Mutuality, substitution and control are UK characteristics of employment, from case law. These are not likely to be relevant in any other country. When paying people outside of the UK, you should ask the individual to find out and let you know about employment status rules in their country. It may be that local advice is needed to establish their employment status.
If you decide the person is an employee and they are based entirely outside of the UK (and have never been resident in the UK) then then:
- Payments should go on the UK payroll but with an NT (no tax) tax code and table letter X (no NI) national insurance rate.
- Tax must be paid in the local country by the individual. This is the case for all countries.
- Social security or equivalent
- must be paid by the individual for countries outside of the EU.
- the employer must ensure the social security (employees and employers) is being paid in the local country if the worker based inside the EU.
If the individual is self employed (as per their local rules) then you pay their invoice. They will need to charge VAT or other sales tax (unless they are under the registration threshold) as they are supplying services to a non-business (unless it is to GFI Solutions Limited).
As with all of our tax tips and web pages this information is necessarily summarised and of a general nature. If you would like detailed specific advice please contact us.