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HMRC internal manual

PAYE Manual

PAYE operation: international employments: UK employer's duties

Arrivals in the UK

The following guidance tells you what the employer should do and describes any action you need to take. The CWG2 Employer Further Guide to PAYE and NICs, also gives advice to employers who have to operate PAYE where employees are paid abroad by another employer.

The employee returns to the UK after a period of duty abroad for a UK employer

When the employee returns, there should already be a live record at the employer reference. Although the employer does not need to send in a form P45, P46, or new starter information, the employer should always tell you that the employee has returned. This is so that you can review the NT code (see PAYE81595) and payroll arrangements can be altered if necessary.

The employee comes to work for a UK employer but continues to receive wages and benefits from the overseas employer or from another connected overseas concern

See PAYE81530.

The UK employer must take the following action

  • Send in a completed P46 or P46(Expat), or equivalent starter information if the employer is within RTI
  • Make arrangements with the overseas payer to receive information on the payments made to the employee
  • Operate PAYE on the earnings and any other payments

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The employee works both inside and outside the UK and is not resident in the UK or, is resident, the remittance basis applies and the requirement of Section 26(A) ITEPA are met (a three year period of non residence)

The employer can apply under Section 690 ITEPA 2003 for a direction from HMRC to operate PAYE only on the percentage of the employee’s total earnings that are for work in the UK. This applies to all payments made by the employer including termination payments and share based remuneration. An application for a direction must be sent to Self Assessment, HM Revenue and Customs, BX9 1AS United Kingdom, or Charities, Savings & International 3 HM Revenue & Customs, BX9 1AJ (see PAYE81555)

PAYE: apply for a Section 690 or informal treaty direction (S690)

The Section 690 application is only an estimate of the work done in and outside the UK and the employee should complete an SA return to report the actual position. See PAYE81555 - PAYE81565 on how to handle applications under Section 690 ITEPA 2003.

If an employer does not make an application under Section 690 ITEPA 2003, then unless the employee is within an EP Appendix 6 arrangement (see PAYE81740), they must operate PAYE on all payments made to the employee for work done both in and outside the UK. The employee can claim a repayment of the tax deducted on earnings for work done outside the UK on their SA Return.

You must set up an SA record for an employee who works both in and outside the UK, whether or not a Section 690 application is made.

If the employer provides Tax Equalisation arrangements for the employee, you should refer to PAYE81740.

Cases of doubt or difficulty should be referred to Personal Tax Customer, Product & Process, PAYE Technical, Shipley for advice.

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The new arrival has claimed Jobseeker’s Allowance

A new arrival may have been entitled to Jobseeker’s Allowance between the date of arrival and date of starting work in the UK. The employee may have a P45U to give to the employer when starting their first job.

If so, the employer must

  • Send form P45U to HMRC
  • Operate the tax code specified for emergency use until a revised tax code is issued

The employee receives cash benefits from the employer

If the employer pays cash benefits to the employee (such as reimbursed rent or school fees in cash) in addition to salary, they must be included in gross pay on the P11 Deductions Working Sheet (DWS) / FPS.

If cash benefits have been included in gross pay on the P11 DWS and P14 End of Year documents or FPS

  • Do not code them out
  • The employer need not return them on form P11D

Alternatively, if the employer meets the employee’s pecuniary liability by making the payment directly to the third party, PAYE cannot be operated. Instead, the items should be reported on forms P11D or P9D as appropriate.

Short term business visitors

Refer to the guidance at PAYE81630.

All other cases

The UK employer must

  • Send a completed form P46 or P46(Expat) or equivalent starter information if the employer is within RTI, as soon as the UK work starts
  • Deduct tax from all earnings using the emergency code and account for NICs if appropriate