Pay Overseas Contractors from the UK in 2026: Tax, IR35 and Platforms

To pay overseas contractors from the UK, most businesses either pay a genuinely self-employed, non-UK resident contractor against an invoice with no PAYE deducted, or use a contractor platform or an employer of record (EOR) when the work looks like employment. As of October 2026, HMRC guidance, VAT Notice 741A and vendor pricing pages checked on 24 October 2026 set out the position below.

TL;DR:

HMRC says the off-payroll working (IR35) rules can only apply where the worker has a UK liability to tax or National Insurance, so a non-UK resident working wholly abroad is usually outside them.

For a UK company engaging overseas workers, the worker's residence is the test that matters: HMRC says the residence of any intermediary company does not need to be considered.

Services bought from an overseas business supplier are usually subject to the VAT reverse charge: the UK business accounts for the VAT itself in boxes 1, 4, 6 and 7.

Published prices on 24 October 2026: Deel contractors $49 a month, Remote from $29, Oyster $29; EOR from $599 a month at Deel and Remote and $699 at Oyster.

For one or two genuinely independent contractors, a contract, an invoice and a bank transfer can be enough.

Do you need to run PAYE when you pay overseas contractors from the UK?
When do IR35 and the off-payroll rules apply to overseas workers?
Do you pay VAT on services bought from overseas contractors?
What are misclassification and permanent establishment risk in plain terms?
Contractor platform, employer of record or your own entity: which fits?
Deel vs Remote and the alternatives: what do they cost?
When is a bank transfer and a written contract enough?
What should a practice check before a client hires abroad?
Why does independent evidence matter when choosing a global payroll platform?
Realistic expectations: what a platform will and will not do for you
Find your next payroll and HR tool through The AI Ledger
Frequently asked questions

Do you need to run PAYE when you pay overseas contractors from the UK?

Usually not, if the contractor is genuinely self-employed, not UK resident and does the work outside the UK. HMRC's Employment Status Manual says a non-UK resident worker performing duties outside the UK is unlikely to be within the UK tax or National Insurance charge (HMRC: ESM10025).

The position changes in two situations:

The worker is really an employee. If the relationship is employment, the question becomes whether UK PAYE applies to that employee, and the answer depends on residence and where the duties are done.
The worker is a UK employee sent abroad. HMRC's guidance on employees working abroad, updated 7 July 2026, says "You must continue to calculate and deduct PAYE Income Tax from all payments made to employees who work abroad" (GOV.UK: Employees working abroad).

On National Insurance, the same page says employers keep deducting UK contributions for the first 52 weeks abroad where they have a UK place of business and the employee is ordinarily resident in the UK. Countries with a UK social security agreement, and the EU, EEA and Switzerland, have their own rules.

Pro Tip: Keep a short residence note for every overseas contractor: country of residence, where the work is done and the date you last confirmed it.

When do IR35 and the off-payroll rules apply to overseas workers?

The off-payroll working rules apply only where the worker has a UK liability to tax or National Insurance. HMRC puts it plainly: "An engagement can only fall within Chapter 10, Part 2 ITEPA 2003 if the worker has a UK liability to tax or NICs" (HMRC: ESM10026).

Three rules of thumb follow from ESM10025 and ESM10026:

Non-UK resident worker, work done abroad: unlikely to be within UK tax or National Insurance, so the rules do not bite.
UK resident worker, work done abroad: generally taxable in the UK on earnings from anywhere, so the rules can still apply, subject to any tax treaty. An overseas intermediary "does not affect the operation of the rules".
Client wholly overseas: a medium or large client that is not UK resident and has no UK permanent establishment is outside the client-side rules; one with a UK branch or office is inside them.

HMRC also says the residence of the worker's intermediary does not need to be considered. Where a UK resident worker is involved, HMRC's Check employment status for tax (CEST) tool helps decide status, and HMRC says it "will stand by all results given by the tool, as long as the information you give remains accurate".

