PAYE81523 - PAYE operation: international employments: invalid globally mobile employee PAYE notification

Invalid notification

For an appropriate person to be able to make a globally mobile employee (‘GME’) PAYE notification for a tax year in relation to an employee, one or more of the following conditions must be met for that tax year:

  • the employee must be, or be likely to be, non-UK resident for that tax year,
  • the tax year must be, or be likely to be, a split year in relation to that employee
  • the employee must be, or be likely to be, a qualifying new resident for that tax year, or
  • the employee must be, or be likely to be, treaty non-resident for that tax year.

Consideration of whether an employee meets one or more of the conditions above in a tax year requires an objective view of the employee’s circumstances at the time the notification is made. This means it is necessary to consider whether, at the time the notification is made, a reasonable person would conclude that the requirement was met based on the evidence available to the appropriate person at that time.

If a notification is made but it is found that the condition for the employer to be able to make that notification was not met when the notification was made, then the notification is not valid and has no effect from the date that it was acknowledged. The employer was obligated to operate PAYE on all PAYE income paid to the relevant employee.

Example

An employer made a notification under s.690D for a tax year on the basis that the employee was likely to be a qualifying new resident for that tax year. HMRC opens an enquiry into the employee’s Self-Assessment tax return and it becomes apparent that although the employee was UK resident in that tax year, the employee was not a qualifying new resident in that tax year. The employee is therefore taxable on all their worldwide income.

HMRC asks the employer for any evidence that supported their view that the employee was likely to be a qualifying new resident for the tax year, but they are unable to provide anything. As the employee was not a qualifying new resident for that tax year, even though they were UK resident, the notification made by the employer for the year is therefore found to be invalid. This means that no part of the payments made by the employer was treated as being not PAYE income. The employer was obligated to operate PAYE on all of the PAYE income paid to the employee from the date the invalid notice was made.

If a notification was validly made and the employee’s circumstances subsequently changed, this would not invalidate the notification from the outset.  For example, if a valid notification was made on the basis that an employee was likely to be non-resident for the UK in a tax year, and subsequently it becomes apparent that instead they are likely to be UK resident for that tax year, the notification would remain valid.

However, where there has been a change in the employee’s circumstances this may affect the future operation of any notification (see PAYE81522) because a notification can only apply to certain types of payment. This means that where there has been a change in the employee’s circumstances, the employer should consider whether to make a further GME PAYE notification for the tax year (see PAYE81520).

Incomplete notifications

Any notification must be made in the manner and form, and contain such information as is specified in a general direction by the Commissioners of HMRC. When a notification is received that does not contain the required information, or does not meet such other necessary criteria, specified in the Commissioners’ direction, the notification would be invalid and so have no effect from the date it was acknowledged. The full amount of income paid will be PAYE income and subject to Part 11 ITEPA 2003 and the PAYE regulations as normal.

The employer will be able to resubmit a valid notification, should the employee’s circumstances allow.