Tax and finance
Kieron Thomas of DVLA
Gina Snow and Lynn Hucker of the HMRC Embassy Unit briefed finance officers on direct taxes and National Insurance Contributions for local staff. Issues such as pensions auto-enrolment and insurance were raised by HR managers.
PAYE
The HMRC Embassy Unit moved from Cardiff to Exeter last year and the team of four is due to expand to eight to be able to handle inquiries from embassies about the tax status of local employees. HMRC is currently engaged in efforts to establish the tax liability of each and every local employee at diplomatic missions in the UK.
Gina Snow and Lynn Hucker reminded financial attachés that missions were under no obligation to deduct tax or National Insurance from their employees. However they appealed to financial attachés to urge any locally employed workers to complete the New Starter forms to HMRC in order that they can assess whether staff are paying the correct tax. This could depend on a number of factors, such as whether the member of staff is employed by the mission (or is a so-called ‘freelancer’), their residency status in the UK, their nationality and whether any double taxation arrangements apply.
In every case HMRC promised to write to the individual concerned confirming their liability or exemption to UK income tax and /or National Insurance Contributions and will confirm how any tax and NIC will be collected.
They also requested that missions supply HMRC with staff lists annually to ensure that their records are up to date.
Embassies that are considering operating a Pay As You Earn (PAYE) scheme can choose between one that collects either National Insurance only or income tax and national insurance. For smaller schemes HMRC provide software to help with processing the payroll but there is commercial software also available and details can be found on the HMRC website. Operating a full PAYE scheme means local staff can be confident that their income tax and National Insurance Contributions are properly taken care of.
For missions not operating a PAYE scheme, the responsibility lies with employees to ensure that the correct deductions and submissions are made and paid to HMRC. They will be set up with either a DCNI (Direct Collection scheme for National Insurance) or DPNI (Direct Collection scheme for Tax and National Insurance).
They also stressed that employees should maintain their primary class 1 NIC record in order to receive the state pension.
Sources of information
HMRC has detailed advice online. The following links give information on income tax exemptions and double taxation agreements
www.legislation.gov.uk/ukpga/2003/1/section/301
www.legislation.gov.uk/ukpga/2003/1/section/302
www.hmrc.gov.uk/manuals/intmanual/INTM345600.htm
Pensions Auto-enrolment
Finance officers were also concerned about communications from the Pensions Regulator about their staging date for auto-enrolment and asked whether diplomatic missions were obliged to start a pension scheme for local employees.
The HMRC team made enquiries on behalf of missions to the Pensions Regulator and were told that there appears to be no ‘blanket approach’ to diplomatic missions.
Financial attachés were advised to contact the Pensions Regulator helpline direct to discuss their own case in detail. At present there is no dedicated Embassy Unit within the Pensions Regulator.
Sources of information
Pensions Regulator guidance
www.thepensionsregulator.gov.uk/docs/detailed-guidance-3.pdf
Helpline: 0345 600 1011
Insurance
Diplomatic staff may have difficulties obtaining insurance from regular insurance providers in the UK, due to their special circumstances and diplomatic immunity.
Ibrahim Ozkaratan of Clements Worldwide advised HR managers to refer staff to specialist brokers who work with the diplomatic community so that insurance can be obtained at a reasonable cost.
Clements Worldwide offers motoring insurance but also health insurance and life insurance, which is becoming increasingly important following heightened security risks, even in capitals considered to be ‘safe’.
