With this arrangement, you can reduce the amount of UK tax by the amount of foreign tax. This helps prevent the employee paying full taxes to both the UK and the foreign body, and it can reduce your liabilities to HMRC. You can only offset the value of the foreign tax up to the value of the UK tax. Then report the reduced and foreign amounts of tax to HMRC under RTI. Your software includes information about the reduced UK tax values, and the foreign tax on your full payment submission (FPS). Before you can operate a net of foreign tax arrangement, you must first register to HMRC to do so. NOTE: Appendix 5 doesn't automatically change the employee's NI category. If you're unsure which NI category to use for an employee, contact HMRC.
Enable net of foreign tax credit relief If you need to use this arrangement and you've registered with HMRC, you need to ▼ enable it in your software. - Click Company then click Settings.
- In the Details tab, select the Operate net of foreign tax credit relief checkbox.
- Click OK then click OK.
Set an employee as paying foreign tax Once you've enabled this arrangement in your Sage 50 Payroll company, ▼ enable it for the relevant employees. Enable individual employees via their employee record, or enable for multiple employees using Global Changes. Appendix 5 typically requires a Week 1 / Month 1 tax code for affected employees. If you're not certain which tax code to use, contact HMRC. From the employee record - On the Employee List, double-click the required employee.
- Click the Employment tab.
- Select the Operate net of foreign tax credit relief checkbox then click OK.
- If the employee's tax code is cumulative, a message appears to advise you of this. Select OK to acknowledge this.
- If HMRC provides a non-cumulative tax code, select the Week 1/Month 1 Basis checkbox
- Click Save then click Close.
- Ensure that you use the correct tax code as specified by HMRC. If the tax code is cumulative, don’t select this checkbox
Using Global Changes - On the Employee List, select the required employees.
- Click Tasks then click Global Changes.
- Click Net of Foreign Tax then click Set Net of Foreign Tax Flag.
- Click Yes then click OK.
- If you need to set any employees' tax codes as non-cumulative, select them on your employee list now.
- Click Tasks then click Global Changes.
- Click Tax Codes then click Set Week 1/Month 1 flag then click Yes.
- Ensure that you use the correct tax code as specified by HMRC. If the tax code is cumulative, don’t select this checkbox
Record foreign tax amounts Once you're set up, you can use Enter Payments to ▼ enter foreign tax values. - On the Employee List, select the required employees.
- Click Payroll then click Enter Payments.
- Click the Payments tab then Foreign Tax.
- If the Foreign Tax button doesn't appear, check you enabled Appendix 5 in the employee's record. If the issue persists, go to the Summary tab and check for the Foreign Tax button here.
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Enter the amount of foreign tax due in the current period. If you're advancing pay, enter this for the advanced period then select OK. After entering the relevant foreign tax, the amount of PAYE in Enter Payments will still show the full value of tax owed by the employee. However, the foreign tax you entered is now part of this value. Sometimes the amount of Foreign tax exceeds the amount of UK tax in a period, or if the employee is due a tax refund. Refer to the Common Questions section for information on this scenario.
Check amounts deducted To check the year to date total, or for previous periods, ▼ check the employee's record. - On the Employee List, double-click the required employee.
- Click the Employment tab then click YTD Values.
- Click the Tax tab then in Foreign Tax.
- Check the amount shown in the Foreign Tax-Deducted box.
- If required, to check the amounts for individual periods, select the + button. You can then view the amounts for each pay period.
Stop using this arrangement If you need to stop using the net of foreign tax arrangement for any employees, you can ▼ disable it in the employee record. Before you stop operating the net of foreign tax credit relief arrangement, you must inform HMRC. From the employee record - On the Employee List, double-click the required employee.
- Click the Employment tab then clear the Operate net of foreign tax credit relief checkbox.
- To set your employee's tax code as week 1 / month 1, select the Week 1/Month 1 checkbox.
- Click Save then click Close.
Using Global Changes - On the Employee List, select the required employees
- Click Tasks then click Global Changes.
- Click Net of Foreign Tax then click Clear Net of Foreign Tax Flag.
- Click Yes then click OK.
- Click Tasks then click Global Changes.
- Click Tax Codes then click Set Week 1/Month 1 flag then click Yes.
Where foreign tax appears in Sage 50 Payroll Reports Most standard reports and payslip layouts within Sage 50 Payroll show the full amount of UK tax, excluding any foreign tax. Here’s how some of the most common reports ▼ display the information. - Payslips - Show the full UK tax figure
- P32 Employer Payment Record - Shows the reduced amount of tax due to HMRC
- P45 - Shows the reduced amount of tax due to HMRC
- P60 - Shows the reduced amount of tax due to HMRC
Payslip layout If you prefer, you can ▼ add net of foreign tax information to your payslip layout. - Click Payroll, then Pre-update Reports.
- Right-click the payslip you want to amend, and select Edit.
- The Sage Report Designer opens. Click Toolbox, then Add Expression.
- On the report layout, select where you want to add the new field. The Expression editor opens.
- In the Fields box to the bottom-right box, double-click CurrentPay.
- Scroll down this list of expressions and double-click ForeignTaxCreditCur.
