Workforce Payments Guide United Kingdom
Last updated: Dec 18, 2023
Papaya Global fully support payments in the UK.
Papaya Global supports payments to contractors in the United Kingdom. The payout currency may vary based on the receiver bank account setup when receiving foreign currencies. It is advised for contractors to reach out to their bank to confirm how foreign currencies are handled
|IBAN Example United Kingdom
|IBAN in print
|GB56 BARc 2004 0462 4786 71
|Bank Account Number
The KYC (Know Your Customer) process in the United Kingdom involves verifying the customer’s identity through various documents.
The Financial Conduct Authority (FCA) oversees the KYC process ensuring that firms conduct business in compliance with KYC and Anti-Money Laundering (AML) laws. The FCA also encourages the digitization of KYC, known as Digital Identity Verification.
The process falls under the UK’s AML and Countering Financing of Terrorism (CFT) model, with the Money Laundering Regulations of 2007 and 2017 playing a significant role. This legislation adopts a risk-based approach with additional controls and expanded Customer Due Diligence (CDD) requirements. Businesses in the regulated sector must have policies and procedures in place to comply with these regulations. The FCA mandates every financial institute to hire a Money Laundering Reporting Officer (MLRO) to focus on AML activities and detect any suspicious activities.
The UK’s National Crime Agency (NCA) is responsible for identifying and tracking major criminals, as well as organizing training sessions for AML compliance personnel.
Finally private sector businesses are required to develop in-house identity verification mechanisms to verify their customers and monitor their transactions under the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017). In case of company changes, the updated PSC Information must be reported to the UK’s registry and company house.
The General Data Protection Regulation (GDPR) is also applicable to protect customer data collected during the KYC procedures.
Banking laws that impact cross-border workforce payments are primarily governed by the EU’s Funds Transfer Regulation (FTR), which has been adapted to a UK-only context after Brexit.
This regulation, also known as the “travel rule”, requires specific information about the payer and payee to accompany electronic payments to help combat money laundering, terrorist financing, and breaches of financial sanctions. The UK version of the FTR requires additional information for transfers outside the UK and Gibraltar. After 31 March 2022, transfers from the UK to the EEA exceeding EUR 1,000 must carry certain specific information, and the Financial Conduct Authority expects firms to have effective risk-based procedures in place for receiving transfers of funds lacking this information.
Bank Account Opening
To open a business bank account in the UK, you typically need to provide: proof of identity, proof of address, and your company’s registration number.
You should also provide details of your business such as your annual turnover, tax information, and business plan, as well as details of any other directors or partners in the business. The bank may also require verification of identity and address for anyone who will have access to the account, or anyone who owns a part of the business (normally at least 25%).
The bank needs to meet at least one representative of your company face-to-face in the UK to sign a bank mandate. You should be at least 18 years old with a UK address and your company should be registered with Companies House.
The length of time it will take to set up your business bank account depends on several factors including the provider you choose and your personal circumstances. It can take anywhere from 7 days if you use the Current Account Switch Service, to a few minutes to several weeks for a bank account application to be approved, but the process can take up to 3 months in some cases.
Major foreign banks operating in the United Kingdom include
- Santander UK
- Aareal Bank AG
- ABN AMRO Bank N.V.
- Abu Dhabi Commercial Bank (ADCB)
- Access Bank UK Ltd
- Agricultural Bank of China
- Bank of America
- Banco Santander S.A.
- Bank of Baroda (UK) Ltd
- Bank of China (UK) Limited
- Bank of India
- Bank of Japan
- Bank of Korea
- Bank of New York Mellon
- BNP Paribas UK
- Commonwealth Bank of Australia
- Deutsche Bank AG
- Emirates NBD
- Goldman Sachs Bank USA
- London Branch, ICBC (London) plc
- J.P. Morgan Chase in the UK
- Mizuho Bank, Ltd
- Morgan Stanley UK
- MUFG Bank Ltd
- National Australia Bank Limited
- Royal Bank of Canada
- Standard Advisory London Ltd
- State Bank of India
- Toronto-Dominion Bank,
- BS United Kingdom
Local Major Banks
The major local banks operating in the United Kingdom are:
- Lloyds Banking Group
- NatWest Group
Other notable banks include Bank of Scotland, Clydesdale Bank, Standard Chartered, Santander UK, Nationwide Building Society, Virgin Money UK, The Co-operative Bank, and Metro Bank.
The B2C payment tools available in the United Kingdom include debit cards, credit cards, contactless payments, PayPal, Apple Pay, Google Pay, digital wallets, bank transfers through the Faster Payment Network, and Buy Now, Pay Later (BNPL) services like Klarna.
Other payment tools available include: Zettle, Revolut, Worldpay, Square, SumUp, Stripe, Mollie, Opayo, Checkout.com, 2Checkout, Amazon Pay, Paysafe, and Clearpay.
These payment gateways support various payment methods and offer different pricing models.
Income Tax and National Insurance: Under UK law, paying employees in crypto would be considered ‘income’ and would therefore be taxed at source the same way regular salaries are. Tax and National Insurance would be deducted, then employees would receive the net amount in crypto.
PAYE Reporting: Like ‘normal’ cash salary payments, payments to employees in the form of ‘readily convertible assets’ are also subject to Pay-As-You-Earn (PAYE) withholding. Under PAYE, the employer needs to report the cash equivalent of the income on their UK payroll, and deduct PAYE income tax and Class 1 employer and employee National Insurance Contributions (NICs).
Payment Submission: The employer usually must send details to HMRC every time they pay an employee, on or before the time of the payment. The information is submitted electronically using a Full Payment Submission (FPS) which is generated by the employer’s payroll software or payroll provider.
Payment to HMRC: Payroll taxes are payable to HMRC by the same date (or the 22nd if the payment to HMRC is made electronically). Because the income is not paid in cash, but PAYE and NIC payments must be paid to HMRC, the employer has two options: Pay employees the crypto equivalent of the net amount after PAYE and employee NI deduction, or Pay PAYE to HMRC on behalf of the employee.
Crypto Wallets: Some companies, like Mode Global, have announced partnerships to pilot a Bitcoin payroll product for Brits, allowing employers to pay British employees directly into their Mode crypto wallet.
Given the possible differences in treatment and differing view on the treatment of some crypto assets for some individuals, it is important any business thinking of paying their employees in crypto assets takes specialist advice beforehand