By prior agreement with HMRC an employer may operate a Modified
PAYE arrangement for its "tax equalised" employees (see Appendix 6
of the Employment Procedures Manual which is available on the HMRC
internet site). Should such an arrangement apply then relief under
a double taxation agreement (DTA) for employer and employee
contributions can be given in the PAYE calculation.
Under Modified PAYE the employer makes an estimated PAYE tax
calculation for its "tax equalised" employees at the beginning of
the tax year and, subject to review, pays PAYE tax on that basis
during the year. The employer should exclude from the estimated
PAYE calculation the contributions it will make on behalf of those
employees to overseas pension schemes to which the provisions of a
DTA apply. The employer may also exclude an amount for
employees’ own contributions. This is on the understanding
that the employer or advisers engaged by the employer will prepare
the relevant tax returns of its “tax equalised”
employees in accordance with IR212.
| Glossary ( RPSM20000000) |
