to do no more than establish, as far as possible that the UK does not have overall taxing rights and that DTC partner countries are aware of the employment income concerned. For this reason, these factors must be an integral part of any relaxations if they are to be acceptable.
Traders should be looking to a working arrangement that caters for both HMRC and employer needs. It is accepted that to a degree the employer will only be able to supply certain information on a ‘best of my belief’ basis but it is to their obvious advantage to ensure accuracy.
…………. These arrangements represent a valuable saving for employers and HMRC alike. Certainly, for visitors up to 60 days in the UK, substantial savings arise where an employer confirms the following
The individual spends less than 60 days in a tax year in the UK and
* That period does not form part of a more substantial period when the individual was present in the UK
* The individual does not have a formal contract of employment with a UK company
(this follows DT1922)
Where liability is subsequently found to arise, the employer agrees to pay all tax grossed-up unless arrangements are made by the employer to recover the tax from the employee
Then, for intermittent visitors, for up to 30 days, no statements will be required from either employer or employee. Where however the visit is for a period of 30 days or more some information will be required.
A blanket statement from the employer, covering points at (a) and (b) above, will suffice. But if it is to cover both continuous and intermittent visitors, certain other details will be required for employees on a continuous visit of 30 days or more. See EP Appendix 4 (PAYE82000).
In considering whether PAYE relaxations can be made, traders should work within the following parameters, tailored as necessary to the particular needs of the case.
The procedures at (a) and (b) above apply to specific secondments and regular visitors. For casual / intermittent visitors the appropriate procedures should be applied as each stage is reached. Confirmation from the employee, employee agent, employer will normally be sufficient. In determining whether remuneration is borne by a concern in the UK, reference should be made to DT1920. It may be possible to accept a statement from the employer – not the agent – that earnings relating to certain categories of employees, for example, casual visitors, certain trainees, certain secondees and so on will not in any circumstances have their remuneration borne by the UK branch or other UK concern. (It may be that part of the earnings, particularly benefits, are paid and borne in the UK. This part will be taxable in the UK in the normal way.)
Any statement covering a number of employees should specify their duties in the UK, for example training, job exchanges and specific project work. A report should be sent to the CT office in order that when the UK accounts are submitted it can be verified that the earnings covered by the statement have not ultimately been borne by a UK entity either directly or by re-charge.
An application to apply the arrangement known as EP Appendix 4 can be downloaded at PAYE82000. Employers must have an agreement in place to apply the relaxations from 6 April 2013.
Transborder Workers’ Relief
To qualify for this relief you must:
- be tax resident in Ireland
- work in a country that Ireland has a double taxation agreement with
- have paid tax in the other country and are not due a refund of the tax
- be present in Ireland for at least one day for every week you work abroad.
The employment must be held for a continuous period of 13 weeks in the year.
You cannot claim this relief if you receive Seafarers’ Allowance, Foreign Earnings Deduction (FED) or split year treatment. You also cannot claim relief if you or your spouse or civil partner are proprietary directors of the company you work for abroad.
Social Insurance/ National insurance
In addition to income tax each EU country charges a social insurance tax. The UK equivalent is national insurance and the rates payable by employers and employees are relatively high. Because social insurance/national insurance impacts on the employee’s ability to claim pensions there are a certain amount of EU wide rules which impact on social insurance contributions and pension entitlements.
In broad terms within the EU (and also the EEA and Switzerland) rules provide that social insurance contributions are paid in the country where the individual works. There are exceptions for short-term workers and certain types of workers who work abroad for relatively temporary periods. In certain cases, there are agreements similar to double taxation agreements under which social insurance remains payable in the home state during a period of posting.
In some cases, an individual may be liable to make social insurance contributions in two countries under their rules. There are rules based on EU wide regulations which seek to ensure a person is subject to social insurance in one country only.
A person who pursues an activity as an employed person in an EU member state on behalf of an employer which normally carries out its activities there and is posted by that employer to another EU state to perform work on that employer’s behalf continues to be subject to the home state’s legislation provide the duration does not exceed 24 months.