Deciding when someone is an employee is a perennially tricky area, especially where people work internationally. The off-payroll working arrangements consider whether someone is employed by a business, or would be if there was no intermediary in place. They should always be considered by businesses where they start to work with new individuals or change the way they are working with them.
Even for those businesses who think they have good systems, controls and processes, when executing a transaction such as a sale, merger, or refinancing, these will usually all come under the spotlight during the due diligence process. One of the many areas that we see questioned during a DD process is the off-payroll workers and PAYE compliance around employees working remotely overseas.
Due diligence can be a time consuming, exhausting process, so being as prepared as you can be will save you time and costs, as well as preventing additional grey hairs!
At BHP, we work with our clients to ensure that their business is compliant and will have a smooth due diligence period.
Understanding the risk exposure
The starting point is to consider the population of individuals that could be caught by either the off-payroll working rules or for employees working remotely from another country.
The employer is always responsible for ensuring that the correct PAYE withholdings are made, which is not always limited to the UK when there are cross border implications.
When considering the off-payroll working rules, trying to distinguish who is responsible to make checks can be problematic. The party responsible for determining whether the worker is employed for tax purposes depends on if the client is a small business, in the public sector or in the private and voluntary sector. In most cases, the client will be responsible for deciding the worker’s employment status and if the rules apply.
Take action
If there is any off-payroll working or PAYE compliance issues, a potential buyer can often demand a price reduction to cover any PAYE and NIC that they could assume as the purchaser.
It’s therefore important to consider and address any potential issues on this front. BHP can assist with everything from assessing whether the off-payroll working rules apply to advising and facilitating UK payroll for non-resident individuals.
If you need further guidance, or would like to speak to a tax advisor, get in touch with our expert International Tax team, call 0333 123 7171 or email peter.dobson@bhp.co.uk. You can also read more on off-payroll workers and non-resident employees here.
