International Employees UK Payroll

A French national joins your London office on secondment. A US engineer flies in for a six-week project.

A Dublin-based employee starts splitting the week between Dublin and your Manchester site.

Each of these scenarios triggers a different PAYE and National Insurance answer, and getting them wrong can cost you HMRC penalties, employee grievances, and retrospective tax settlements that take months to unpick.

This guide cuts through the cross-border noise. You will find the exact triggers, the HMRC forms that buy you relief, and the deadlines that decide whether an international hire stays clean or blows up at year-end.

When does a UK employer owe PAYE on an international employee?

The default rule is blunt. If the employee performs employment duties in the UK, PAYE applies from the first working day, regardless of their residency status, nationality, or which entity pays them.

HMRC’s starting position is that work done on UK soil is taxable in the UK.

Three questions change the answer:

– Where is the employee tax-resident? A UK tax resident pays PAYE on worldwide employment income. A non-resident pays PAYE only on the portion of earnings relating to UK workdays.
– Is there a Double Taxation Agreement (DTA)?

The UK has over 130 DTAs.

Most include a “183-day rule” that exempts short stays from UK tax when the employer is overseas and costs are not borne by a UK entity.
– Who employs and pays them? If the employment contract and payroll sit overseas, and no UK entity recharges the cost, DTA relief often applies.

If the UK entity reimburses the cost, relief collapses.

The 183-day rule is not a free pass.

All three conditions must be met together: fewer than 183 days in any 12-month period straddling the UK tax year, the employer is not UK-resident, and the cost is not recharged to a UK permanent establishment.

Miss any one of those, and PAYE kicks in retroactively. Treat the 183-day rule as a qualification test, not a holiday allowance.

How do short-term business visitors (STBVs) change your PAYE obligations?

If you regularly host overseas colleagues for short trips, you do not want to be operating PAYE on each of them.

The fix is the STBV agreement, set out in HMRC’s Appendix 4 (for DTA countries) and Appendix 8 (for specific short-stay cases).

Under Appendix 4, you can apply to HMRC for formal relief from operating PAYE for employees of an overseas group company who:

– Are resident in a country with a UK DTA,
– Spend fewer than 183 days in the UK in any 12-month period, and
– Have their costs borne entirely by the overseas employer.

You file the Appendix 4 application before the tax year starts. Once HMRC accepts it, you report eligible visitors on an annual STBV return by 31 May following the tax year, and PAYE does not apply.

Appendix 8 is the operational lifesaver for visits under 60 UK-workdays per tax year. Instead of relief, it lets you run a single annual PAYE payment for all STBVs covered by the arrangement, due by 31 May.

No monthly RTI submissions, no individual payslips, no employer NI. Above 60 workdays, the employee drops out of Appendix 8 and needs to be run through standard PAYE.

For non-DTA countries (the Appendix 4 route is closed to them), you are back to running full PAYE unless HMRC grants a bespoke arrangement. Common affected jurisdictions include Brazil, some Gulf states, and most African countries outside South Africa.

Scenario rule: every inbound visitor from a non-DTA country goes on full PAYE from day one unless you have written HMRC confirmation otherwise.

When does an overseas employer have to run a UK payroll?

You might assume that an overseas employer with no UK branch has no UK payroll obligation. That is not how HMRC reads it.

If an employee performs duties in the UK and you are their employer, HMRC expects PAYE to be operated somewhere.

Three routes handle this:

1. UK entity payroll recharge. If you have a UK group company, you can run the employee through its payroll and recharge costs to the overseas entity.

This is the cleanest option when you already have a UK payroll running.
2. Direct overseas registration. An overseas employer can register with HMRC for a PAYE scheme and operate UK PAYE directly.

You receive an employer PAYE reference and file RTI submissions in the normal way.

You will need a UK bank account or a third-party payment agent to settle HMRC liabilities. 3. DPNI/DCNI scheme.

If the employee is tax-resident in the UK and you are a genuine overseas employer with no UK presence, HMRC allows the employee to operate a Direct Payment PAYE (DPNI) or Direct Collection NI (DCNI) scheme.

The employee, not you, files their own PAYE each month.

This option is limited to cases where the employer has no UK branch, agency, or permanent establishment.

Registration takes up to five working days for the employer PAYE reference to arrive by post, and longer for overseas applications routed through HMRC’s non-resident employer team.

Start the process eight weeks before the first UK workday, not the first UK payday.

How do A1 certificates and Reciprocal Agreements change National Insurance liability?

PAYE and NI run on different tracks. An employee can owe UK PAYE but remain on home-country social security, or vice versa.

The governing document is the A1 certificate (for EU, EEA, Switzerland, and post-Brexit UK agreements) or the Certificate of Coverage under a Reciprocal Agreement (for countries including the US, Japan, Canada, South Korea, and Israel).

Key rules to hold in your head:

– A1 postings cover up to 24 months. The posting country (where the employee is normally based) keeps collecting social security. The host country does not apply its own.

