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HMRC internal manual

Debt Management and Banking Manual

HM Revenue & Customs
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Interest: Interest Review Unit (IRU): PAYE and National Insurance Contributions: Modified PAYE schemes including expatriate employees

Employers are allowed, by agreement, to operate modified PAYE schemes where a variationof a normal PAYE scheme is needed. These are employers of:

  • Employees seconded abroad;
  • Expatriate employees;
  • Market research interviewers;
  • Members of the reserve or auxiliary forces.

For all modified PAYE schemes the rules for charging interest on late paid PAYE tax arenot changed.

For employees seconded abroad and expatriate employees, the employer can be allowed todelay sending end of year return information, and in the case of employees seconded abroadalso delay payment of secondary NICs.

Employees seconded abroad

Employers, subject to agreed conditions, can apply to delay sending the return forsecondary NICs and payment until 31 January following the end of the relevant tax year.

From 1 February interest is charged on secondary NICs that remain outstanding at 31January.

Expatriate employees (Foreign national sent to work in UK by his employer)

Subject to certain conditions, the deadline for sending returns and taxable expenses(forms P11D and P11D (b)) for Class 1A NIC may be extended from 6 July to 31 January. Thelegal payment date of 19 July following the end of the relevant tax year is not affected.When the employer does not have all the relevant information to work out the correctamount due, a ‘best estimate’ should be paid by 19 July.

Interest is charged on all Class 1A NIC that remains unpaid by 19 July. The reason for thedelay does not affect this.

Objections to interest

When considering an interest objection that involves a ‘Modified PAYE’ scheme, checkthat interest has been charged correctly in line with the relevant instructions. It can bevery complex to run these schemes, so it may be necessary to contact the appropriateoffice for advice.

Where it is found that interest has been charged from an incorrect date, recalculate andarrange for the excess interest to be cancelled.

Where it is confirmed that returns have been filled in incorrectly, arrange whereappropriate, for payments to be transferred to the correct PAYE year(s) or other schemes.Amendment forms P228 can then be dealt with and any necessary change made to the interestcharge. Where, for administration reasons, the IRU are asked not to change the PAYErecord(s), accept the request. The interest charge should be theoretically recalculatedand any excess interest given up.