Frequently Asked Questions about the euro - employers

Contents

Payroll questions

Payment questions

Payroll questions

Q. Can I make my monthly PAYE and NI payments in euro?

A. Yes, you can pay any tax or NI liability in euro and we will convert the payments into sterling.

However, all PAYE and NI calculations must still be performed in sterling, regardless of whether you choose to pay us the tax or NI payments in euro, and regardless of the currency in which the employee is paid.

Q. Can I calculate my employees PAYE and NI deductions in euro?

A. No. All PAYE and NI calculations must be performed in sterling, using the sterling tax tables. There are no euro versions of the UK tax tables, and all UK tax returns must be completed in sterling.

Therefore, if you pay an employee in euro you must convert the gross salary amount from euro into sterling, before performing the PAYE calculations in sterling, and converting the net balance back to euro for payment to the employee.

The exchange rate to use would be the rate for the day the calculation is performed, and would therefore vary every time the payroll is run. The Bank of England issues the exchange rates, and there are a number of different sources of information that can help you establish the exchange rate on a particular day. These include:

Q. How do I calculate PAYE / NI deductions if I pay my employees in euro and make the PAYE / NI payments in euro?

A. All PAYE and NI calculations must be completed in sterling, but you can make the corresponding payments in euro.

If your employees are paid in euro, and you want to make the PAYE remittances in euro, then it is important that you follow the sequence of events shown below. Otherwise you might be faced with complaints and claims of shortfall and unpaid arrears if exchange rates move in the wrong direction (from your employees' perspective).

The sequence of events would need to be as follows:

  1. Convert the gross weekly wage from euro to sterling. The rate to be used is the rate for the day when the calculation is performed.
  2. Use the sterling figure to calculate the PAYE deductions on the weekly P11 record sheet.
  3. Convert the net sterling figure back into euro using the same rate as at 1 above. (This is important, otherwise by using a different exchange rate employees could be paid "tax free" remuneration.)
  4. When the time comes to make monthly or quarterly PAYE remittances, total the sterling amounts on each employees P11 record sheets to arrive at the respective totals of TAX, NICs, etc. Identify what the euro equivalent is likely to be at the time of payment, and make a euro payment by your chosen method. There are a number of different sources of information that can help you make an estimate of the exchange rate on the day of payment.

    These include:
  5. Your PAYE account would then be credited with the actual sterling value that HMRC receives when the transaction is cleared. Any under/overpayments arising from exchange differences would be reported to you. Any overpayment would be repaid to you in sterling, and any underpayment would require a further payment from you.
  6. At the end of the year, all of the PAYE weekly/monthly records would be in sterling and you would need to reconcile the total amounts of Tax, NICs etc due for the year (in sterling) with the amounts actually paid during the year (sterling exchange value of euro payments). The final payment to be made, including any shortfall from currency exchange rates, must be paid in full by 19 April.
  7. Any payslips must show the sterling figures for gross pay, net pay and relevant deductions, and it is your choice whether you include euro values as well.

Q. Can I pay some of my employees in sterling and some in euro?

A. This is not a matter on which HMRC can advise. However, if you decide to pay remuneration in different currencies, you must always use the sterling equivalent when operating all aspects of PAYE.

Payment questions

Q. Which tax and national insurance liabilities can I pay in euro?

A. You can pay any tax or national insurance liability in euro, and we will convert the payments into sterling.

You can pay by:

  • Bacs Direct Credit, Internet or Telephone banking
  • CHAPS
  • Euro denominated cheque
  • Euro notes (HMRC offices at ports and airports only)

You can find further details about euro payment procedures in the area specific guides within the Paying HMRC section of this website.

Paying HM Revenue & Customs

Q. What charges will be made for converting euro payments into sterling?

A. We will not pass on to you any of our administrative costs for converting euro into sterling unless it is a euro payment drawn on an overseas bank account. However, we will not meet the risk of any currency value fluctuations.

Q. What exchange rate do I use to convert my sterling tax and national insurance liabilities into a euro amount for payment?

You have to estimate the exchange rate at the time of payment, because the actual rate used is the one in force when the clearing bank presents your payment. This rate cannot be predicted in advance by HMRC, so we cannot set a rate for you.

There are a number of different sources of information that can help you make an estimate of the exchange rate on the day of payment. These include:

Q. What happens if the converted amount is either too much or too little?

A. The rate of exchange between sterling and the euro can vary many times during the same day , as with any other currency. The exchange rate used is the one in force when your payment is presented by the clearing bank. If the rate used for converting euro into sterling leaves a shortfall, you may have to pay the difference. If you overpay, any repayment arising will be made to you in sterling.

Although you cannot totally eliminate the risk of shortfall or overpayment , you can minimise it by using Bacs Direct Credit, Internet/Telephone banking or CHAPS rather than cheque. These methods reduce the time it takes for the payment to be cleared through the banking system.

Q. If I make my tax payments in euro, will any repayments be made in euro?

A. No. All tax repayments are made in sterling, including overpayments due to exchange rate fluctuations.

Q. Can I pay my UK tax bill directly from my euro account based in a euro-area country? If so, how?

A. There are a number of methods of payment that can be used from euro bank accounts held overseas, depending on the value of the payment:

  1. A Bacs Direct Credit, Internet/Telephone banking or CHAPS transfer to the relevant HMRC bank account, will be accepted for any amount. These are our preferred methods of payment from an overseas account, and is also the best way for you to minimise your risk of overpayment or underpayment due to exchange rate fluctuations.
  2. A euro cheque (drawn on an overseas euro account), which will be accepted only if your tax liabilities are over £50. (Cheques for less than the equivalent of £50 that are drawn on an overseas euro account will be returned, because of the high bank charges for conversion.)
  3. A Eurocheque (from a Eurocheque account) will be accepted providing individual Eurocheques do not exceed the equivalent of £700. (Eurocheques for less than the equivalent of £700 cost the same as a sterling cheque to process, but Eurocheques for more than £700 incur higher bank charges for conversion.) If your tax liabilities exceed £700, then more than one Eurocheque can be submitted for a single tax liability, but each individual Eurocheque should not exceed the equivalent of £700.

Bacs Direct Credit, Internet/Telephone banking and CHAPS Payments

If you choose to pay by Bacs Direct Credit, Internet/Telephone or CHAPS then you will need to provide your bank with HMRC’s bank account details:

International Bank Account Number (IBAN)

SWIFT Bank Identifier Code (BIC)

Account name

GB05CITI08321012001020

CITIGB2L

HMRC Shipley

GB74CITI08321012001039

CITIGB2L

HMRC Cumbernauld

Note: Where an IBAN is shown you must give this number as well as the SWIFT BIC.

You will also need to provide your HMRC Accounts Office reference number.
You'll find this printed in the format 123PA00012345 on the front of the payslip booklet HMRC sends you, or on the letter sent in place of a booklet.

It is important that you show the reference number with no gaps between the characters, otherwise it could lead to delays in updating your records.

You can find further details about euro payment procedures in the area specific guides within the Paying HMRC section of this website.

Paying HM Revenue & Customs.