Finance Act 2025

21 Application of PAYE in relation to internationally mobile employees etc. U.K.

(1) For section 690 of ITEPA 2003 (employee non-resident etc) substitute—

“690 Internationally mobile employees

(1) This section applies in relation to an employee if the employee is or has been internationally mobile at any time in tax year 2025-26 or a subsequent tax year.

(2) An employee is “internationally mobile” at a time in a tax year if at that time the employee works or is likely to work both inside and outside the UK during the tax year (“the mobile tax year”) and at that time—

(a) the employee is or is likely to be non-UK resident for the mobile tax year, or

(b) the mobile tax year is or is likely to be a split year as respects the employee.

(3) If the employer makes an uncertain payment to the employee in any tax year, the entire payment is to be treated for the purposes of PAYE regulations as a payment of PAYE income of the employee.

(4) For the purposes of this section and sections 690A and 690B, an “uncertain payment” means a payment of, or on account of, the income of the employee to the extent that—

(a) the employer is unable to ascertain the extent to which the income is PAYE income, and

(b) the reason for the employer being unable to ascertain that extent is connected to the employee being or having been internationally mobile in the mobile tax year.

(5) Subsection (3) is without prejudice to—

(a) any assessment in respect of the income of the employee in question, and

(b) any right to repayment of income tax and any relevant debts overpaid and any obligation to pay income tax underpaid and any relevant debts that remain wholly or partly unpaid.

(6) For the purposes of this section and sections 690A to 690E—

(a) any reference to a payment made by the employer includes a reference to a payment made by a person acting on behalf of the employer and at the expense of the employer or a person connected with the employer, and

(b) in a case where section 689 or 689A applies, any reference to a payment made by the employer is to be read as a reference to a payment treated, for the purposes of PAYE regulations, as made by the relevant person.

690A Employer notification for internationally mobile employees

(1) This section applies in relation to an employee if the employee is or has been internationally mobile within the meaning of section 690(2) at any time in tax year 2025-26 or a subsequent tax year (“the mobile tax year”).

(2) The appropriate person may give a notice to an officer of Revenue and Customs at any time during the mobile tax year—

(a) that the employer is proposing to treat a proportion of any uncertain payment made by the employer to the employee as not being PAYE income of the employee for the purposes of PAYE regulations, and

(b) specifying that proportion.

(3) If a notice given under this section has effect, the proportion of any uncertain payment made by the employer to the employee in any tax year which is to be treated for the purposes of PAYE regulations as not being a payment of PAYE income is the proportion specified in the notice.

(4) But if section 690D(4) (employer notification for qualifying new resident) also applies to a payment made by the employer, subsection (3) does not apply to the payment to the extent that it is a qualifying payment within the meaning of section 690D.

(5) A notice given under this section—

(a) does not have effect if a direction has previously been given to the appropriate person under section 690B (direction by HMRC in relation to internationally mobile employees) in relation to the employee and the mobile tax year;

(b) otherwise, has effect when it is acknowledged by an officer of Revenue and Customs.

(6) A notice given under this section ceases to have effect if—

(a) a direction under section 690B is given to the appropriate person in relation to the employee and the mobile tax year,

(b) a subsequent notice is given by the appropriate person under this section and is acknowledged by an officer of Revenue and Customs, or

(c) where the notice was given on the basis that the employee was likely to be a non-UK resident for the mobile tax year, a subsequent notice—

(i) is given by the appropriate person under section 690D (employer notification for qualifying new resident) on the basis that the employee is or is likely to be a qualifying new resident for the mobile tax year, and

(ii) is acknowledged by an officer of Revenue and Customs.

(7) A notice given under this section must be in such manner and form, and contain such information, as may be specified in a general direction made by the Commissioners for His Majesty’s Revenue and Customs.

(8) Subsection (3) is without prejudice to—

(a) any assessment in respect of the income of the employee in question, and

(b) any right to repayment of income tax and any relevant debts overpaid and any obligation to pay income tax underpaid and any relevant debts that remain wholly or partly unpaid.

