If you employ an internationally mobile workforce and want to ensure you minimise their UK tax burden, recent government updates may prove useful. In this article we guide you through what you need to know.
From 6 April 2025, a new process applies to obtain an agreement under Section 690 ITEPA 2003. It is aimed at providing relief from the strict operation of PAYE on salaries paid to non-UK resident employees who perform some of their role in the UK.
This relief is helpful where the employer (or host employer) has a tax presence in the UK, and the employee undertakes at least one day’s work here in the UK.
Under the new arrangements employers can send an application to HMRC specifying the proportion of the employee’s earnings which will relate to their non-UK duties, and as such will not be subject to PAYE.
The application will be made online and once HMRC acknowledges receipt of the application, it will be possible for the employer to operate PAYE on the estimated amount of the salary which solely relates to the employee’s UK duties.
Immediate impact of the change
Employers who have previously made use of a Section 690 application must apply for a new agreement. All previous agreements (made prior to 6 April 2025) will cease to apply with immediate effect.
What needs to be done
Employers who previously used Section 690 to help manage PAYE payments for non-UK resident employees who work some of their time in the UK, should re-apply for a new Section 690 agreement with HMRC.
However, if you are an employer who has employees falling within the following categories, then applying for a Section 690 agreement may prove beneficial, especially where the following fact patterns may be present:
- Employees who work across more than one country.
- Non-UK resident employees who spend some of their time working in the UK.
- UK resident employees who qualify for overseas workday relief.
- Non-UK resident employees who are reliant on a tax treaty between the UK and their home, or other countries, for determining the level of their remuneration which will be subject to UK income tax.
The use of the agreement can help to limit the amount of PAYE deducted from an eligible employee’s salary to the work physically performed in the UK. For the employee, this will help to lessen the impact of double taxation on their salary.
As a further reminder, the individual will be required to file a UK tax return each year calculating the final UK tax liabilities, which will need to consider the actual number of days spent in the UK.
How can HaysMac help?
Our Employment Tax team can help you review the position for the company, which can include:
- A review of your existing arrangements for any employees (including Directors) who may fall within one of the above residency categories.
- Make recommendations on the level of the employee’s salary which will benefit from a Section 690 agreement.
- How to manage the use of the Section 690 agreements and tracking the number of UK workdays.
- Assist with the preparation of the UK tax returns, which will ultimately reconcile the number of UK workdays and the employee’s tax bill.
Please note the Section 690 agreement does not apply to National Insurance (Social Security), which is something that can be overlooked. Consideration will need to be given to where Social Security contributions will be due with the following key points:
- Where the employee is habitually resident
- The time spent in the UK
- Whether the UK has a reciprocal agreement with the employee’s home country (including the EU).
For further information please contact a member of the Employment Tax team employmenttax@haysmac.com
