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Where a UK employee is seconded to a company overseas, it will often be the case that they are offered an enhanced remuneration package such as will compensate for additional costs of living, accommodation, the education of any children and higher taxation, so that their net spendable income after normal living expenses is not reduced. If such compensation, or 'equalisation', is achieved merely by increasing salary from £x to £y or by the addition to £x of a lump sum or scale-rate addition of £z, and if the employee remains within the UK national insurance net (as will be the case if, for instance, the secondment is to the USA for a period which is not expected to exceed five years and the relevant paperwork is completed), the secondary Class 1 contribution burden on his UK employer will be increased – often massively – by reason of the fact that the whole of the amount paid will be regarded as earnings subject to Class 1 contributions.

HMRC does not accept that overseas allowances and expenses may