Modified payrolls for inbound employees

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Employment Tax

Guidance

STOP PRESS: The remittance basis is abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. The legislation is included in FA 2025. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.

A seconded employee for PAYE purposes includes all individuals included by an employer within an expatriate modified PAYE scheme.

What is a modified PAYE scheme?

A modified PAYE scheme is suitable for expatriate employees sent by an overseas employer to work in the UK who are covered by a tax equalisation scheme ― see the Tax equalisation guidance note. Tax equalisation generally describes an arrangement where an employer agrees to pay a foreign national employee working in the UK a specified net amount of cash earnings and non-cash benefits. With tax equalisation, the employer undertakes to meet on the employee’s behalf any additional UK tax payable above

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Paul Tew

Writer and advisor at Paywatch

Paul Tew is a freelance adviser, primarily in the areas of pay, personal taxation and remuneration planning. A frequent contributor to technical journals on pay and benefits issues, having written for the "In Business" section of the Times. Paul continues to supply articles for various recognised professional publications including Pay and Benefits magazine, Taxation magazine and Company's Secretary's Review. Paul also has had several loose leaf and bound books published on a variety of subject matter including PAYE, NIC, Sickness and Maternity Pay.Paul has written and presented training courses as well as headed up payroll and employment help desks and acted as an assessor for recognised Payroll/HR qualifications. Paul previously worked in the healthcare and oil sectors managing Pay and benefit services, so has many years of experience in dealing with PAYE and employment compliance issues across a broad range of industries and organisations.

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