We live in a world of mobile working where individuals can be sent to work around the world for their companies. In a series of case studies looking at sending workers overseas, we now look at a UK employer sending an employee to work abroad. Again the UK employer does not have an overseas branch or entity and so will not be registered for tax purposes in the host country.
The UK Company is obliged to continue deducting PAYE from the amounts paid to the individual, subject to any changes notified in the tax code. It may be possible, if the employee is going to be overseas for more than a tax year, that they can apply to HMRC to have no tax deducted from their salary. This has to be done by the employee, not the employer. It is also possible, that the host country will want to tax the individual and so consideration will be needed as to whether additional tax is due overseas.
Working in Spain
We had a position where an individual went to work in Spain. As mentioned above, if sent from a UK employer this would mean that tax would continue to be deducted in the UK and if applied for, National Insurance could also be deducted.
However, in this situation it was determined to be a permanent move and so we have to consider the situation of the host country. As it turned out, we have the ability to restructure the business and actually consider setting up a local employer with no ties to the UK Company which could enable special tax reliefs to be given from the Spanish authorities.
This highlights the need to engage with our international associates to ensure that we are considering the worldwide position of our clients, as special reliefs can be available for inbound individuals moving to other countries because they are keen to encourage skilled workers into their countries. For the Spanish purposes, this can result in six years of beneficial tax rates for individuals and so should not be ignored.
If you are thinking of sending any workers overseas, please do get in contact with our International Tax Expert, Lucy Orrow to discuss matters with you.
- Sending an employee to work abroad – Peru
- Sending an employee to work abroad – Norway
- Coming to work in the UK from Australia
- Case Study: Coming to work in the UK from Poland