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Where Taxpayers and Advisers Meet

Paying Tax and NIC while working for German company from the UK

ppoly
Posts:2
Joined:Mon May 11, 2020 12:18 pm
Paying Tax and NIC while working for German company from the UK

Postby ppoly » Mon May 11, 2020 12:25 pm

Hello,

I have just started working for a company in Germany and due to the current COVID situation I begun working from home in the UK. I am an EU citizen but have been a resident in the UK for the past 9 years. My new company has advised my that while I will be still living in the UK, i have to pay tax in the UK as i cant register at the local registries in Germany until I move there. I have been searching through the HMRC website for hours but im still new to all of this and not quite sure how to proceed. I am a full time employee and will be getting paid in my UK bank account. The big unknown for me is I dont know for how long I will still be living in the UK for and when I will be able to relocate but once I do I will start paying my tax in Germany.

Is anyone else in a similar situation or knows how I go about paying tax in the UK on foreign income? Ive found self assessment forms but those are to be filled at the end of the financial year from what I have read: does that mean I wont pay tax on that income until then?

Any help would be greatly appreciated,
Thanks,
P.S this company does not have any UK base

etf
Posts:1278
Joined:Mon Nov 02, 2009 5:25 pm

Re: Paying Tax and NIC while working for German company from the UK

Postby etf » Tue May 12, 2020 12:26 pm

Your German employer may have an obligation to operate a national insurance only payroll in the UK whilst EU rules still apply-see guidance below.

From 1 May 2010, an employer in another European Union (EU) Member State will also be treated as being UK registered or having a place of business in the UK for National Insurance purposes where the employee is in UK National Insurance. From 1 April 2012 this will also be the case for employers based in Switzerland, from 1 June 2012 employers based in Norway, Iceland or Liechtenstein, and from 1 July 2013 employers based in Croatia.


From May 2010 EC Regulation 883/2004 introduced a change to the NIC responsibilities of employers based in other EC member states.

Where an employee works in the UK for an employer based in another EC member state and NI liability arises, the liability will be for both primary and secondary contributions. In such a situation the employer is responsible or setting up (or arranging for a UK agent to set up) a NI scheme to pay the NI liability to HMRC
.

You will be able to pay any UK tax due on your employment income through the completion of a UK personal tax return after 5 April 2021.

PS You may like to post your query on HMRC's own tax forum to see whether they agree with the above summary.

ppoly
Posts:2
Joined:Mon May 11, 2020 12:18 pm

Re: Paying Tax and NIC while working for German company from the UK

Postby ppoly » Tue May 12, 2020 4:26 pm

Thank you for the reply, i dont know if it makes any difference the dact that once i am able i will be relocating (so hopefullly over the next two months) and dont have any current plans of returning to the UK. Just thought id mentiom that as well.

darthblingbling
Posts:698
Joined:Wed Aug 02, 2017 9:09 pm

Re: Paying Tax and NIC while working for German company from the UK

Postby darthblingbling » Wed May 13, 2020 8:13 am

If the intention is to work full time in Germany then EC 883/2004 art 13 may give Germany the sole right for social security contributions. This is kinda complicated by the fact that you don't actually have a residence in Germany yet nor have even worked in Germany. Have a read up on the guidance, although this may be more an exercise for the employer than yourself. My team specialises in Global Mobility if you to ask your employer to get in touch with us. PM me for contact details.

There's also a PE risk for your employer as you're working at a fixed address in the UK. But admittedly this is likely minimal as there's not really a degree of permanence to the arrangement if you're planning to relocate to Germany soon.

For you personally, the income you earn whilst still resident and working in the UK will be taxable here as you won't yet be tax resident in Germany so can't rely on the treaty exemption. Strictly I believe HMRC will expect you to contact them to organise a direct pay arrangement, but in practise they're usually OK with it just being declared on a tax return.

etf
Posts:1278
Joined:Mon Nov 02, 2009 5:25 pm

Re: Paying Tax and NIC while working for German company from the UK

Postby etf » Wed May 13, 2020 9:14 am

I have copied below HMRC's guidance which I think covers the tax collection element:

A National Insurance (NI) scheme is used where the only liability is for primary and secondary National Insurance Contributions (NIC). The employer is responsible for setting up the NI scheme and paying the NIC to HMRC. If the employee has UK tax liability this will be paid through Self-Assessment or, if preferred, a DPGEN (tax only) scheme.

From May 2010 EC Regulation 883/2004 introduced a change to the NIC responsibilities of employers based in other EC member states.

Where an employee works in the UK for an employer based in another EC member state and NI liability arises, the liability will be for both primary and secondary contributions. In such a situation the employer is responsible or setting up (or arranging for a UK agent to set up) a NI scheme to pay the NI liability to HMRC.

etf
Posts:1278
Joined:Mon Nov 02, 2009 5:25 pm

Re: Paying Tax and NIC while working for German company from the UK

Postby etf » Wed May 13, 2020 10:04 am

Regarding social security, I may be mistaken, but my reading of the situation was that the German employer was not reporting remuneration for the initial period of UK work through the German payroll-hence the suggestion for payment of UK tax. If my understanding is correct, then presumably UK NI will be due as the EU rules aren't there to create a zero social security situation? Does that make sense?

darthblingbling
Posts:698
Joined:Wed Aug 02, 2017 9:09 pm

Re: Paying Tax and NIC while working for German company from the UK

Postby darthblingbling » Wed May 13, 2020 10:39 am

EEA rules will trump UK rules on SS to ensure it arises in only one EEA state.

As he will be working in more than one member state for more than 5% of his time each, the employer will need to look at article 13 on EC 883/2004. This gets tricky as he doesn't yet have a residence in Germany yet but obviously fully intends to relocate there. It asks whether you work a significant amount of time in your country of habitual residence.

If he doesn't then it would look at where the employer is registered as a business.

Significant is subjective, but there is some guidance on this. May be the case that UK NI will arise while he is still habitually resident here if he is deemed to work a significant amount of time in the UK. This may then switch once the move is made.

Ultimately I think it's an issue his employer needs to deal with and not the employee.

LndMaths
Posts:1
Joined:Fri Jan 15, 2021 11:18 am

Re: Paying Tax and NIC while working for German company from the UK

Postby LndMaths » Fri Jan 15, 2021 11:26 am

Hi PPoly,

Did you ever resolve this issue? I'm likely to be in a similar situation however, signing a new contract from this February.

One other question - which might not be relevant - if you had to keep working from the UK post Brexit did you have any issues arranging a work visa for Germany, since you would have been employed there? Again, I will likely have this issue.

Many thanks,

eucitizeninuk
Posts:3
Joined:Fri Apr 16, 2021 10:04 am

Re: Paying Tax and NIC while working for German company from the UK

Postby eucitizeninuk » Fri Apr 16, 2021 10:28 am

Hi all,

Did this topic ever get resolved?
@LndMaths How did you get on, especially now with the new Brexit rules, when starting in February.

The reason, I might start a new work for a German company, but will keep living in the UK, which includes paying tax and NIC. The company in Germany is struggling a fair share with their tax advisor, who seems to be against hiring someone living in the UK. That might be due to a lack of experience for this special case and actually, overthink and overcomplicate the situation.

Any tips, hints, experiences and recommendations are welcome and highly appreciated. Also, I am happy to engage with advisors offline, happy to onboard them to help us here.
I am an Austrian citizen and just under 5 years in South England.

Many thanks and a happy weekend!


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