The euro: 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:

a) Bank of England website
b) High Street Banks
c) HM Customs & Excise Daily Exchange Rates Helpline (01702 366349)
d) Ceefax / Teletext

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:
    1. Bank of England website
    2. High Street Banks
    3. HM Customs & Excise Daily Exchange Rates Helpline (01702 366349)
    4. Ceefax / Teletext
  5. Your PAYE account would then be credited with the actual sterling value that the Inland Revenue 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 19th 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 the Inland Revenue 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:

CHAPS

Clearing House Automated Payment System

BACS

Bankers Automated Clearing System

CHEQUE

Euro denominated cheque

CASH

euro (notes only)

Further details about euro payment procedures can be found in HM Treasury Factsheet 7

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 the Inland Revenue, 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:

  1. Bank of England website
  2. High Street Banks
  3. HM Customs & Excise Daily Exchange Rates Helpline (01702 366349)
  4. Ceefax / Teletext

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 CHAPS or BACS rather than cheque. Both of 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 CHAPS transfer to the relevant Inland Revenue bank, which will be accepted for any amount. This is our preferred method of payment from an overseas account, and is also the best method 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 would 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.

CHAPS Payments

If you choose to use the CHAPS method, then you will need the bank details of your Inland Revenue Accounts Office - Cumbernauld or Shipley.

The relevant Accounts Office is shown on your tax demand notice.

Cumbernauld CHAPS Account Details

Sort Code: BKENGB2L

Account Number: 24921211

Shipley CHAPS Account Details

Sort Code: BKENGB2L

Account Number: 24921114

Further details about euro payment procedures can be found in HM Treasury Factsheet 7

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