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Modified PAYE schemes can be operated where circumstances require a variation in the operation of a normal PAYE scheme (for example, workers seconded abroad).

Employers of:

• employees seconded abroad
• expatriate employees
• market research interviewers (for tax years up to 5 April 2007)
• members of the reserve or auxiliary forces
• employees who have been rewarded by a payment card company, bank or building society and the tax has been paid on that reward via a payment card rewards scheme

can operate a modified PAYE scheme.

Employers who have an agreement to operate a modified PAYE scheme when paying employees who are seconded overseas or who are working in the UK but employed by an overseas employer, pay their employer liabilities based on a best estimate of the employees� earnings. At the end of the tax year when the actual earnings are known, they will then send a NICs settlement return (NSR) with the correct amounts. Paying the Apprenticeship Levy works in a similar way.

If an employer operates a modified PAYE scheme, the pay bill for levy liability purposes will be the estimated monthly earnings on which they are liable to pay Class 1 secondary NICs for the modified PAYE scheme. If, at the end of the tax year, their actual pay bill is either smaller or greater and they use a NSR to correct the difference in Class 1 secondary NICs due, then the amount of levy paid on the estimate will also be incorrect. »Ê¹ÚÌåÓýappy must recalculate the levy owed, then send in an updated Employer Payment Summary (EPS) and pay the difference or claim a refund. If a refund of levy is due, they must offset this refund against any other PAYE liabilities they have, before claiming a refund.