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I have left the country. I moved to Finland in 2020 and have residency and the right to work here. I am now planning to work for a UK company (whose work is solely based in the UK) fully remotely from Finland. I have never worked for this company before. I will be employed under PAYE (not self employed). I am trying to establish what action I need to take and my prospective employer needs to take in terms of tax and national insurance.
The guidance generally assumes you have left the UK to work abroad while currently working for an employer. I am starting a new working relationship while already living abroad.
This guidance states: "Employees who spend most of their time abroad over a period of a year or more may be able to obtain full UK tax relief on their earnings. Ask your employee to complete form P85 and send it to HMRC who will confirm the tax code to use."
This guidance states: "You, or your employer, should apply for a certificate if any of the following apply, you’re:
employed in the UK by an employer who normally carries out their activities in the UK, and you’re going to work temporarily in either an EU country or Switzerland for up to 2 years"
The tax treaty states (article 25, para 2(a), page 30):
(2) Subject to the provisions of the law of Finland regarding the elimination of
international double taxation (which shall not affect the general principle hereof), double
taxation shall be eliminated in Finland as follows:
(a) Where a resident of Finland derives income or chargeable gains which, in
accordance with the provisions of the Convention, may be taxed in the United
Kingdom. Finland shall, subject to the provisions of sub-paragraph (b) of this
paragraph, allow as a deduction from the Finnish tax of that person, an amount
equal to the United Kingdom tax paid under the law of the United Kingdom and
in accordance with the Convention, as computed by reference to the same
income on chargeable gains by reference to which the Finnish tax is computed.
So, with reference to the above I have three questions:
1. I will spend most (all) of my time abroad. Should I fill out a p85 which will provide my prospective employer with the correct tax code?
2. I would be employed in the UK by an employer who normally carries out their activities in the UK and working in this role in an EU country for less than two years so I seem to fit the criteria to apply for a certificate. Is this correct? If I do not meet the criteria, what action should I or my prospective employer take to clarify my position on national insurance?
3. The UK-Finnish Tax treaty seems to say that I would be first taxed as normal in the UK, then would pay any additional tax in Finland i.e. if effective tax rate in Finland is higher I would pay the difference to the Finnish tax authorities. Is this correct?
Thanks for the reply.
I consulted both above pages on PAYE. My understanding is that I should:
1. Complete a P85 and send to HMRC to confirm which tax code my employer should use.
2. Complete the HMRC standard double taxation claim form and send it to the Finnish tax authority (this one: https://www.gov.uk/government/publications/double-taxation-treaty-relief-form-dt-individual)
Is this correct and is there anything I am missing?
I consulted this page: https://www.gov.uk/guidance/national-insurance-for-workers-from-the-uk-working-in-the-eea-or-switzerland
It says I should apply for a certificate if I am "employed in the UK by an employer who normally carries out their activities in the UK, and you’re going to work temporarily in either an EU country or Switzerland for up to 2 years"
Does this apply to me? I will be undertaking a fixed term contract of less than 2 years with a UK based employer for work based in the UK.
I am living in Finland and in discussion with a UK based employer to work fully remotely on a fixed term contract. I have Finnish residency and plan to remain here for the foreseeable future. Could you please clarify what actions are required by myself and my prospective employer with regards to income tax and national insurance.