Do you pay VAT on services bought from overseas contractors?

Usually yes, through the reverse charge, if your client is VAT registered and buying for its business. VAT Notice 741A says "The B2B general rule for supplies of services is that the supply is made where the customer belongs" (section 6.3), so most business services bought from an overseas supplier are treated as supplied in the UK (GOV.UK: VAT Notice 741A).

Under the reverse charge the customer "must act as if you are both the supplier and the recipient" (section 5.1). In practice:

Output tax goes in box 1 and the same amount as input tax in box 4.
The full value of the supply goes in both box 6 and box 7.
For a fully taxable business the net cost is nil, but the entries still have to be made.

Section 5.7 adds a point that catches small clients: reverse-charged general rule services count towards the VAT registration threshold, so heavy overseas spending can push an unregistered client over it.

What are misclassification and permanent establishment risk in plain terms?

Misclassification means calling someone a contractor when the facts make them an employee. The contract label does not decide status; the working relationship does. If a UK business sets the hours and supervises a long-term overseas "contractor" like staff, that person's country may treat them as an employee, with back taxes and employment rights to follow.

Permanent establishment (PE) risk is the other side. HMRC's manual uses the definition in section 1141 Corporation Tax Act 2010: a PE includes "a fixed place of business", such as a branch or office, and an agent who habitually exercises authority to do business on the company's behalf (HMRC: ESM10025). HMRC applies the same concept to non-residents trading in the UK (HMRC: INTM264010).

Other countries have similar tests. An overseas hire who signs contracts with local customers, or works from an office the client pays for, could create a taxable presence there, which needs local advice.

Pro Tip: Ask one question of every overseas engagement: does this person sell or sign on the client's behalf? If yes, take local advice on PE before choosing a contractor arrangement.

Contractor platform, employer of record or your own entity: which fits?

A contractor platform pays independent contractors; an employer of record employs people for you in their country; your own entity means registering a local company and running payroll there.

Route	What it does	Fits when	Main risk it addresses
Bank transfer plus contract	You pay invoices directly	One or two genuinely independent contractors	None beyond your own paperwork
Contractor platform	Contracts, invoices and payouts in one place	Several contractors in different countries	Admin and payment tracking
Employer of record	A local employer hires on your behalf	The role is really employment, or local law requires it	Misclassification and local payroll compliance
Own overseas entity	You employ directly through a local company	A sustained team in one country	Per-head EOR cost at scale

Vendors describe their EOR models differently. Deel says "We own entities and payroll engine in 130+ countries" (Deel: Employer of Record). Remote says "100% owned entities, no third parties" and offers EOR in 90+ countries (Remote: Employer of Record). Oyster lists 120+ countries but its EOR page does not say whether it owns its entities or uses partners (Oyster: Employer of Record).

Deel vs Remote and the alternatives: what do they cost?

On published prices read on 24 October 2026, Remote and Oyster are cheaper than Deel for contractors, and Deel and Remote match each other on entry EOR price. None of the four shows GBP prices; all are in US dollars, so the sterling cost will move with the exchange rate.

Tool	Contractor price per month	EOR price per employee per month	Owns entities (as stated)	Data hosting (as stated)	Editor score
Deel	$49	$599	Yes, 130+ countries	AWS, primary operations in Ireland, disaster recovery in France	4.3 out of 5
Remote	From $29 (Plus $99)	From $599	Yes, "100% owned entities"	Not stated	Not listed
Oyster	$29	$699 (annual discount, figure not stated)	Not stated	AWS, region not stated	Not listed
Rippling	Not stated (custom quote)	Not stated (custom quote)	Not stated	Not stated	Not listed

Prices are from each vendor's pricing page and hosting from the Deel and Oyster security pages. Rippling's pricing page says only that plans start at $8 per employee per month plus a base fee, with quotes for contractor and EOR. Deel says its pricing is month to month.

