We live in a world of mobile working where individuals can be sent to work around the world for their companies. Many of these companies are not international businesses and so we have to understand how that individual should be taxed in each jurisdiction. We have had a number of examples of this in the last few years and an example is considered below, looking specifically at coming to work in the UK from Poland.
Coming to work in the UK from Poland
We had an individual sent to work in the UK from a Polish company. The Polish company did not have a business in the UK and so we had to understand how to tax the individual. As a UK resident individual, this person is required to pay tax in the UK on their earnings, but what about National Insurance?
As the company did not have a base of operations here, they would not be registered with the authorities for tax purposes.
In this situation, we had to register a PAYE scheme for the company and set up a Direct Collection, National Insurance Only scheme. This enabled the company to pay the employers and employees National Insurance contributions to HMRC.
However, the PAYE which is also due and payable is dealt with via the individual’s Self Assessment Tax Return.
Now this individual may not understand the UK tax rules or indeed have any other requirement to file a Self Assessment Tax Return. In this situation, it is possible to also set up a Direct Collection (Tax Only) scheme to assist with paying over PAYE on a monthly basis. In our situation, the individual had other reasons to file a Self Assessment Tax Return and so it was agreed that they would pay the tax due at the end of the year.
This can be an onerous situation for the individual, as they need to ensure they have retained sufficient tax to cover the liability due. Also, under UK tax law they may also be liable to make payments on account as it will be a significant amount of tax.
There is one caveat with this where the individual employed by the EU Company has a benefit in kind, such as a company car, this must be dealt with through a PAYE scheme and so this would trigger a normal collection of PAYE and National Insurance for the individual. This, in our situation, has meant that in the second year, our individual is now having tax deducted at source from their monthly pay and the employer is making payments directly to HMRC for both PAYE and National Insurance.
If you find yourself in a sililar situation where you are coming to work in the UK from another country or if you have any questions about your current tax arrangements, please get in touch.