How do I operate Foreign Tax Credit Relief for appendix 5 employees working overseas?
If an employee is working overseas, HMRC may allow you to operate FTCR using a procedure known as EP appendix 5. This involves reducing the amount of UK tax to take into account the amount of foreign tax deducted. For more information, please see HMRC's guidance.
Many payroll packages are not capable of correctly reporting the reduced UK tax in their RTI submissions, but The Payroll Site does have this ability. If you are operating appendix 5, you should use the system as normal except, after creating the pay run:
- Use the 'Extra Options' column on the right to enter a Deduction from Net Pay for the amount of foreign tax.
- Once you have completed that page, click 'Calculate Deductions' as you normally would.
- Next click the 'Edit' button next to the employee's name, manually change the amount of UK tax and click 'Save Changes'.
Once you have confirmed the pay run and created the RTI submission, it will include the correct figures for Tax and for Deductions from Net Pay. As with all of our RTI submissions, you can view and print it before deciding whether to send it to HMRC.