Income Tax (Earnings and Pensions) Act 2003 section 689

Employee of non-UK employer

Section 689 deals with ensuring PAYE is operated when an employee works in the UK for someone other than their actual employer, and that employer is outside the UK and does not operate PAYE.

• Where an employee works for a UK host but is paid by a non-UK employer (or intermediary) that does not operate PAYE, responsibility for operating PAYE is transferred to another party — either a third party who arranged the work, or the person for whom the employee actually works.
• The deemed PAYE payment is calculated as the gross amount: if the employee received a net-of-tax payment, the figure must be grossed up to include the income tax and any other PAYE debts due; otherwise, it is simply the amount actually paid.
• Where income is provided in a non-cash form — such as vouchers, credit cards, or readily convertible assets — these notional payments are treated in the same way as actual payments for the purposes of this section, but without the requirement to gross up.
• The section does not apply to oil and gas workers on the continental shelf (covered by section 689A), to payments that constitute employment income under the disguised remuneration rules in Part 7A, or to the loan charge arising under Schedule 11 to Finance (No. 2) Act 2017 in respect of loans outstanding on 5 April 2019.