UK sales manager of Cyprus company

[WordIsBond]

I would certainly NOT engage a London solicitor. I'd draw up the contract under Cyprus law. And if the sales manager complains about that, offer him another 2% to accept it. This company does not want to end up dragged into a UK court.

And I WOULD mention "UK" law specifically. Courts in Cyprus aren't going to care about England/Wales vs Scotland vs NI. This company in the UK is going to be responsible for whatever needs to be done under any of them. The sales manager is an employee or officer of the UK company and it is their responsibility to take care of all that. The Cyprus company is paying the UK company well to handle all of that.

[SueEllen]

Maybe. Until the public sector "reform" is applied to the private sector. Then, it becomes the fee-payer's liability, and the fee-payer being a foreign company is not necessarily always going to be a protection.

It's not that far a step from there to deciding (especially if a different government is in power) that foreign fee-payers in these cases are actually operating a sham and that evil multinational corporations are therefore to be viewed as having established a presence in the UK when they have IR35 "employees" here. Therefore, having established a presence, they are liable to the entire UK tax regime.

OP, in the short run, Lance's suggestion probably works very well. If you are going to pay him extra, make it explicit in the contract that this engagement is inside IR35 and that his company is being compensated for the costs of operating IR35. Also make it explicit that his company is responsible for all compliance with UK tax and employment law. That will make it very hard for anyone to ever blame you if anything goes wrong. If he doesn't pay the entire tax, he'll have no room to argue if HMRC come calling, and no way to ever come back at you for anything.

Whether that will work in the long run may depend on future elections. What I said above may sound like paranoia, but I truly am paranoid about Komrade Korbyn.

There is no such thing as UK law.

Scotland and NI are separate UK legal jurisdictions. While most employment law in England and Wales is mirrored, NI does have different employment laws. Also the Scottish parliament has tax raising powers that can effect income tax and this is not applicable to the other legal jurisdictions in the UK.

You also don't want to mention employment law because even though he's a
contractor in some legislation e.g. Health and Safety he's covered as a worker so the client could still be found liable for breaches regardless of what is written in the contract.

The best thing to do is to get a contact solicitor based in England to draw up some terms to make it clear he's liable for all taxes demanded and due to be paid to HMRC as the contract falls within IR35 legislation, and his tax liability under the contract is under the laws of England as that's where he is based.

[WordIsBond]

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

Maybe. Until the public sector "reform" is applied to the private sector. Then, it becomes the fee-payer's liability, and the fee-payer being a foreign company is not necessarily always going to be a protection.

It's not that far a step from there to deciding (especially if a different government is in power) that foreign fee-payers in these cases are actually operating a sham and that evil multinational corporations are therefore to be viewed as having established a presence in the UK when they have IR35 "employees" here. Therefore, having established a presence, they are liable to the entire UK tax regime.

OP, in the short run, Lance's suggestion probably works very well. If you are going to pay him extra, make it explicit in the contract that this engagement is inside IR35 and that his company is being compensated for the costs of operating IR35. Also make it explicit that his company is responsible for all compliance with UK tax and employment law. That will make it very hard for anyone to ever blame you if anything goes wrong. If he doesn't pay the entire tax, he'll have no room to argue if HMRC come calling, and no way to ever come back at you for anything.

Whether that will work in the long run may depend on future elections. What I said above may sound like paranoia, but I truly am paranoid about Komrade Korbyn.

[AlexCh]

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

Thank you for your reply. We also would like to use the variant and will try to clarify if it works for our sales partner and his LTD.
It is quite excessive for us to establish our tax presence in the UK now

[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.

[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]

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]

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?

[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

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.

[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.

[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

[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.

[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