UK tax liabilities
The rules and practicalities on tax liability and national insurance and/or social security are complex and country-specific. Specialist advice will need to be taken in some circumstances (this could relate to personal advice sought by the employee or the University’s Payroll Office seeking further professional advice about a specific country).
In some cases it will also be necessary for the University to engage the services of a third party payroll software provider, who will liaise and/or register with the host country’s authorities and take on the responsibility of local Social Security and tax legislation and payments. There is a significant cost associated with this approach, which would be borne by the employing department. For further advice, please contact the Payroll Manager.
Overseas work lasting up to six months
Overseas work assignments lasting up to six months will not normally affect the employee’s tax if their employment with the University continues as normal.
Overseas work lasting six months and over
Any overseas working arrangements that last six months or longer may affect the individual’s tax liabilities in the UK. For example, their residence status, as defined by the HMRC, might be affected, which might then affect their tax liabilities in the UK. Where an employee is expected to spend at least one full tax year (6 April – 5 April) working abroad, they should be advised to fill in HMRC’s P85 form, which allows them to claim tax relief or a repayment of tax.
The UK has agreements with many countries that prevent employees from being taxed on their UK income whilst resident in another country. These are called 'double taxation agreements'.
Prior to an employee leaving the UK to work abroad, a letter should be requested from the Payroll Manager which will include:
- the date they are going abroad to work
- their gross pay (pay before tax and NI deductions are made) from the start of the tax year to the date they went abroad
- the tax deducted from the start of the tax year to the date they went abroad
It is advisable to request this letter from no later than two weeks prior to leaving the UK. This can then be presented to the local authorities as evidence of the individual's UK income.
Each overseas working arrangement will be unique and needs to be assessed on an individual basis. Specialist advice may be necessary, and departments should contact the Payroll Manager in the first instance. The employee may also wish to seek advice directly from HMRC.
Employees should be reminded that it is also their responsibility to ensure that their income tax payments are correct and advice on tax and NI should be sought in advance.
UK National Insurance Contributions (NICs)
UK National Insurance Contributions (NICs) provide entitlement to certain state benefits, including the state pension. The actual entitlement to such benefits and the amount payable can depend on the individual’s NICs record (accrual of payments).
Normally, employees working abroad will pay compulsory NICs for the first 52 weeks after leaving the UK. After this, the compulsory NICs payments cease and departments should contact Payroll to ensure that accurate adjustments are made to the employee’s pay record. The University also ceases paying the employer National Insurance payments. Once NICs payments 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.
It is the responsibility of an employee to arrange the payment of voluntary NICs directly with the HMRC. Employer contributions will not be payable in this scenario.
Individuals may also be liable for Social Security payments in the country of work/residence. Advice from Payroll should be sought at the earliest opportunity.
Social Security payments abroad
The rules regarding Social Security liabilities are entirely separate from tax in most countries, and can also be subject to 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.
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.
For EU nationals, the European Commission website contains some useful information on working in another EU country, including further details about the social security rights.
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