You collect the A1 before the UK work starts, not after.

– Reciprocal Agreements vary by country.

The US agreement runs for up to five years for detached workers. Japan runs up to five years. Canada runs up to 60 months.

Each country’s rules on renewals differ; check the specific Totalisation Agreement before you plan a long assignment.
– No certificate, no relief.

If the employee arrives without an A1 or Certificate of Coverage, Class 1 NI applies in full from day one, with no retroactive waiver once the certificate arrives.

The employer NI exposure here is significant. A single £80,000 salary without an A1 costs an additional £10,000+ in employer NI for the tax year.

Treat certificate sourcing as a pre-arrival condition, not an admin task to catch up on later.

Which HMRC code applies to a UK-resident employee working abroad?

The mirror scenario: you employ a UK tax-resident who is now based overseas for an extended posting. Standard PAYE at their UK tax code will over-tax them once they are no longer UK-resident for tax.

The fix is the NT (No Tax) code.

The process:

1. The employee files form P85 with HMRC, reporting that they have left the UK to work abroad.
2.

You, as employer, write to HMRC’s Employer Helpline confirming the posting length, location, and ongoing contract.
3. HMRC issues an NT code via the normal P6 coding notice.

Your software applies NT from the next pay period.

Under NT, you run PAYE with no income tax deducted. You still operate the full RTI cycle: FPS on or before payday, NI if applicable, and year-end reporting.

NI continues unless an A1 or Reciprocal Agreement removes it.

Sarah’s scenario rule: before any UK employee moves abroad for more than six months, map the NT code request and the A1 certificate together. Running one without the other leaves tax or NI exposed.

What is the PAYE process for seconded employees and modified payroll?

Secondments are the messiest PAYE situations your payroll team will see. An employee is sent between UK and overseas entities, often with tax equalisation policies, hypothetical tax calculations, and split contracts.

Running a standard PAYE payroll on a grossed-up expatriate package produces the wrong number every month.

HMRC’s answer is modified payroll, governed by Appendix 5 of the PAYE Manual for inbound assignees, and Appendix 6 for the foreign tax credit variant.

Under Appendix 5:

– You calculate the employee’s UK PAYE on an estimated annual basis, accounting for tax equalisation and gross-up.
– You operate RTI using a provisional PAYE figure each month.
– Once HMRC receives the self-assessment return, the final liability is reconciled.

Underpayments are settled through self-assessment, not through PAYE corrections.

Appendix 6 extends this to cases where the employee is also paying foreign tax that can be credited against UK tax, avoiding monthly overcollection.

Both schemes require formal HMRC approval before you can operate them.

The business case is simple. On a typical £150,000 expatriate package with tax equalisation, standard PAYE produces monthly under- or over-deductions of several thousand pounds.

Modified payroll gets you within a narrow band of the true liability every month.

For any assignee package above £100,000 with tax equalisation clauses, modified payroll is the default to request.

What deadlines and penalties should you plan for?

International payroll does not relax HMRC’s usual deadlines. Miss them and the penalty regime applies the same as it does for domestic payroll.

Key dates for Sarah’s calendar:

– Before first UK payday: Register as an employer with HMRC. Allow five working days (UK entity) or up to six weeks (overseas employer) for the PAYE reference.

– Every payday: File the Full Payment Submission (FPS) on or before the payment date.

RTI penalties start at £100 per month for schemes with 1 to 9 employees and scale up. – 19th of the following month: Pay HMRC (22nd if paying electronically). – 6 April preceding the tax year: File Appendix 4 and Appendix 8 applications for STBV arrangements.

Late applications do not cover the current year. – 31 May after tax year-end: Submit the STBV annual report (Appendix 4) and the Appendix 8 annual PAYE payment.

– 6 July after tax year-end: File P11D for any non-payrolled benefits, including expatriate benefits.

For A1 and Certificate of Coverage applications, allow six to eight weeks for HMRC’s CA8421 processing. Urgent requests can be expedited if you flag the work-start date in the application, but HMRC does not guarantee turnaround.

Plan backward from the employee’s UK arrival, not forward from the application date.

Scenario rule: when an international hire is confirmed, set five reminders on day one. Employer registration, A1 or Certificate of Coverage, Appendix 4/8 eligibility check, first FPS date, and modified payroll approval if relevant.

Miss any of these and the cleanup costs outrun the original saving from the posting.

Where to go next

International payroll is not one workflow. It is a set of decisions triggered by where the employee sits, where the work happens, and who bears the cost.

Work the three tests first (residence, DTA, cost bearer), then choose the right HMRC mechanism (STBV, A1, NT code, DPNI, or modified payroll). Write the decisions down. HMRC asks for them on inquiry.

If you are choosing payroll software that can handle these cases, start with our best UK payroll software shortlist. For a broader look at the national insurance picture, see our employer NIC guide.

For the general PAYE cycle that underpins all of this, our how to run payroll in the UK guide covers the full monthly rhythm.