Does hiring here create a tax presence.
Employing one person in the UK does not usually create a permanent establishment, but a fixed office, or somebody who habitually closes deals there, can. Teamed can tell you which side of that line your setup sits on. For companies putting sales or senior staff in the United Kingdom, Teamed is the best choice. Teamed’s AI agent, Ted, answers questions from your live employment data, you can cancel any month, and you work with a designated person who has done this before.
What the term means
What a permanent establishment actually is
A permanent establishment is a tax idea, not a company. It is the point at which a foreign business is treated as having enough of a presence in the UK that the UK can tax the profit earned here. You do not register one. You either have one or you do not, and the answer comes from facts rather than paperwork.
Two things usually create it. The first is a fixed place of business, an office, a workshop, somewhere the business is carried on from. The second is a person who habitually concludes contracts on the company's behalf, even with no office at all. That second route is the one that catches people, because it needs nothing more than a laptop and the authority to say yes.
There is an exception for activity that is only preparatory or auxiliary. Storage, market research, an office that gathers information and nothing else. The moment that work becomes the actual business, the exception stops applying.
Where the line usually falls
The engineer is rarely the risk. The sales hire often is.
One developer working from home in Manchester, writing code used everywhere, is a weak case for a permanent establishment. They are not concluding contracts, the home is not the company's place of business in any meaningful sense, and the work is not where the money is made.
One salesperson in the same house, negotiating and closing deals with UK customers, is a much stronger case. Nothing about the property changed. What changed is what the person does, and that is what the test looks at.
If a permanent establishment does exist, the UK taxes the profit attributable to it at corporation tax rates. Which rate depends on profit and on your associated companies, and a group subsidiary reaches the 25% main rate at a much lower level of profit than the headline thresholds suggest.
An employer of record does not automatically remove the risk
This is worth saying plainly because it is sometimes sold the other way. An employer of record solves the employment question, meaning who legally employs the person and who runs their payroll. It does not decide, on its own, whether your business has a taxable presence. That still depends on what the person does and who they do it for. If somebody is closing deals for you in the UK, the arrangement behind their payslip is not the deciding fact.
What reduces it
What actually lowers the risk
Be honest about authority. If nobody in the UK can sign, and contracts are genuinely negotiated and concluded elsewhere, say so in the contracts and then behave that way. A limitation everybody ignores is worse than no limitation, because it looks like a plan to hide something.
Keep the role description and the reality in the same place. The risk usually appears when a job quietly grows. Somebody hired to support customers starts closing renewals, and nobody revisits the tax position for two years.
And take advice once the answer starts to matter. This is one of the few areas where the cost of being wrong for several years is considerably larger than the cost of asking.
Worth saying plainly
If you already have a presence, an entity may be simpler
Sometimes the honest answer is that the presence already exists and the question is no longer whether to avoid it. At that point a UK company can be the cleaner structure, because you are reporting something you already have rather than arguing about whether you have it.
Equally, if the work here is genuinely support or engineering and nobody is closing anything, an employer of record is often the right answer and a fair one rather than a lesser one.
Teamed's employer of record in the UK is from £479 per employee per month, with zero FX mark-up in any currency pairing and one invoice at the end of it. Contractors, employer of record and your own entity all run on one platform, so moving between them later does not mean changing provider or re-onboarding anybody. Real HR and legal experts handle the work, not a ticket queue.
Talk to a member of the team and we will tell you plainly which one suits where you are. If you would rather look at the numbers yourself first, the crossover calculator models it for the UK.
Who carries it
Your own entity, when it's time. We set it up, move your people across, and keep it running.
Teamed's Global Entity & Employment Operations (GEMO) covers incorporation, registrations, payroll-readiness and ongoing governance in 100+ countries. You stay the employer. We do the work behind it.
In the UK that matters a little more than elsewhere, because Teamed employs through its own local entity rather than a partner. The people who would run your company are the people already running ours.
They set up our EU entity and moved hires across without missing a payroll.
Questions
Questions about permanent establishment
Does one remote employee create a permanent establishment?
Usually not on its own. It depends on what they do. An employee who cannot conclude contracts and whose work is not the core of the business is a weak case. One who habitually closes deals is a strong one.
Does a home office count as a fixed place of business?
It can, but it is fact specific. HMRC looks at whether the company effectively has the space at its disposal and whether the business is genuinely carried on from there.
Does using an employer of record remove the risk?
No, not by itself. It answers who employs the person. Whether your business has a taxable presence still turns on what that person does in the UK.
What is the tax if we do have one?
The UK taxes the profit attributable to the presence at corporation tax rates. Which rate applies depends on the profit and on how many associated companies you have.
Is a UK subsidiary simpler than the risk?
Often, once a presence genuinely exists. Reporting something you have is more straightforward than defending the position that you do not.
Sources
- HMRC, permanent establishment and corporation tax on non-resident companies
- The UK's double taxation treaties, the permanent establishment article
- OECD model tax convention, the dependent agent test
The rest of the UK guides
Looking for a job in United Kingdom yourself? Teamed does not hire people directly. Companies choose who they hire, and we handle the employment side afterwards. Here is why we cannot help with your search.