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Worked sum: three overseas contractors for 12 months

Deel: $49 x 3 contractors x 12 months = $1,764
Remote Contractor Management: $29 x 3 x 12 = $1,044 (Plus tier: $99 x 3 x 12 = $3,564)
Oyster Global Contractors: $29 x 3 x 12 = $1,044, and Oyster's page says contractors are free for 30 days
Bank transfer plus contract: no platform fee, but bank and currency conversion charges apply and vary by bank

One EOR employee for 12 months: Deel $599 x 12 = $7,188; Remote from $599 x 12 = $7,188; Oyster $699 x 12 = $8,388 before any annual discount. These are platform fees only; salary, local employer social security and any deposit are on top.

For three contractors, Deel costs $720 a year more than Remote's entry plan, so features and support matter as much as price.

When is a bank transfer and a written contract enough?

For one or two overseas freelancers who run their own businesses and invoice for defined work, a written contract plus a bank transfer is often enough. A platform adds no tax protection the facts do not already give.

That simple route works when:

the contractor is not UK resident and works outside the UK;
they invoice as a business, so the reverse charge can be applied correctly;
the work is project-based, not an open-ended role with set hours;
the client keeps the contract, invoices and payment records.

GOV.UK says a limited company must keep records "for 6 years from the end of the last company financial year they relate to", including receipts for all money spent (GOV.UK: Company and accounting records).

Pro Tip: Revisit the choice when a client is chasing invoices in several currencies each month, or when one contractor has quietly become full-time.

What should a practice check before a client hires abroad?

A practice should confirm five facts for each overseas worker before the first payment: status, residence, VAT treatment, PE exposure and records. This is general information, not tax advice: confirm each client's position on its own facts.

Status: Is this genuinely self-employment? If the role looks like employment, consider an EOR or local employment.
Residence: Is the worker UK resident? If so, PAYE or the off-payroll rules may apply (HMRC: ESM10026).
VAT: Is the supplier a business? If so, apply the reverse charge and check the effect on the registration threshold (GOV.UK: VAT Notice 741A).
Local presence: Does the worker sign contracts or use premises paid for by the client? If so, take local advice.
Records: Are contracts, invoices, residence notes and payment records kept for at least six years?

Why does independent evidence matter when choosing a global payroll platform?

Vendor pages often omit what an accountant needs, such as data hosting or entity ownership. Of the four vendors above, only Deel stated a hosting region on the pages read today.

The AI Ledger directory publishes an editor score and a last-verified date for each listing. The Deel listing was verified against the vendor's site on 10 October 2026, and its prices were re-checked for this article on 24 October 2026. The AI Ledger has not tested these platforms hands-on, and unlisted rivals are named without a score. You can line up listed tools side by side on /compare.

Realistic expectations: what a platform will and will not do for you

A platform handles contracts, payouts and, for EOR, local employment. It does not decide whether your client's arrangement is employment, and it does not remove the need to check residence, VAT and local presence yourself.

Find your next payroll and HR tool through The AI Ledger

The Payroll and HR category lists the payroll tools The AI Ledger has reviewed, each with an editor score and last-verified date. If you are unsure which fits a client, the tool finder narrows the list by practice size and need.

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Frequently asked questions

Do I deduct UK tax when paying an overseas contractor?

Usually not, where the contractor is genuinely self-employed, not UK resident and works outside the UK. HMRC says such a worker is unlikely to be within the UK tax or National Insurance charge.

Does IR35 apply to contractors based abroad?

Only where the worker has a UK liability to tax or National Insurance. A non-UK resident working wholly abroad is usually outside the rules, but a UK resident working abroad can still be inside them.

What is an employer of record in the UK context?

An employer of record is a company that legally employs a worker in their country on your behalf and runs local payroll. It lets a UK business hire abroad without its own overseas entity.

Is Deel or Remote cheaper?

On published prices on 24 October 2026, Remote's contractor plan starts at $29 a month against Deel's $49, and both start EOR at $599 per employee per month.