(9) For the purposes of this section and sections 690B, 690D and 690E —

(a) where an amount of employment income is treated as PAYE income paid by the employer for the purposes of PAYE regulations by virtue of section 693 (cash vouchers), section 694 (non-cash vouchers) or section 695 (credit-tokens), the employer is to be treated as making a payment of that amount of employment income, and

(b) “the appropriate person” means—

(i) the person designated by the employer for the purpose of this section and sections 690B, 690D and 690E and, if no person is so designated, the employer, and

(ii) in a case where section 689 or 689A applies, the references to the employer in sub-paragraph (i) are to be read as references to the relevant person (within the meaning of section 689 or 689A).

690B Direction by HMRC in relation to internationally mobile employees

(1) This section applies where—

(a) a notice given during the mobile tax year under section 690A has effect, and

(b) it appears to an officer of Revenue and Customs that the proportion of any uncertain payment made by the employer to the employee that is treated as not being a payment of PAYE income for the purposes of PAYE regulations should not be the proportion specified in the notice.

(2) An officer of Revenue and Customs may give a direction—

(a) for determining a proportion of any uncertain payment made by the employer to the employee which is to be treated for the purposes of PAYE regulations as not being a payment of PAYE income, or

(b) that any such payment is to be treated entirely as PAYE income for the purposes of PAYE regulations.

(3) A direction under subsection (2)—

(a) must specify the employee and the mobile tax year,

(b) must be given by notice to the appropriate person, and

(c) may be varied by notice to the appropriate person from a date specified in the notice (which may not be earlier than 30 days from the date on which the notice is given).

(4) If—

(a) a direction under subsection (2) has effect, and

(b) any uncertain payment is made by the employer to the employee in any tax year,

the direction applies in relation to the payment.

(5) A direction under subsection (2) has effect when it is given.

(6) A direction under subsection (2) ceases to have effect if—

(a) the notice to which the direction relates was given on the basis that the employee was likely to be non-UK resident for the mobile tax year, and

(b) a notice has subsequently been—

(i) given by the appropriate person under section 690D (employer notification for qualifying new resident) on the basis that the employee is or is likely to be a qualifying new resident for the mobile tax year, and

(ii) acknowledged by an officer of Revenue and Customs.

(7) Subsection (4) is without prejudice to—

(a) any assessment in respect of the income of the employee in question, and

(b) any right to repayment of income tax and any relevant debts overpaid and any obligation to pay income tax underpaid and any relevant debts that remain wholly or partly unpaid.

690C Employees who were internationally mobile etc. before 2025-26

(1) This section applies in relation to an employee if the employee falls within subsection (2) or (3) in relation to a tax year that was before tax year 2025-26.

(2) An employee falls within this subsection in relation to a tax year if the employee worked both inside and outside the UK in that tax year and—

(a) the employee was non-UK resident for that tax year or it appears likely to the employer that the employee was non-UK resident, or

(b) the tax year was a spilt year as respects the employee or it appears likely to the employer that the tax year was such a year.

(3) An employee falls within this subsection in relation to a tax year if—

(a) the employee worked outside the UK in the tax year,

(b) the employee met the requirement of section 26A for that tax year or it appears likely to the employer that the employee met that requirement, and

(c) the employee has made a claim under section 809B of ITA 2007 (claim for remittance basis) for that tax year or it appears likely to the employer that the employee has or will make such a claim.

(4) If the employer makes a payment to the employee of, or on account of, general earnings for that tax year, the amount of the payment that is to be treated as PAYE income for the purposes of the PAYE regulations is the amount that, on the basis of the best estimate that can be reasonably made, is likely to be PAYE income.

(5) For the purposes of subsection (4)—

(a) where this section applies to an employee because it appears likely to the employer that a certain state of affairs exists, the employer may assume that state of affairs exists;

(b) whether general earnings are “for” that tax year is determined in accordance with sections 29 and 30.”

(2) The amendments made by this section have effect for the tax year 2025-26 and subsequent tax years.

(3) Any direction given by an officer of Revenue and Customs under section 690 of ITEPA 2003 (employee non-resident etc) has no effect in relation to tax year 2025-2026 or any subsequent tax year.