½Û×ÓÊÓƵ

The concept of tax equalisation

Tax equalisation is not a statutory concept, but an arrangement between the employer and the employee. It is the process by which the employer ensures that the employee is in the same net financial position as if he had not taken up the overseas assignment.

The employer deducts from the employee's pay, the amount that would have been due under the home regime. This is called hypothetical or 'hypo' tax. The employer then pays the actual amount due under local tax laws over to the local tax authorities where the seconded employee is working, making up the difference (if more), or keeping the balance (if less).

Redspots Ltd's obligations in respect of PAYE and NIC

As Chuck will be working for Redspots Ltd in its UK business, Redspots Ltd will have to operate PAYE in respect of the amounts paid to Chuck by the San Francisco office. This is because the UK 'person' for whom the employee works is treated as making payments within the PAYE regulations and must account for income