Are your short-term business visitors from overseas HMRC-compliant?

26 April 2024

It is common for international businesses with UK operations to have overseas employees visit the UK for short-term business trips. UK businesses need to be aware that income tax and National Insurance contributions (NIC) obligations may be triggered by employees from day one in the UK.

The rule states that an individual physically working in the UK, even for a single day, is taxable on that day in the UK. However, several Double Tax Agreements (DTAs) exist between the UK and other countries that, provided certain conditions are met, can exclude the income earned while in the UK from UK taxation. 

When an employee of an international business visits the UK for a short-term business trip and performs substantive duties of their employment during that visit, the UK operation may be required to operate income tax and NIC on their earnings under PAYE in respect of that trip. This is the case regardless of:

  • how long the employee spends in the UK during the tax year;
  • which entity ultimately pays them; and
  • whether or not the individual is exempt from UK tax under a DTA. 

HMRC and short-term business visitors

HMRC’s stance on internationally mobile employees has become firmer over the years. Where non-compliance with PAYE obligations is identified, HMRC may seek to recover the underpaid tax and NIC from the UK business, along with penalties and interest charges.

A UK operation with short-term business visitors to the UK should therefore consider entering into an Appendix 4 short-term business visitors arrangement (STBVA) with HMRC. If visitors come from a country with which the UK has a DTA, containing a relevant employment income or dependant services article, the STBVA can remove the need for the UK business to operate PAYE. An STBVA report will need to be submitted to HMRC by 31 May following the end of the relevant tax year.

Several factors need to be considered before making an application for an STBVA, including:

  • the concept of economic employer versus contractual employer;
  • whether the individual visiting the UK is working for an overseas branch of a UK company; and
  • the nature of any internal recharges.

Having a robust tracking system in place for internationally mobile employees is also a key requirement of an STBVA.

In summary, an STBVA can offer the following benefits for the UK business:

  • it addresses the cash-flow issues and the administrative burden associated with tax withholding obligations for these visitors to the UK;
  • it eliminates the time and expense of filing UK tax returns for these employees to reclaim the UK tax withheld if they would otherwise be treaty-protected from UK tax; and
  • it provides peace of mind around PAYE compliance requirements for the UK business.

Limitations of the short-term business visitors’ arrangement

A STBVA does not apply for NIC purposes. The NIC position must be considered separately and the issue of whether UK NIC needs to be operated depends on the availability of an exemption. For instance, this could be because the employee’s home country is in the EEA or Switzerland, and they have obtained an A1 certificate allowing them to continue to pay social security contributions in that country.

Individuals coming from countries with which the UK does not have a DTA, or from overseas branches of the UK entity, cannot be included in a standard 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.

An STBVA cannot be applied in respect of non-UK resident company directors who are visiting the UK. For non-UK resident company directors visiting the UK from overseas, we recommend seeking advice regarding the UK tax and NIC position as early as possible.

How we can help you

We can help you with considering the UK PAYE, tax and NIC obligations arising from your internationally mobile employees and directors. We can, for example, provide guidance on making an STBVA application to HMRC, and advise on systems for monitoring and recording employee movements.

If internationally mobile employees and directors have not been treated correctly for tax and NIC purposes in the past, we can also assist with identifying any potential exposure for earlier years and how the position can be regularised with HMRC.

For a conversation around any of the above topics please get in touch with Ian Jones, Joanne Webber or your usual RSM contact.