UK sales manager of Cyprus company

[AlexCh]

Hello!
Please could anybody help us with the next question.
We are a Cyprus company and have one of our Sales offices in London.
We are not registered in the UK.
We have one Sales manager in the UK office, a citizen of the UK.
He performs his duties as a contractor and he asked us to hire him as our Cyprus company full-time employee.
However, we would not like to open a UK branch or subsidiary only because of the employment case.
Must we do it?
Our Cyprus accountants told us that we would need to pay him his gross salary and he would be responsible for all his UK taxes (income tax and national Insurance) further and there would be NO any payroll related taxes in Cyprus.
Please could anybody from local UK accountants clarify:
1) if is it possible to have him on our Cyprus company payroll without establishing legal UK entity (branch/subisdiary)?
or we must establish a tax presence in UK to have him as our employee?
2)If there are any UK payroll taxes related to the employment that our Cyprus company should be aware and must pay for the employee in the UK?
3) How do we need to formalize the employment? Is it possible to have a signed contract with him where his full-time employee status will be specified?
Thank you

[Lance]

Your sales manager could start his own LTD company in the UK. You then pay his company and his tax affairs are his business.
Or employ him through an umbrella company which is UK registered.

[DaveB]

My understanding is that as Cyprus is part of the EU then employing a UK citizen in the EU means the company is treated as being established in the UK and is therefore liable for operating PAYE (Pay As You Earn) for that employee as part of your payroll process.

You would have to register with HMRC and would be liable for collection of Income Tax and National insurance payments relating to that employee. This is not the same as establishing a company in the UK.

This summarises it from the pint of view of an overseas technology company but the principles are the same. However you should get proper advice from a tax specialist.

https://www.moorestephens.co.uk/Medi...s.pdf?ext=.pdf

[DaveB]

Your sales manager could start his own LTD company in the UK. You then pay his company and his tax affairs are his business.
Or employ him through an umbrella company which is UK registered.

He's already a contractor and wants the be a permie.

[AlexCh]

My understanding is that as Cyprus is part of the EU then employing a UK citizen in the EU means the company is treated as being established in the UK and is therefore liable for operating PAYE (Pay As You Earn) for that employee as part of your payroll process.

You would have to register with HMRC and would be liable for collection of Income Tax and National insurance payments relating to that employee. This is not the same as establishing a company in the UK.

This summarises it from the pint of view of an overseas technology company but the principles are the same. However you should get proper advice from a tax specialist.

https://www.moorestephens.co.uk/Medi...s.pdf?ext=.pdf

Thank you for your thoughts. Actually, as soon as i understood if we sign a contract with the person, not his LTD, we will have to register with HMRC and would be liable for collection of Income Tax and National insurance payments relating to that employee.
Honestly, we were not planning to register our tax presence in the UK and we were planning to operate as a Cyprus tax resident and just to pay the UK employee his gross salary. And he would be liable for collection of Income Tax and National insurance payments in the UK on his own.

[AlexCh]

Your sales manager could start his own LTD company in the UK. You then pay his company and his tax affairs are his business.
Or employ him through an umbrella company which is UK registered.

Actually, we are paying his LTD now. But he has mentioned some potential issues from the UK Tax office (IR35?) because he works for our Cyprus company almost on a full-time basis.
We would not like to register any legal entities in the UK now only because of the employment case.

[AlexCh]

My understanding is that as Cyprus is part of the EU then employing a UK citizen in the EU means the company is treated as being established in the UK and is therefore liable for operating PAYE (Pay As You Earn) for that employee as part of your payroll process.

You would have to register with HMRC and would be liable for collection of Income Tax and National insurance payments relating to that employee. This is not the same as establishing a company in the UK.

This summarises it from the pint of view of an overseas technology company but the principles are the same. However you should get proper advice from a tax specialist.

https://www.moorestephens.co.uk/Medi...s.pdf?ext=.pdf

Actually, we would not like to register with HMRC only because of the employment case. But as we understand we must do it if we sign a contract with him, not his company, correct?

[Lance]

UK sales manager of Cyprus company

Actually, we are paying his LTD now. But he has mentioned some potential issues from the UK Tax office (IR35?) because he works for our Cyprus company almost on a full-time basis.
We would not like to register any legal entities in the UK now only because of the employment case.

On that basis then you pay him more to cover his additional tax implications. That’ll cost no more than employing him directly.

Edit: if you do that he probably won’t pay the extra tax but that’s his problem not yours. If you employ him you take on a lot more than just some more cash. Sounds like he just wants more so you should just negotiate.

[AlexCh]

On that basis then you pay him more to cover his additional tax implications. That’ll cost no more than employing him directly.

Edit: if you do that he probably won’t pay the extra tax but that’s his problem not yours. If you employ him you take on a lot more than just some more cash. Sounds like he just wants more so you should just negotiate.

Yes, we read that we must register our tax residence (branch/subsidiary) with HMRC and it seems we can face some potential tax issues and additional admin work in UK.
Actually, we were advised that there would be no problem with the UK tax office if our UK salesperson processes 95% of his LTD company income as salary and as long as he sticks to the IR35 rules he would be fine. Could it work for the case?

[Lance]

Yes, we read that we must register our tax residence (branch/subsidiary) with HMRC and it seems we can face some potential tax issues and additional admin work in UK.
Actually, we were advised that there would be no problem with the UK tax office if our UK salesperson processes 95% of his LTD company income as salary and as long as he sticks to the IR35 rules he would be fine. Could it work for the case?

Yes that works. More importantly for you is that it’s not your liability.