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UK Payroll & Tax Compliance for Cross-Border Employees

Increasingly, employees are splitting their time between the UK and another country. Whether due to remote working arrangements, regional responsibilities, or international projects, these cross-border working patterns require careful management from a payroll, income tax, and social security perspective.

This page is designed for HR and personnel managers at head office level, based outside the UK, who are responsible for the payroll and compliance of employees working partly in the UK.

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+44 (0) 1636 526 075

Key Considerations for UK-Based Cross-Border Employees

1. Right to Work in the Other Country

Since Brexit, UK nationals are no longer part of the EU free movement of people. This means a British employee cannot simply go and work in another country without the correct visa or work permit. You should check with local immigration advisors to ensure compliance with the laws of the other country.

2. Does the Employee Need to Pay Tax in the Other Country?

If tax is due in the other jurisdiction, you’ll need to manage how that interacts with your UK payroll. Typically, the UK will remain the main payroll, and a shadow payroll is operated in the other country to report and withhold taxes locally.

You may need to:

  • Set up shadow payroll arrangements.
  • Coordinate with overseas payroll providers.
  • Ensure correct reporting in both countries

3. Tax Return Obligations in the Other Country

In addition to payroll withholding, the employee may need to file a tax return in the other jurisdiction. If so, will you as the employer provide support or guidance? Clear communication is key to avoid employee frustration or non-compliance.

4. Tax Return Obligations in the UK

Not every UK taxpayer needs to file a tax return. However, if an employee is claiming double taxation relief due to overseas workdays, they will usually need to complete a UK self-assessment tax return.

We can assist employees with:

  • Self-assessment registration.
  • Completion of their UK tax return.
  • Double taxation relief claims.

Managing PAYE for Overseas Workdays

The default UK position is that 100% of an employee’s salary is taxed under PAYE, even if they have overseas workdays. You can only reduce the UK tax through payroll if a formal arrangement is agreed with HMRC – this is where EP Appendix 5 comes in.

EP Appendix 5 – Net of Foreign Tax Credit Relief

This HMRC arrangement allows you to give provisional credit through payroll for foreign taxes paid on overseas workdays.

Key points:

  • Must be agreed with HMRC in advance.
  • Credit is only for actual tax deducted and paid overseas.
  • Cannot reduce UK NICs through this arrangement.
  • Final double tax relief is claimed via the employee’s UK tax return.
  • Year-end reporting to HMRC is required, including evidence of foreign taxes paid.
 

We can help:

  • Apply for the EP Appendix 5 agreement.
  • Operate payroll under the agreement.
  • Handle year-end reporting.

Social Security: Only Pay in One Country

Under the UK’s social security coordination agreement with the EU, an employee only needs to pay contributions in one country.

Usually, if at least 25% of their work is in the UK, social security continues to be payable in the UK. You’ll need an A1 certificate issued by HMRC to prove this to overseas authorities.

We will:

  • Apply for the A1 certificate on your behalf.
  • Help you keep it up to date.

Co-ordinating with Overseas Advisors

We regularly liaise with overseas tax and payroll advisors to ensure coordinated cross-border compliance.

We will:

  • Keep you and the employee informed.
  • Make sure you understand obligations in both jurisdictions.
  • Advise on payroll reporting, filing, and planning.

Day Tracking and Recordkeeping

To determine the correct tax treatment for overseas workdays, it’s essential to maintain detailed travel records.

Your records should show:

  • Entry/exit dates for each country.
  • Time of travel and mode of transport.
  • Purpose and location of work performed.
 

We will help you:

  • Design templates and processes.
  • Review and audit day-count records.

Expense Reimbursement for Multi-Jurisdiction Roles

The ability to reimburse expenses tax-free depends on whether a workplace is considered “permanent” or “temporary”.

We will:

Expense Reimbursement for Multi-Jurisdiction Roles

We specialise in helping overseas employers with UK-based employees, including those working internationally. Our global mobility support includes:

  • Payroll registration and operation
  • EP Appendix 5 application
  • A1 certificate application
  • UK tax return preparation for employees
  • Liaison with your local advisors
  • Day tracking and compliance

Need help with UK Payroll & Tax Compliance for Cross-Border Employees

Contact us to discuss how we can support your UK-based cross-border workers.

Sarah English

Senior Manager

Head of Direct Taxes

sarah.english@tuerner.com
+44 (0) 1636 526 075

Liam Perry

Senior Associate

Global Mobility, Personal Tax & VAT

liam.perry@tuerner.com
+44 (0) 1636 526 075

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