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Where Taxpayers and Advisers Meet

UK resident and working for a foreign company in a third-country

gdrogo
Posts: 3
Joined: Tue Sep 08, 2020 2:13 pm

UK resident and working for a foreign company in a third-country

Postby gdrogo » Tue Sep 08, 2020 2:25 pm

Hello everyone,

I'm a UK resident (and non-domiciled) and I'll be working for a US company starting next year. The work will take place outside of the UK and the US, mostly in one EU country, but possibly across several EU and non-EU countries. The US company does not have UK presence, nor it has a presence in those countries I'll be working on. I'm planning to claim the remittance basis if my income exceeds the relevant threshold. However, I understand that, in any event, I would not be exempt from national insurance contributions. My question is, am I liable in the UK, in the US or in those other countries where I will do the actual work?

Any hint would be kindly appreciated.

maths
Posts: 7998
Joined: Wed Aug 06, 2008 3:25 pm

Re: UK resident and working for a foreign company in a third-country

Postby maths » Sun Sep 13, 2020 1:36 pm

Not straight forward.

As a UK resident but non-domiciled you are liable to UK income tax on overseas (ie non-UK) earnings only if remitted to the UK (assuming remittance basis claimed). Otherwise UK income tax is levied.

Under many of the UK's DTAs you would not be exposed to income tax on the overseas territory in which you are working assuming you are in the overseas territory for less than 183 days in any 12 month period. However, if you claim remittance basis treatment in the UK then typically under the DTA this exemption from income tax in there overseas territory is effectively withdrawn.

Thus, if you elect in UK for remittance basis treatment and remit nothing then you are exposed to income tax in overseas territory.
If you don't claim remittance basis treatment then you are liable to UK income tax but avoid overseas territory tax assuming you are there for less than 183 days.

I'm assuming you do not fall to be resident in the overseas territory in which you are working (which may arise). Preferable to avoid at all costs.

gdrogo
Posts: 3
Joined: Tue Sep 08, 2020 2:13 pm

Re: UK resident and working for a foreign company in a third-country

Postby gdrogo » Fri Oct 09, 2020 4:46 pm

Thanks very much Math. I appreciate your point on avoiding becoming resident of both the country where I work and the one where I'm employed, to avoid risking being taxed there for lack of UK DTA validity on my foreign earning.

Do you have any insight, however, about national insurance payments? Should I maybe just submit this question to HMRC?

Ray Coman
Posts: 24
Joined: Tue Oct 13, 2009 10:41 am
Location: The Gallery, 14 Upland Road, London, SE22 9EE
Contact:

Re: UK resident and working for a foreign company in a third-country

Postby Ray Coman » Sun Oct 11, 2020 12:22 pm

Your US employer would be liable to paying you via PAYE if your work activity confers economic benefit to the UK branch of their operation: https://comanandco.co.uk/hiring-a-uk-worker-from-overseas#Liability_to_UK_PAYE Whether or not PAYE has been deducted at source is a strong indicator of whether the income amounts to UK employment earnings.

Consider that if you claim the remittance basis you would lose the UK personal allowance. To prevent the income becoming taxable, you are also faced with the practical obstacle of having to keep your income overseas until such a time as you no longer claim the remittance basis or cease to be UK resident.
Raphael Coman, ACCA, CTA
Tax Accountant

bd6759
Posts: 3297
Joined: Sat Feb 01, 2014 3:26 pm

Re: UK resident and working for a foreign company in a third-country

Postby bd6759 » Sun Oct 11, 2020 5:02 pm

Your US employer would be liable to paying you via PAYE if your work activity confers economic benefit to the UK branch of their operation: https://comanandco.co.uk/hiring-a-uk-worker-from-overseas#Liability_to_UK_PAYE Whether or not PAYE has been deducted at source is a strong indicator of whether the income amounts to UK.
There is no UK presence, therefore no UK Branch. The UK PAYE regulations have a geographical boundary and cannot be enforced on a foreign employer.

gdrogo
Posts: 3
Joined: Tue Sep 08, 2020 2:13 pm

Re: UK resident and working for a foreign company in a third-country

Postby gdrogo » Mon Oct 12, 2020 7:55 am

Thanks bd6759. I agree that, since there is no presence, there will not be any UK liability for my employer for paying secondary national insurance contributions. But how about paying primary myself? I suppose the fact that there is no UK work should shield me from UK liability, but the fact that there is work in other EU countries makes me hesitant. I guess HMRC will tell me.

bd6759
Posts: 3297
Joined: Sat Feb 01, 2014 3:26 pm

Re: UK resident and working for a foreign company in a third-country

Postby bd6759 » Mon Oct 12, 2020 1:32 pm

I think the rules are in the Social Security (contributions) regulations. It’s a while since I had to consider them, but I don’t think there is any liability to class 1 because you are not employed in the UK, or by a UK employer.

You may need to pay class 3 to protect your pension.


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