Inbound secondment ― payroll issues

Produced by Tolley in association with Paul Tew

The following Employment Tax guidance note Produced by Tolley in association with Paul Tew provides comprehensive and up to date tax information covering:

  • Inbound secondment ― payroll issues
  • Creating an employment record
  • Operating a UK PAYE tax coding
  • Exemption for short-term secondments
  • Agreement to use an annual PAYE scheme
  • Formal HMRC direction to apportion PAYE
  • Payment made by overseas business ― whether PAYE to be operated and by whom
  • Agency rules where there is a non-UK entity in the supply chain
  • NIC position working in the UK

Inbound secondment ― payroll issues

The collection of income tax and social security (Class 1 NIC in the UK) from employees is normally the responsibility of the employer’s payroll operation. The UK comprises England, Wales, Scotland and Northern Ireland, including territorial waters within 12 nautical miles of the shore. It does not include the Isle of Man or the Channel Islands. The UK also includes the UK sector of the Continental Shelf, as designated under the Continental Shelf Act 1964, s 1(7).

Creating an employment record

Where the employee of an overseas employer is seconded to the UK, the employee will be either resident or non-resident in the UK. See the Residence and domicile ― effect on tax liability guidance note. A seconded employee includes individuals:

  1. working wholly or partly in the UK for a UK resident employer on assignment whilst remaining employed by an overseas employer

  2. assigned to work wholly or partly in the UK at a recognised branch of their own employer’s business

  3. who are included by an employer within a dedicated expatriate scheme or an expatriate EP6 (modified) PAYE scheme ― see the Modified payrolls for inbound employees guidance note

The following information must be included on a seconded employee’s payroll record. Under Real Time Information (RTI), the Full Payment Submission (FPS) report sent to HMRC includes the employee’s full name, date of birth, gender, address at which the employee will reside when in the UK and National Insurance number, if known. Although not a mandatory field for overseas employees on UK secondment, HMRC encourages employers to report the passport number as a one-time event. The passport number will be used to help identify the employee and help prevent multiple records from being set up for an employee on HMRC’s National Insurance and PAYE Service (NPS).

On the first FPS sent to HMRC for a seconded employee, it is necessary to indicate ‘yes’ to whichever of the following apply (otherwise leave the data field blank):

  1. the

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