PAYE28015 - Employer records: modified PAYE schemes: expatriate employees (tax equalisation)
An expatriate employee, subject to tax equalisation (Word 24KB), is a foreign national who is sent to work in the UK by his employer. (This would typically be a multinational company).
Modified PAYE, Employment Procedures (EP) Appendix 6
Where an expatriate employee is fully tax equalised, the employer can apply to operate a Modified PAYE arrangement under an EP Appendix 6 agreement. This arrangement was updated in April 2006 and again in January 2009. Detailed information on this subject can be found at PAYE81740.
In July 2009, all expatriate work was centralised in CAR’s Expat Unit in Manchester. All applications to operate these arrangements must be dealt with by CAR Expat Unit. Therefore any applications received must be forwarded to them.
Employers who were already operating Modified PAYE for tax equalised employees under an existing EP Appendix 6 arrangement could continue to use this arrangement for 2006-07. However any modified arrangement governed by an earlier version of EP Appendix 6 was terminated at 5 April 2007.
Employers had to re-apply under the updated arrangements for 2007-08 onwards, before 6 April 2007.
Modified NICs, Employment Procedures (EP) Appendix 7A
From April 2006 a new procedure for operating Modified NICs was introduced for 2006-07 and later years for employers who
- Employ expatriate employees that are fully tax equalised
- The employees earn above the Upper Earning Limit
- May receive earnings or benefits paid outside the UK.
To apply to calculate and pay NICs on a modified basis under EP Appendix 7A, the employer must have a new updated EP Appendix 6 Modified PAYE arrangement in place.
All applications to operate Modified NICs for expatriate employees must be dealt with by CAR Expat Unit. Therefore any applications received must be forward to the Expat Unit who will be responsible for arranging the
- Creation and maintenance of a separate EP Appendix 7A PAYE scheme
- Processing the NIC Settlement Return (NSR) (PDF 31KB)
This arrangement requires the employer to
- Account for NICs in the normal way, using a best estimate of all earnings and benefits that attract Class 1A NICs
- Enter the figures for NICs on the EP Appendix 6 form P35, for submission by 19 May following the end of the tax year
- Submit the correct figures for NICs on the NSR and pay any additional NICs not reported on the form EP Appendix 6 P35 by 31 March following the end of the tax year
Note: In most cases the NSR will show an additional amount of NICs to pay. If so, this additional amount is processed under the EP Appendix 7A employer reference. However where the NICs originally paid using the best estimate are overpaid, a refund will be due and
- A refund due to the employer will be processed under the employer’s main PAYE reference
- For a refund due to the employee, a copy of the NSR will be sent to NICO whom will make the refund.