Mission UK: employer and employee tax consequences of UK assignments

When technology and media companies begin to globalise, sending employees on overseas assignments will be a natural consequence. The UK is a popular target market, but some key issues need to be considered to avoid unnecessary costs.

Step one is to understand the full cost of the international assignment, including the tax and benefit costs of living and working in the new jurisdiction. Technology and media businesses should establish a comprehensive assignment policy, including topics such as duration, expenses, allowances and tax. This is the best way to keep costs under control and reduce the potential for disputes.

Know your compliance obligations

Employers have compliance obligations that must be met – otherwise costly penalties could be imposed. When sending employees on assignment to the UK, technology and media businesses need to understand issues such as:
  • Wage withholding: UK requirements are strict. Moreover, the obligation to deduct employee taxes from wages may apply even if your business does not employ the expatriate individual. Penalties for compliance failures can be harsh.
  • Post-assignment tax liabilities: sums paid to the individual after they return home, such as bonuses, may be taxable in the UK and must therefore be monitored.  
  • Reporting of benefits and expenses: annual forms may need to be filed relating to employee expenses and benefits, even if paid outside the UK. There may also be a National Insurance Contribution (NIC) payment and reporting consequences.
  • Share reporting: UK requirements are complicated and can easily trip up international technology and media businesses. Don’t assume expats are exempt.
  • NICs: social security tax can be expensive for technology and media companies paying UK NIC rates. Periods of exemption and non-exemption need careful tracking. Social security treaties exist, but approval from the home country tax authorities is required to confirm an employee’s exempt status
Maximise your tax relief

Expat tax reliefs do exist in the UK, as well as elsewhere. Technology and media companies should consider how UK-based assignments are structured in order to maximise the benefits for the company and the employee. Living and travel expenses should be considered, as well as any work performed outside the UK.

Support your employee

Working in the UK should provide an exciting opportunity, but can also present challenges for expats, particularly in relation to tax. Access to a local UK tax expert can be helpful for initial briefings and on-going support, particularly for registration with the tax authorities and completion of unfamiliar (and often complex) UK income tax returns. Such professional tax support could be included in employees’ assignment packages.

For more information please contact Mark Ayres.
 

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