DMBM406010 - Interest: Interest Review Unit (IRU): PAYE and National Insurance Contributions: Modified PAYE schemes including expatriate employees

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Employers are allowed, by agreement, to operate modified PAYE schemes where a variation of a normal PAYE scheme is needed. These are employers of:

  • Employees seconded abroad;
  • Expatriate employees;
  • Market research interviewers;
  • Members of the reserve or auxiliary forces.

For all modified PAYE schemes the rules for charging interest on late paid PAYE tax are not changed.

For employees seconded abroad and expatriate employees, the employer can be allowed to delay sending end of year return information, and in the case of employees seconded abroad also delay payment of secondary NICs.

Employees seconded abroad

Employers, subject to agreed conditions, can apply to delay sending the return for secondary NICs and payment until 31 January following the end of the relevant tax year.

From 1 February interest is charged on secondary NICs that remain outstanding at 31 January.

Expatriate employees (Foreign national sent to work in UK by his employer)

Subject to certain conditions, the deadline for sending returns and taxable expenses (forms P11D and P11D (b)) for Class 1A NIC may be extended from 6 July to 31 January. The legal payment date of 19 July following the end of the relevant tax year is not affected. When the employer does not have all the relevant information to work out the correct amount due, a best estimate should be paid by 19 July.

Interest is charged on all Class 1A NIC that remains unpaid by 19 July. The reason for the delay does not affect this.

Objections to interest

When considering an interest objection that involves a 'Modified PAYE' scheme, check that interest has been charged correctly in line with the relevant instructions. It can be very complex to run these schemes, so it may be necessary to contact the appropriate office for advice.

Where it is found that interest has been charged from an incorrect date, recalculate and arrange for the excess interest to be cancelled.

Where it is confirmed that returns have been filled in incorrectly, arrange where appropriate, for payments to be transferred to the correct PAYE year(s) or other schemes. Amendment forms P228 can then be dealt with and any necessary change made to the interest charge. Where, for administration reasons, the IRU are asked not to change the PAYE record(s), accept the request. The interest charge should be theoretically recalculated and any excess interest given up.