Your Payroll Questions Answered - Overseas Employees

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Q&A Overseas Employees Q. My UK resident employee is going to work abroad for an overseas branch of the company. What steps do I need to take? A.

  1. A letter needs to be sent to the HMRC detailing the date the employee went abroad, as well as the gross pay paid and the tax deducted whilst in employment from the 6th April of the current tax year to the date the employee went abroad.
  2. If the employee is moving abroad permanently then a P45 needs to be produced, with all parts being submitted online.
  3. If the employee is working more than a complete tax year and/or is not planning to return to the UK then a P85 form will need to be completed and submitted.
  4. Two employee records can be run for the employee – one for the UK payroll paid up to departure on a cumulative tax code, and one for earnings done for departure on an NT tax code. The HMRC must first however notify you if an NT tax code is to be used for overseas earnings, and you must notify the HMRC that you will be running two separate records for the same employee. Two P14s will then need to be filed for both records.

  Q. What steps do I need to take if my employee is returning back to live in the UK from an overseas branch of the company, and to work at the UK branch? A.

  1. Inform the HMRC of the employee’s return
  2. Provide a P46 for the employee to complete (which will take them off an NT tax code) and operate PAYE.
  3. Overseas tax authorities may get in touch about making foreign tax deductions. If this happens, it is advisable to contact the HMRC.

Q. What steps do I need to take if my non-UK resident employee has been seconded to a UK branch of the company? A.

  1. The employee must fill in form P46(expat) to complete section 1. Section 2 is then completed by the employer and sent online to the HMRC.
  2. If the employee has entered X in the European Economic Area citizen box on the section one of form P46(expat), then it is the case that the emergency tax code on a cumulative basis (e.g. 944L) must be applied even if the employee has indicated B or C on the P46(expat)
  3. UK PAYE is applied to the employee.

Q. What would I do if I employ an employee who is a UK non-resident and working entirely outside of the UK? A.

  1. You would still operate PAYE for the employee (with a few exceptions)
  2. Use tax code NT for the employee, which will be issued by the HMRC
  3. There are no P14s to submit, and no entry on the P35 for the employee.
  4. The employee will not be liable to National Insurance Contributions.

Clients can reach this service by dialing 0844 892 2772, and choosing Option 3. This service is available from Monday – Friday between 9am and 6pm.


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