I beg to move amendment 15, in clause 21, page 11, line 21, after “is” insert “or has been”.

This amendment makes it clear that new section 690 applies if an employee has been internationally mobile in a tax year, even if the employee is no longer internationally mobile.

With this it will be convenient to discuss the following:

Government amendments 16 to 19.

Clause stand part.

I will briefly address clause 21 before explaining what the amendment seeks to achieve.

The clause makes changes to simplify the process for operating pay-as-you-earn where an employee is eligible for overseas workday relief. It relates to some of the reforms we are making around non-UK domiciled individuals, which we will return to later in Committee, because those clauses are in a different part of the Bill. More broadly, the context of this measure is that the Government are removing the outdated concept of domicile status from the tax system, and replacing it with a new, internationally competitive, residence-based regime from 6 April 2025.

Currently, where an employer makes an application to treat only a portion of the income that they pay to an employee as PAYE income, they are required to wait for HMRC to approve an application, which can result in delays. The changes made by clause 21 will mean that from 6 April 2025, an employer will be able to operate PAYE only on income relating to work done in the UK once they have received an acknowledgment from HMRC of their completed application, rather than having to wait for HMRC to approve it. That approach will simplify the operation of overseas workday relief for employers, while still allowing HMRC to direct employers to amend the proportion of income on which PAYE is operated, should it be necessary to do so.

Amendments 15 to 19 are needed in order to ensure that the legislation regarding the correct operation of PAYE works as intended. The Government are committed to making the tax system fairer so that everyone who is a long-term resident in the UK pays their taxes here. The new regime ensures this, while also being more attractive than the current approach, as individuals will be able to bring income and gains into the UK without attracting an additional tax charge. That will encourage them to spend and invest those funds in the UK.

As we have heard from the Minister, clause 21 amends the process by which employers can operate PAYE on a proportion of payments of employment income made to an employee during the tax year. It is a welcome change. We will be supporting the clause and the simplification that it introduces.

By way of background, the clause amends section 690 of the Income Tax (Earnings and Pensions) Act 2003. Section 690 provides a mechanism for an individual or employer to seek a decision from HMRC regarding the tax treatment of certain earnings. The resulting determination under section 690 is an agreement between HMRC and a UK employer on the estimated percentage of duties that an internationally mobile employee expects to carry out in a tax year. Once that determination is provided, the employer can operate PAYE on only that percentage of the employee’s salary.

Unfortunately, that is easier said than done. According to the Institute of Chartered Accountants in England and Wales, historically HMRC has missed its four-month target to agree employers’ applications, and in some cases it has taken up to a year to obtain HMRC’s approval. This is just one example of the difficulty that taxpayers have in engaging with HMRC. I welcome the comments that the Minister made at Treasury questions last week about the work that he is doing—he chairs the board of HMRC, I believe—to ensure that HMRC delivers a better service for customers. We all wish him well on that.

Perhaps this is an opportune time to remind the 3.4 million people who have to submit self-assessment tax returns to do so before the 31 January deadline. Colleagues may wish to ensure that they have submitted theirs.

In the absence of an agreement, PAYE must be operated on the whole salary, meaning that the employee would be overtaxed and must claim relief after the year end. That is not a satisfactory outcome for anyone. These changes will allow employers to immediately operate PAYE on only the proportion of earnings that they believe relates to UK duties, rather than having to wait for HMRC to approve the application. This new process is a welcome step forward in dealing with an issue that HMRC has had in meeting its legal obligations under the current tax system.

The Chartered Institute of Taxation and the ICAEW have raised concerns that the reforms to section 690 make no reference to treaty non-resident cases. Will the Minister clarify whether there will be another process for treaty non-resident cases?

The ICAEW also considers that the Bill overlooks scenarios in which a section 690 determination will be required—for instance, where all the UK tax on foreign employment income is covered by foreign tax credits. Has the Minister considered amending the new section 690 so that the definition of an internationally mobile employee includes that scenario?

On the scope of the measures, I would be grateful if the Minister can confirm how many people the change is likely to impact, and to what extent it is expected to improve the timeliness of a determination. I would also be grateful if he can confirm what risks, if any, the change poses to tax compliance.

As I have set out, we support this change, but I would appreciate the Minister’s comments on how the amended process will work for certain groups. I recognise that this is a detailed issue, so he may wish to write to the Committee on the points I have raised.

I thank the shadow Minister for his support for the clause and the amendments. He rightly recognises that this is a simplification to make things happen quicker in the tax system, and we can all agree on that. He raised some specific points, and I will write to him on the detail of the operation of the clause so that he has a record of that. I endorse his call for anyone who has not already submitted their self-assessment tax return to be mindful of the deadline of the end of the month.

Amendment 15 agreed to.

Amendments made: 16, in clause 21, page 12, line 4, after “being” insert “or having been”.

This amendment is consequential on Amendment 15.

Amendment 17, in clause 21, page 12, line 22, after “is” insert “or has been”.

This amendment makes it clear that a notice under new section 690A can be given during the mobile tax year if the employee has been internationally mobile during that year, even if the employee is no longer internationally mobile.

Amendment 18, in clause 21, page 13, line 22, leave out “public notice given” and insert “general direction made”.

This amendment means that the requirements of notices under new section 690A will be specified in a general direction made by HMRC rather than a public notice.

Amendment 19, in clause 21, page 15, line 38, at end insert—

“(3) Any direction given by an officer of Revenue and Customs under section 690 of ITEPA 2003 (employee non-resident etc) has no effect in relation to tax year 2025-2026 or any subsequent tax year.” —

This amendment means that any direction given under the old section 690 will cease to have effect in relation to future tax years.

Clause 21, as amended, agreed to.