Employees based in USA

kazflan Registered Posts: 36 ? ? ?
The scenario is as follows.
Company 2(UK) is part of a large group which consists of companies in the UK &US. Company 2 reports to company 1 (based in the US). The work carried out by an employee of Company 1(US) is solely for company 2 (UK). The employee lives and works in the US and travels to the UK approx 40 days or less a year to attend meetings and trade shows.
Company 2 (UK) is recharged by company 1 (US) for time and expenses. Therefore the UK company is paying the employee salary. The employee is paying tax etc on his salary in the US.
My question is ,should the UK company pay UK paye on the amount of salary recharged and then recover from the US???
Does anybody deal with a similar situation as I am getting conflicting answers. My logic would say that as the employee lives and works in the US and is paid his salary there, then he should pay his taxes there. The UK company will get the benefit of his work and will pay corporation tax on any profits made by the UK company. It seems very long winded and costly to go through the process of paying tax on the recharged salary and then having to recover it.
I hope this all makes sense.


  • oakley
    oakley Registered Posts: 73 ? ? ?
    when we had the same issue, the us company charged the product line of the uk co at group accts level only but did not invoice (its wooden money moving round the same co and its only one person). Certainly wouldnt bother with paye on recharge amount if it did happen. US also charges tax on worldwide earnings of us employees so you would need to look at the tax treaties between the two countries.
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    If the employee is an employee of the US company, then the US company looks after their tax. If the UK company just pays a fee to the US company for the use of the employee, then that's not got anything to do with UK PAYE.

    If the employee is employed by the UK company, that's different. They wouldn't be chargeable to UK PAYE for their work in the US, but they may be for their duties performed in the UK.
  • kazflan
    kazflan Registered Posts: 36 ? ? ?
    The employee is employed by the parent company but all the workk carried out by the employee is for the UK company. The UK company is then recharged for time and expenses.
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