SE11942 – PAYE avoidance: payment by an intermediary - example 3 - payments by an overseas intermediary in readily convertible assets

Section 203C and 203L ICTA1988

Example 3

• A worker is engaged to work on a construction project in the UK by a UK client
• the worker is engaged by the client via an agency overseas
• the worker is paid in readily convertible assets (see SE11803)
• payment is made by an overseas intermediary of the UK client.

Is PAYE due on the payment by the overseas intermediary ?

From 6 April 1998 the agency is deemed to be the employer (Section 203L(1A) ICTA1988) and consequently the agency is deemed to have made the payment to the worker under Section 203C(3A). However the agency is based overseas and consequently PAYE regulations do not apply to it.

However, Section 203C provides for the operation of PAYE where individuals work for one person but are paid by another to whom the PAYE regulations do not apply, by imposing an obligation to operate PAYE on the person for whom the work is carried out – the UK client.