When employees are sent on international assignment, tax outcomes can vary dramatically. Some countries have high income tax rates, while others have little or no personal taxation. Without proper planning, this can leave employees either better off or worse off than if they had stayed at home.
To create fairness and consistency, many multinational companies implement a tax equalisation or tax protection policy. At Türner & Co, we work with HR and finance teams at head office to ensure these policies are applied correctly for assignees in the UK.
We also provide UK shadow payroll services so that tax equalised employees are reported correctly to HMRC, while their global salary position is reconciled centrally at head office.
Tax equalisation ensures that an assignee’s net take-home pay is broadly the same as if they had remained in their home country.
This approach keeps the employee “tax neutral” and avoids assignment acceptance being influenced by tax considerations.
Tax protection ensures that the employee is not worse off because of tax differences.
This arrangement is less common, but it may be preferred in some groups where assignees are encouraged to accept postings to lower-tax countries.
Even if payroll is operated from the home country, the UK still requires reporting of assignee income through PAYE (Pay As You Earn). For tax equalised employees, we provide a shadow payroll service in the UK.
We can help your business at each stage of managing globally mobile employees:
Whether you are sending employees into the UK or sending UK employees abroad, we work alongside your head office teams and overseas advisors to ensure compliance, fairness, and clarity.
Tax equalisation ensures that an assignee pays no more and no less tax while working in the UK than they would have paid at home. The employer pays the actual UK and home country taxes, while the employee contributes a “hypothetical tax” based on their home country liability.
Under tax protection, the employee pays all actual taxes due but is reimbursed if the host country tax is higher than their home country liability. If the host country tax is lower, the employee keeps the benefit. With tax equalisation, by contrast, any tax refunds or extra liabilities belong to the employer.
A UK shadow payroll is a reporting mechanism that allows employers to meet HMRC requirements for assignees whose salaries are paid overseas. It ensures UK taxable earnings are reported correctly and aligns with the company’s tax equalisation or protection policy.
Not always. It depends on the employee’s UK tax residence, the terms of the assignment, and whether PAYE applies. We can assess the situation and confirm when shadow payroll is required.
Senior Manager
Head of Direct Taxes
