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I'm a UK resident entering into employment with a US company. They're not currently registered for PAYE in the UK, nor do they yet have a UK entity, and they would like to pay my salary directly from the US entity.

What are the tax implications for me of such an arrangement, compared to being paid by a UK entity? Is this arrangement against my interests, and should I insist that they establish a UK entity and register for PAYE?

(Alternatively, does such an arrangement in some way reduce the overall tax burden that my employer and I face, perhaps by reducing the total amount of National Insurance contributions we must pay, and should I therefore want it preserved?)

Mark Amery
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Note: this answer is not authoritative in the sense that I have no personal experience of this, but have rather just assimilated some web searches into my existing understanding of UK tax law.

If your employer has no "tax presence" in the UK - it's not got any permanent establishment and isn't trading in the UK through an agency or similar - then the employer isn't liable to operate PAYE and nor is it liable to pay employer National Insurance.

However, you are still of course liable for income tax, and also for employee National Insurance.

I think your employer can nonetheless volunteer to operate PAYE and NI collection on your behalf. If they do this without establishing a UK entity, then I don't think this makes them liable to employer's NI. So this seems strictly better than setting up a fully UK entity, as they would be taking the work of paying the tax away from you without creating a larger liability for them.

If they don't do it on your behalf, then you need to contact HMRC to set up a "Direct Payment" scheme - in this case I think it would cover both income tax and NI.

If the Direct Payment scheme doesn't cover income tax then you'd need to pay income tax through self-assessment at the end of each tax year, and likely make "payments on account" during each tax year.

Ganesh Sittampalam
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