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HMRC internal manual

PAYE Manual

From
HM Revenue & Customs
Updated
, see all updates

Employer records: modified PAYE schemes: expatriate employees - arrangements up to 5 April 2006 (Action Guide)

Note: Tax equalisation is a term often used by HMRC and tax professionals to refer to a contractual arrangement under EP Appendix 6 between an employer and a foreign national employee working in the UK under which

  • The employee is entitled to a net amount of cash earnings and non-cash benefits

And

  • The employee agrees to meet all of the UK income tax arising from the cash earnings and non-cash benefits

To deal with modified PAYE schemes for employers who employ expatriate employees, subject to tax equalisation and who agree to bear part or all of the employee’s tax under a Tax Equalisation Agreement, made before 5 April 2006, follow steps 1 - 3 below.

For details of how to access any of the Employer Business Service functions, use PAYE057.

Note: Where an employer / agent requests authority to operate modified PAYE scheme see PAYE28018.

Action after 31 January

1. Review the list of employers in employer-related electronic file ‘P11D(b) - Modified PAYE schemes’. In each case check whether a P11D(b) has been received for year CY-1
   
  * If a P11D(b) has been received up to and including 31 January take no further action
  * If a P11D(b) has been received after 31 January
  * Remove the Permanent P11D(b) Penalty Inhibition indicator. You must
  Select the [Details] button on the Select Employer screen in ECS
  Select the [Update] button on the Employer Details screen
  Select the P11D(b) Penalty box on the Update Employer screen
  * Issue a final penalty
  * Reset the Permanent P11D(b) Penalty Inhibition indicator
  * If a P11D(b) has not been received
  * Remove the Permanent P11D(b) Penalty Inhibition indicator (see above)
  * Issue an interim penalty
  And
  * Note the employer-related electronic file that the inhibition indicator has been removed

Action between 6 and 19 July

2. Review the employer-related electronic file and ask the ECS penalty officer to
   
  * Reset the Permanent P11D(b) Penalty Inhibition indicator for any employers where it has been removed
3. Where an employer is identified as having a modified PAYE scheme and a P11D(b) penalty has already been issued this must be discharged in full