Non-resident directors – Are you fulfilling your UK PAYE obligations?

What are the reporting requirements?

When a director of a UK company, who is not a resident of the UK, visits the UK to perform duties associated with their role as an office holder, any salaries or fees paid to them in that regard are within the scope of PAYE and such payments should be processed via the UK payroll. 

This can apply even when the payment is not made by the UK company itself, for example, you may have a multi-national group with a non-resident individual being a director for a number of companies across the group, including a UK company. The individual may receive their salary from one of the overseas group entities, but where there has been presence in the UK for UK director duties, HMRC would expect for a proportion of the salary to be allocated accordingly and the onus would be on the UK company to operate the PAYE on that amount.

Along with the requirement for tax to be deducted under PAYE, the employer may also be required to pay employers and employees NIC on the salary or fees paid to the director. It is important to note that there are potential concessions available that may remove the NIC charge. These should be considered prior to any payment being made.

Why are we making you aware?

It is very simple for HMRC to check whether there is non-compliance for companies with NRDs. The company is required to disclose details of its directors with Companies House and HMRC will have access to this information. They can then cross-check the information against their PAYE records to confirm whether any submissions have been made for said NRDs. Although this on its own may not seem like grounds for a determination, it could lead HMRC to carry out checks into the business’ PAYE reporting and check whether compliance is up to date.

Any under-reporting through PAYE could lead to HMRC charging penalties and interest on any underpaid tax or NIC, along with the possibility of further scrutiny into the tax compliance of the company.

The takeaway

Although a director is not resident in the UK, there may still be UK tax reporting obligations for the company and the director for their UK earnings. It is essential that the company does not fall short of these requirements to mitigate any potential HMRC enquiries.

The next step

If you have any questions or concerns about meeting your UK tax reporting obligations or have any queries on other tax matters, please do not hesitate to contact Sarah Whalley on, or Joe Stuart on, or your usual UHY adviser.

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