If you run a business that’s based somewhere other than the UK and are looking to expand here, one of the first steps is to think about having a UK employee. So how do you organise setting up UK employees for an overseas company?
You might not be thinking of setting up a UK subsidiary, but that is one way to create a UK presence. You might be thinking of setting up a UK office, or just to have an employee in the UK who works from their home, while you continue to invoice everything from your home country.
Either way, the first thing to do is to register as an employer with the UK tax agency, HM Revenue and Customs. Secondly, you’ll need to consider HR rules and make sure you comply, and thirdly, you’ll need to run a payroll and deal with the month to month admin. Then you need to be aware of the likely costs. Here’s what you need to consider under each point to comply with the requirements for having UK employees for an overseas company.
1) Registering as an employer is mainly straightforward
a. You can do this online on the HMRC.gov.uk website for most business if you have a UK based director with a UK national insurance number.
b. If you are an overseas business without a UK office (ie a fixed establishment), or don’t have a director with a UK national insurance number, then you need to do this by phone or post to HMRC as you can’t use the online service (yet!).
c. Can you register for PAYE tax as an overseas company without a UK office? Well, sometimes. HMRC will need to satisfy itself that PAYE is appropriate to set up – especially if there is not a UK address to which correspondence can be posted.
d. You’ll need to provide the following details about the company:
· company name, registered address and phone number
· trading name if this is different
· business activities – for example, electrical engineering
· Unique Taxpayer Reference (UTR)
· company registration number
· the names and National Insurance numbers of every company director
2) The HR legislation in the UK can be complex
a. You will need to give your employee a written contract of terms and conditions of employment on the day they start work, if not before.
b. There are rules as to the minimum wage you can pay and the maximum number of working hours they work.
c. There are rules as to minimum notice and a procedure to follow in terminating staff.
d. You need to check that each starter has the right to work in the UK.
e. There are minimum statutory payments for sick pay, maternity or paternity pay, etc.
f. Expenses or Benefits in Kind need to be reported and often taxed.
g. There is a minimum number of paid holidays.
3) Month to month payroll admin can be annoying
a. The UK has a system of RTI or real time payroll reporting. Each time a payrun takes place, whether weekly or monthly, one or two reports are required.
b. Starters and leavers need to be reported as part of the RTI information.
c. All RTI reporting is done online via your payroll software direct to HMRC.
d. HMRC issues tax code notices that are used to calculate the amount of employee tax deductions.
e. Monthly payments of the payroll tax, pension, etc., are required.
f. The UK tax year ends on 5 April and there is a year end P60 report that is given to the individual employee.
g. If you give Benefits In Kind, this will probably require a annual report on form P11d.
4) What does an employee cost?
a. Obviously there will be the agreed salary or hourly rate.
b. Employers National Insurance, currently 15.05% of wages over a threshold
c. Employers pension contributions, currently 3% of wages over a threshold
d. In addition the employer is responsible for making various employee deductions for income tax, national insurance, student loan and pension contributions each payrun.
e. Most employers can benefit from the employment allowance which reduces the employers NI costs by up to £5000.
The good news is that JVCA can deal with all of the complexity for you and provide help and advice to make sure that you don’t get caught out by the rules – and be a point of contact so HMRC as us any questions first. Our consultants can deal with all of the HR paperwork and advice and we can deal with the setup and operation of the payroll. All you have to do is pay your employee and the various payroll deductions each month!
Are you looking to set up UK employees for an overseas business? Want us to get started for you? Contact us now.