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PAYE81730 | PAYE operation: international employments: Denmark: offshore workers

From HM Revenue & Customs · PAYE Manual

Subjects needing special care

There are special rules for employees of UK employers working offshore in the Danish sector.

Since 6 April 1992 the Double Taxation Agreement with Denmark has prevented Double Taxation of earnings from work in offshore areas in the exploration of oil and gas resources.

Danish residents employed in the UK sector pay only UK tax but still pay Danish Social Security contributions. Such employees are dealt with by the Employers Section, NIC&EO, Longbenton.

Similarly, UK residents employed in the Danish sector pay Danish tax but UK National Insurance contributions. If UK National Insurance contributions are not deducted, employers are expected to deduct the Danish equivalent.

The remainder of this subject is presented as follows

UK employer starts operating in Danish sector

The Danish Hydrocarbon Taxation Office normally contacts a UK employer soon after offshore operations start.

Danish regulations make employers liable for deducting Danish tax from payments to employees' for

  • Duties performed in the Danish sector
    And

  • Periods off duty spent outside the sector

Office action where UK employer starts operating in Danish sector

Once a UK employer has been contacted by the Danish Hydrocarbon Taxation Office you should explain that

  • No tax should be deducted under PAYE from Danish sector earnings (any tax deducted from such earnings before the date revised procedures operate, should be refunded)

  • UK National Insurance Contributions are still due on Danish Sector earnings - and should be recorded on a separate Payroll record which should also be used for any UK sector and other Non-Danish sector earnings

  • Any tax refunds due because of the cumulative operation of PAYE against earnings before starting work in the Danish sector should be calculated (on the original Payroll record by applying the old code) and repaid each pay day

What to do if the employee leaves Danish sector

If the employee leaves the Danish sector to work in the UK, overseas or in the UK sector, tell the employer that

  • In the current year, the original payroll record must be brought back into use using the same code as before

  • During a subsequent year, a new payroll record should be operated using the latest code received. After the end of the tax year, the employee’s final RTI submission (form P14 pre RTI) must not show Danish sector earnings or Danish tax payments. The company will be required to report these to the Danish authorities. The employee’s record should show only

  • Earnings and UK tax deducted for work other than in the Danish sector
    And

  • Full UK National Insurance contributions on the whole earnings including those in the Danish sector

So the Employer Office should expect unusual entries on final submissions (end of year documents) due to Danish sector work.

Employer fails to operate special procedure, Danish sector employment

There may be occasions when an employer fails to operate the special PAYE procedure during a tax year when there is a Danish sector employment. For example, the Danish Hydrocarbon Taxation Office may delay making contact.

If this happens, UK PAYE deductions cannot be paid back to the employer to meet any Danish tax arrears. The tax can only be repaid to the employee from whose earnings it was deducted.

Deal with these cases as follows. For each employee, ask the employer to confirm

  • What UK paid earnings are now liable in Denmark

  • During what period they were earned

When you have the details

  • Tell the employees involved to make a claim to relief from UK taxes and a PAYE refund

  • Reduce each employee's gross UK liable earnings by the amount now taxable in Denmark

You should do this by following the procedure for a notional tax credit at PAYE93036.

This will result in an overpayment. The overpayment is repayable to the employee unless authorisation is given to make repayment to the employer.

Cases of doubt or difficulty

Refer any doubts or difficulties about operating PAYE in the Danish offshore sector to .

Give full details of the problem in your submission and IPD Technical (Earnings) will tell you if they require more information.