PAYE81517 - PAYE operation: international employments: qualifying new residents - PAYE notification
Section 690D ITEPA 2003
From 6 April 2025, where an employee is, or is likely to be, a qualifying new resident for a tax year for the purposes of Chapter 5C of Part 2 ITEPA 2003 (see Employment Income Manual (EIM) EIM43560), and works wholly or partly outside the UK, their employer, or a person designated by their employer, can notify HMRC under section 690D of their intention to treat a specified proportion of the employee’s income as not being PAYE income. This means that once HMRC has acknowledged receipt of a valid notification the employer will only be required to operate PAYE on part of the income paid to that employee.
Such a notification only applies to ‘qualifying payments’, which is a payment of, or on account of, the income of a qualifying new resident which is likely to be ‘qualifying employment income’ (see from EIM43555 for more information about qualifying employment income). By making a notification under section S690D employers are required to provide a best estimate of the proportion of a qualifying payment that is likely to be qualifying foreign employment income.
Where a valid notification is made, it has effect from the date that HMRC acknowledge receipt of the notification and allows the employer to only operate PAYE on the proportion of any qualifying payment which is expected to relate to UK duties.
This proportion specified in the notification should be the proportion of the employee’s income which the employer expects to relate to duties performed outside the UK at the time the notification is made.
Where a notification is made under section 690D for a tax year, the employee will need to file a Self-Assessment tax return for that tax year. When filing their return, an employee will also need to consider the financial limits which may restrict the amount of relief that is due which may result in an underpayment of tax. More about the financial limits for OWR can be found at EIM43600.
Where a notification has been made under section 690D, HMRC can issue a direction under section 690E specifying a different proportion to that included in any notification made by the employer, which will then have effect in relation to any subsequent qualifying payment made during the tax year (see PAYE81521).