New section 690 notifications required from 6 April 2025
From 6 April 2025, there will be a new process for notifying HMRC of directions under section 690 Income Tax (Earnings and Pensions) Act 2003, which applies to globally mobile employees and treaty non-residents who work in the UK.
It is important to note that any directions that HMRC has given prior to 6 April 2025 will no longer be valid. So, where applicable, a notification to HMRC will need to be made under the new arrangements.
What is a section 690 direction?
For employers who have employees or directors who work both in and outside the UK, section 690 can provide a useful relaxation to the PAYE rules. It enables the employer to limit the application of PAYE tax to the proportion of the employee’s employment income that will relate to work duties that are physically performed in the UK. This means that rather than applying PAYE tax to 100% of income, it is only applied to the proportion of work actually undertaken in the UK. There are different rules for National Insurance contributions which employers must also consider for the same employees or directors.
What was the previous process?
Up until 5 April 2025, employers and agents could apply to HMRC for a section 690 direction. Where agreed by HMRC, this allowed employers to operate PAYE on a proportion of the qualifying employee’s income that corresponded to duties physically carried out in the UK. Section 690 directions could apply for up to three tax years at a time.
There were, however, often delays in reaching agreement with HMRC which left employers with some uncertainty whilst waiting for confirmation.
What is the new process?
From 6 April 2025, this process has changed. Employers and agents must now notify HMRC through an online form, specifying the portion of income to be treated as exempt from PAYE and once HMRC acknowledges receipt of the notification, employers can immediately operate PAYE only on the reduced amount. This change aims to simplify compliance and reduce processing delays.
New section 690 direction applications will need to be submitted for each tax year that the relevant employee is eligible, rather than for up to three tax years under previous arrangements.
Actions to take
The UK tax and NIC treatment surrounding internationally mobile employees, including non-resident directors, can be complex.
Where employers have employees who are working in more than one jurisdiction, the PAYE position and application of the section 690 arrangements or agreements for short term business visitors should be considered.
In particular, employers with existing section 690 agreements will need to follow the new rules.
Separate advice should be taken to consider any NIC implications of globally mobile employees and directors.
How UNW can help?
UNW’s award winning employment taxes team has significant experience in providing support to clients, irrespective of their size. Our support will be provided to meet the specific requirements of an organisation and can include:
- Advice on the tax treatment of cross-border workers, including applications for section 690 directions and short-term business visitor returns;
- Advice on the NIC and social security position of employees and directors who may work in more than one country;
- Delivery and facilitation of training and workshops on a range of employment tax matters, designed to meet the specific circumstances of an organisation and involving participant discussion, and;
- Assisting with any tax and NIC reporting obligations for employers.
If you would like to discuss how we can help you, or have any other employment taxes related queries, please get in touch with us at employmenttaxesteam@unw.co.uk
