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Finance Act 2014

Section 20: PAYE Obligations of UK Intermediary in Cases Involving Non-UK Employer

Summary

1.This section sets out that a UK agency is responsible for operating PAYE where the worker is employed or engaged by or through a non-UK company and works for a UK company. Where there is no UK agency the arrangements remain as they are currently and the UK company who the employee works for in the UK is responsible for operating PAYE.

Details of the Section

2.Subsection 1 provides for amendments to Section 689 ITEPA 2003.

3.Subsection 2 inserts into Section 689, employee of a non-UK employer, new subsections 1(B) and 1(C). Section 689 applies where PAYE regulation do not apply to the employer of the worker. This is usually because the worker’s employer is outside of the UK.

4.New subsections 1(B) and 1(C) set that the third person (usually a UK agency) is responsible for making PAYE payments on the amounts paid to the worker. It sets out that for the third person to be responsible for making PAYE payments the following conditions must apply:

a.

The employee works for a person who is not their employer (this person is called the relevant person) and that their working for this person is because another party – the third person (usually a UK agency) has facilitated these arrangements,

b.

that the third person (the agency) has not made payments of or on account of PAYE income, and

c.

the PAYE regulations would apply to the third person (the agency). For example they are in the UK.

5.Subsection 3 sets out that this new subsection will take priority over the current arrangements, so where there is a third person (agency) involved in the provision it will be the third person and not the relevant person who is responsible for making PAYE payments.

Background Note

6.This change has been introduced to prevent the avoidance of employment taxes by UK agency engaging UK workers via non-UK agencies. It supports the Government’s anti-avoidance policy.

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