HMRC internal manual

PAYE Manual

PAYE81610 - PAYE operation: international employments: employers ‘presence in UK’

Arrivals in the UK

One of the deciding factors on the operation of PAYE is whether the employer who makes the payment on account of wages or salary has a tax presence in the UK. The decision in Oceanic 56 TC 183 makes it clear that there is a territorial limitation to PAYE which restricts it to cases where the employer has a ‘tax presence’ here.

For PAYE compliance purposes, it does not matter whether any corporation tax liability actually arises on the UK presence of the employer. It is sufficient that a tax presence exists.

HMRC regards a branch or agency in the UK, or a UK representative office, as establishing a tax presence.

However, we would not regard an overseas employer as having a tax presence in the UK simply because there are employees in the UK. For example, an overseas concern may employ sales staff in the UK who simply travel around from their private residences to seek orders. We would not say that there was an employer tax presence at the private address. An overseas employer may also use professional services in the UK, for example banking or legal services. Again, we would not say that this was a tax presence in the UK.

For there to be a tax presence, we need to show there is something in the UK similar to a branch or agency, office or establishment. Essentially, we need a UK address where we can contact the employer, send PAYE literature and, if necessary, enforce compliance.

Cases where doubt exists as to whether PAYE is appropriate should be referred to IPD Technical (Earnings), for advice before it is agreed that Direct Collection procedures can be applied.

Once we can show a tax presence, we can look to that presence to operate PAYE even if payments to employees in the UK are not made from the UK. For example, even if the UK employees of a UK branch or agency are paid by a part of the organisation outside the UK, we would still require the branch to operate PAYE.