Financial information

 

Remuneration

When staff are assigned overseas there may be tax and social security implications even if they continue to be paid through the University payroll in the UK. The area around tax liability and social security is complex and country specific so specialist advice will need to be taken. The questionnaire ‘Employees working outside the UK’ – Checklist A or B should be completed with as much detail as possible. This should be completed by the recruiting/line manager at the earliest opportunity and forwarded to the relevant HR Business Partner who will consult with the University’s Payroll and Tax experts or external specialists.

Actions
Manager completes the 'Employees working outside the UK' checklist
HRBP/Advisor obtains employment advice based on the information contained in the checklist (after receiving specialist advice if needed). This will usually incur a cost to the College.

Tax and social security (National Insurance) implications

When a member of staff is paid in the UK and is working overseas they may remain liable to pay tax and social security on their earnings paid within the UK. This will depend on their 'residency status'].  The employee and University may also become liable for tax and social security in the country that they are working. The rules that govern tax and social security are different in each country. This means that an individual could be liable to pay tax in a specific country but not the social security and vice versa. The University is responsible for ensuring that appropriate tax and social security contributions are deducted and paid to the appropriate authorities in both countries. In order to achieve this, the individual may be required to complete overseas tax returns for the country in which they are working.  The University may seek external advice on this, for which any charges will need to be paid by the College.

Where a member of staff is liable for tax in both countries an agreement called a 'double tax treaty' may be in place between the countries that allows the member of staff to pay tax in one country.  These agreements are country specific and advice will need to be taken from the University’s tax advisor in relation to specific cases.  

Where a member of staff is liable to pay tax outwith the UK the University may need to procure specialist services to calculate the appropriate tax and facilitate payment of overseas taxes. This is likely to result in a cost to the College/ Service employing the individual. It may also be the case that in some instances the tax and social security costs in the overseas country are more favourable than the UK allowing for savings to be made.    

Normally, employees working abroad will pay NICs for the first 52 weeks after leaving the UK. After this, the compulsory NICs payments will usually cease. Once NICs payment cease, individuals may wish to continue to pay voluntary NICs in order to retain and continue to accrue their right to some state benefits in the UK. Payroll should be informed once the employee returns to the UK, so that their pay can be updated accordingly.

It is the responsibility of an employee to arrange the payment of voluntary NICs directly with HMRC. Individuals may also be liable for Social Security payments in the country of work/residence. Advice should be sought from HR at the earliest convenience.

The rules regarding Social Security liabilities are entirely separate from tax in most countries, and can also be subject to 'bilateral social security' agreements between certain countries and the UK. Social Security payments may be payable in the country in which the individual works or has permanent residence status. Social Security payments abroad usually provide a similar entitlement to state benefits in that country as NICs payments do in the UK but it may be necessary to pay for health insurance (eg USA).  

In many countries where the employee continues to remain in the UK NI scheme, exemptions from paying towards foreign Social Security contributions may apply. Further information can be found on the HMRC website. The European Commission website contains some useful information on working in another EU country, including further details about the social security rights.  

Actions
HRBP/Advisors requests specialist advice (from Policy and Reward, Employee Services (Payroll), University Tax Manager, or external providers. This will usually incur a cost to the College
HR Services advise employee of tax and NI arrangements which will apply
Employee organises to pay voluntary NICs if they wish to.

Local taxes/Company and accounting registration

Employing staff overseas may result in the University creating a 'permanent establishment' in another country. As a result the University could potentially be subject to local tax filings and payments, in addition to local accounting filings. For example it may be the case that by employing a single member of staff, who performs their duties for the University in another country, the University would be required to file audited annual company accounts, pay corporation taxes and social security contributions in order for the employee to legally work within the country.

Failing to do this could expose the University to the risk of prosecution and financial penalties. The administration cost of this set up and requirement to procure country specific advice will need to be taken into account when this applies. This would result in a cost to the College employing the member of staff.

Actions
University Tax Manager to advise on local taxes/accounting registration based on information on Questionnaire. This will usually incur a cost to the College.
College is responsible for any costs associated with local taxes etc.

Pensions

There may be implications for eligibility to join pension schemes for staff based overseas. If members of staff are permanently based in Europe out with the UK they may not eligible to be members of the existing University pension schemes.

Employees should contact the Pension and Reward Adviser for scheme specific advice.

Actions
Employee to obtain advice from the University Pensions Advisor if required

Additional allowances

In some specific circumstances it may be appropriate to provide additional allowances to staff who are sent overseas on a long term assignment. This may include return travel from and to the UK, relocation expenses and additional living expenses. Any additional allowances should be discussed with the relevant College/Services HR Business Partner before any commitment is made to a member of staff and must be approved by the Director of HR. Further advice should be sought as some allowances are taxable.

Actions

Manager to discuss any additional allowances with HR for approval