- The required expression CurrentPay.ForeignTaxCreditCur now appears in the large window of the Expression editor. Select OK.
- Move or resize the data field on the payslip by clicking and dragging the edges of the box.
- On the menu bar click Toolbox, then select Add Text.
- This text field is to explain what the Appendix 5 value is. The steps you followed above only added the value, with no description
- Click once where you want the text to appear, beside the foreign tax expression.
- Enter the text you want, for example 'Appendix 5' then click a blank area.
- Click and drag to move or resize the text box, or change the text font or colour.
- Click File, then Save as.
- Double-click the REPORTS folder, then double-click the folder for the type of payslip you've edited:
- For a Laser payslip, double-click the PAYSLIPSLASER folder
- For an Email payslip, double-click the PayslipsEmail folder
- For a Dot-Matrix payslip, double-click the PAYSLIPSDOTMATRIX folder
- Update the name for this amended payslip, and click OK.
Your updated payslip is now available to use within Pre-update Reports. For further information on amending payslips, visit our report designer - the basics article.
Nominal Link If you post salary journals using the nominal Link to your accounts program, your software posts the full UK tax value. To show the amount of foreign tax, you must record a salary journal in your accounts program.
Full Payment Submission (FPS) The FPS liability only shows the full UK PAYE value for the employee. In the background, the FPS also contains their taxable pay, the UK PAYE, and any ▼ foreign tax that you've entered. | Name | Value | | Taxable Pay in This Period | Taxable gross pay | | Deductions From Net Pay | The foreign tax amount in the current period, and any other deductions from net pay. | | Tax Deducted or Refunded | The adjusted UK PAYE value. | | Taxable Pay to Date | The taxable gross pay for the full year to date. | | Total Tax to Date | The adjusted UK PAYE figure for the full year to date. | The adjusted UK PAYE is the value after deducting any foreign tax amount from the UK calculated value. Legislation caps this at zero, so will never show a negative amount.
Download extra reports Alternatively, to view the UK tax, foreign tax, and any shortfall, you can ▼ run the following reports. - Click Help then click About.
- Note the path shown for the Reports directory.
- Click the Download report button for the required report below.
The following reports are available: | Report name | Details | | Appendix 5 - Amount summary | This report appears in Pre-update Reports > User Defined (Local). It shows the reduced UK Tax and foreign tax in the current period from enter payments. |  | | Appendix 5 - End of year employer report | This report appears in Reports > User Defined (Local). This report provides an end of year summary |  | | Appendix 5 - Leaver statement of Overseas Tax | This report appears in Reports > User Defined (Local). This report shows a summary of the foreign tax for you to issue to an affected leaver. |  | The steps below refer to downloading the report using Internet Explorer with its default settings. - If prompted,enter your Sage account login details then select Log in then select the required company.
- Click Download then click Save.
- Browse to the reports directory you noted in step 2.
- Double-click the UserDef folder then click Save.
- If required, repeat these steps for any additional reports.
You can now run the required report from the folder listed in the table above.
Common Questions For further information on this arrangement, view the ▼ frequently asked questions. Why does the full amount of UK tax still show on the employee's payslip? All standard payslips within Sage 50 Payroll show the full amount of UK tax on the employee's pay, excluding any foreign tax. If you prefer, you can add net of foreign tax information to your payslip layout. Alternatively, you can download and run the Appendix 5 reports. For more information, refer to the Reports section under the where foreign tax appears in Sage 50 Payroll heading. I've received foreign tax figures at the end of the year. Can I enter YTDs? As foreign tax is processed period by period, you can’t enter YTD values for foreign tax. Enter any foreign tax figures in Enter Payments against the value of UK PAYE in that period. Alternatively, you may be able to roll back and reprocess to the employee to split out the values. We recommend you contact HMRC for further guidance and authorisation first. I only find out every quarter the amount of foreign tax, is this supported? Yes, however, you can only enter foreign tax values on a period by period basis. Enter any foreign tax figures in Enter Payments against the value of UK PAYE in that period. Alternatively, consider rolling back to reprocess the employee's pay with values per period. We recommend you contact HMRC for further guidance and authorisation first. The amount of foreign tax is greater than the UK amount. Is there anything extra I must do? Sometimes the amount of foreign tax is greater than the amount of UK tax. The employee still needs to pay the full amount of foreign tax to the foreign body. To do this, first enter the relevant amount of foreign tax in Enter Payments. Your software automatically caps this by the amount of UK tax, and doesn't calculate anything above this. To deduct the extra amount of foreign tax owed, set up a post-tax, post-NI deduction for the excess foreign tax. What happens if my employee gets a tax refund? If an employee is due a tax refund, the amount of tax you can deduct is the reduced amount of UK PAYE for the tax year. This is the value after deducting any foreign tax. You can't refund foreign tax to the employee. For example: An employee has paid £1000 of tax to date, including £600 of foreign tax. The maximum amount of tax the employee you can refund is be £400. If an employee receives a UK tax refund, then you can't enter any normal foreign tax for that period. Enter the foreign tax for that period as a post-tax, post-national insurance deduction. [BCB:19:UK - Sales message :ECB] |