PAYE Procedures – Modified procedures in tax equalisation cases

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UK employers of foreign national employees coming to work in the UK may be paid net cash earnings and non-cash benefits on the basis that the employer undertakes, using modified PAYE arrangements, to meet the UK tax liabilities involved and ensure that the employees’ tax affairs are handled by someone experienced in tax equalisation procedures.

On 23 July 2010, HMRC announced that the “Appendix 6” arrangement, used by employers in order to obtain approval to use the modified PAYE procedures, had been amended so that employers are required to notify HMRC when they withdraw personal allowances and operate code 0T within a Modified PAYE scheme. This is to avoid a mismatch between the code 0T that the employer will enter on the employee’s form P14 and the code that HMRC has on the employee’s record.

Paragraph 7 of the Agreement now states:

“Where we give provisional relief for overseas workdays (apportionment of earnings between UK and non-UK duties for the purposes of sections 15 and 26 ITEPA 2003), based on each employee’s workday history or as anticipated by the employees where they join during the tax year, we will withdraw personal allowances, apply code 0T and notify HMRC accordingly. Any tax gross-up will be applied after the earnings have been apportioned between UK and non-UK duties. We will enter code 0T on each employee’s P11 Deductions Working Sheet or equivalent record.”

It is not necessary to sign a new agreement if the current agreement was signed on or after 1 April 2006. If the agreement is dated earlier than this, the employer should contact CAR – Personal Tax International on 0161 261 3398.

Further information:

Revised Modified PAYE arrangement for expatriate employees – Appendix 6

EP Appendix 6: Modified PAYE in tax equalisation cases

This entry was posted on Monday, July 26th, 2010 at 11:55 and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.