PAYE81513 | PAYE operation: international employments: internationally mobile employees

Section 690 ITEPA 2003

From 6 April 2025, section 690 applies in relation to an employee if during a tax year they are ‘internationally mobile’. Section 690 provides that an employee is ‘internationally mobile’ if they work both in the UK and abroad in a tax year, and

• the employee is, or is likely to be non-resident during that tax year, or

• the year is, or is likely to be, a split year for the employee

UK residence is determined by reference to the Statutory Residence Test (SRT). For more information, please go to HMRC manual RFIG20000 If an employee is domestically resident under the SRT but would be considered non-resident by virtue of a double taxation treaty, please read PAYE81518.

When an employee is internationally mobile this can affect the amount of their employment income which is PAYE income.

When an employee is not UK resident for a tax year and performs their duties both in and outside the UK, ordinarily only their employment income which relates to their UK duties will be chargeable to UK tax. This means only part of the employment income paid may be PAYE income.

Similarly, where a tax year is a split year in relation to an employee, any employment income attributable to the overseas part of the year will only be chargeable to UK tax if it relates to duties performed in the UK during the overseas part of the year.

This means that an internationally mobile employee may have income paid to them which is not taxable in the UK and so is not PAYE income. However, it may not be possible to determine the extent that the payment is PAYE income when it is made.

Such uncertainty could make it difficult for an employer to correctly operate PAYE on payments they make to their employees. For periods prior to 6 April 2025 section 690 ITEPA 2003 addressed this uncertainty by treating all income paid to an internationally mobile employee as PAYE income, unless the employer had applied to HMRC for a direction allowing them to operate PAYE only on the percentage of the employee’s income that related to work done in the UK.

From 6 April 2025 the legislation at section 690 ITEPA 2003 has changed and will work differently to before. Section 690 now applies only to uncertain payments. An uncertain payment is a payment of, or part of a payment of, or on account of, the income of an internationally mobile employee, where at the time of the payment, the employer is unable to determine the extent to which the income is PAYE income in connection with the employee being or having been internationally mobile.

This provision treats the entirety of an uncertain payment as being PAYE income, unless the employer has notified HMRC of their intention to treat a specified percentage of any uncertain payment as not being an amount of PAYE income.

From 6 April 2025, section 690 no longer applies to an employee who is eligible for Overseas Workday Relief (also referred to as ‘foreign employment relief’ in Chapter 5C of Part 2 ITEPA 2003) for a tax year. Instead, an employer can make a notification proposing to treat part of the income of an employee who is eligible for Overseas Workday relief in a tax year as not being PAYE income under section 690D ITEPA 2003 (see PAYE81517).

For more information about the effect of section 690 for tax years ending prior to 6 April 2025, please see the guidance at PAYE81512.