With the end of the tax year approaching, UK businesses will need to consider if they have correctly tracked and reported their short term business visitors. Any income earned by an employee working in the UK, even for a single day, may be liable to income tax (PAYE) and National Insurance Contributions (NIC). While the UK does have several Double Tax Agreements (DTAs) with countries that can mean the employee’s earnings are ultimately exempt from UK tax, businesses still have payroll obligations and they must plan ahead to avoid penalties and interest charges on underpaid tax.

How to correctly report short-term business visitors

A UK operation with short term business visitors to the UK should enter into an Appendix 4 short-term business visitors arrangement (STBVA) with HMRC. The STBVA can apply to visitors coming from a country with a DTA (with a relevant employment income or dependent services article) and can mean UK businesses don’t need to operate PAYE. It can also:

• Help address cash-flow issues and the administrative burden associated with tax withholding obligations for visitors to the UK.
• Eliminate the time and expense of filing UK tax returns for visitors already protected by a DTA.
• Provide peace of mind around PAYE compliance requirements for the UK operation.

Businesses who have applied for a STBVA will need to submit a report to HMRC by 31 May following the end of the relevant tax year. The amount of information that needs to be included in the report will depend upon the number of days the employee spent in the UK.

Other factors to be considered in respect of each short-term business visitor include:

• Whether the employer is an economic employer or a contractual one.
• Whether the individual visiting the UK is working for an overseas branch of a UK company.
• The nature of any internal recharges.

It is also a key requirement of a STBVA to have a robust tracking system in place for internationally mobile employees.

Limitations of the short-term business visitors’ arrangement:

• While a STBVA can exempt an employee from PAYE and offer relief to businesses, it also has limitations. A STBVA cannot be used where an employee is liable to UK NIC. There are situations where an employee will be exempt from UK NIC. For example, if an employee’s home country is in the EEA or Switzerland, and they have obtained an A1 certificate, they will pay social security contributions in that country rather than the UK.
• Individuals coming from countries with which the UK does not have a DTA (e.g. Brazil, where the new treaty is still to come into force), or from overseas branches of an international business cannot be included in a STBVA. However, a separate payroll relaxation (STBV Appendix 8) can be agreed with HMRC for individuals who spend 60 workdays or less in the UK in the tax year. This relaxation allows an annual payroll submission to be made after the end of the tax year, with any tax being due by 31 May following the tax year-end.
• Finally, non-UK-resident company directors visiting the UK are also ineligible for inclusion in a STBVA. For non-UK-resident company directors visiting the UK from overseas, we recommend seeking advice on the UK tax and NIC position as early as possible.

How we can help you

Our tax experts can help you manage the UK tax and NIC obligations of your internationally mobile staff. From guiding you through making a STBVA application to HMRC to advising on tracking systems recording employee movements, our specialists are on hand to address your needs.

We can also help identify cases where internationally mobile employees and directors have not been treated correctly and can help regularise their tax position with HMRC.

Get in touch with us today and find out how our experts can help.