Many employers are unaware of the legal requirement to track and report employees making business trips within the UK and overseas. Through our specialist experience and dedicated "Whereabouts" technology solution, GTN can help to ensure you are meeting your obligations on a worldwide basis.
Short Term Business Visitor Arrangements
In the UK, all business visitors (and short term assignees) are liable to UK tax withholding (known as PAYE) from day one unless an application is made under the Short Term Business Visitor Arrangements for exemption based on treaty relief. This would relax the strict PAYE rules for these individuals and would typically be the case where there is a double taxation agreement in force between the UK and the individual’s home country, and where they intend to spend less than 183 days in the UK, and salary costs are not recharged to the UK entity.
Any employer who has business visitors to the UK should consider applying to HMRC for the Appendix 4 scheme and approval for the non inclusion of the STBV on payroll.However, even if PAYE exemption is correctly applied for and received, an employer may still have the additional requirement to file an annual report of all business visitors. The level of information required is based on the total number of days in the UK during the relevant tax year.
One helpful aspect is that there is a threshold under which no reporting is required, although this is set at a fairly low level of 30 days in a tax year.
For those spending 30 to 60 days in the UK, reporting can also be avoided provided that there is no formal contract with the UK employer and the visit is not part of a longer and more substantial period in the UK.
HMRC has included some amendments to the STBV rules which should be considered.Firstly, by defining more closely the 60 day rule and how this applies to individuals where the days form part of a longer period.
HMRC has provided some further explanation of the definition of ‘substantial period’
To consider whether the 60-day period has been exceeded, the following factors may be relevant:
- Is there an expectation that the employee will return to the UK when they depart initially?
- How long is the gap between visits in comparison to the length of those visits?
- How frequently does the employee return to the UK?
- How integral to the business are the duties performed?
Where a business visitor spends more than 60 days in the UK, an employer must prepare and submit an individual report to the tax authorities. The report must include details such as the name and address of the assignee, duties of employment, the country in which a tax return is filed declaring worldwide income, and confirmation that the UK Company has not borne the costs of the assignment.
HMRC is also introducing, on a trial basis, an advance approval for an individual to be considered as a STBV, where they spend more than 60 days in the UK and the costs are recharged back to or paid by the UK, providing that under the respective double tax treaty the individual will qualify as a treaty resident of the home country.This is a change to the current position where the treaty relief claim would have previously need to have been made on the individual’s self assessment return.
Where a business visitor spends more than 90 days in the UK, further information is required, including a copy of an overseas tax residence certificate (from the home country tax authority) or evidence of continuing residence for U.S. citizens. The report must also contain details of the individual’s nationality, place of birth, country where they normally live, UK arrival date, and confirmation that they have not spent 183 or more days in the UK in any tax year, or more than 364 days in the UK in the past five tax years.
HMRC also need advance approval of any individuals who intent to be in the UK between 151 and 183 days in order for them to qualify as a STBV for the year.The individuals should be reported to HMRC as soon as it is known that they will be in the UK for this length of time, so in year proactive tracking will be very important to ensure this category can continue to be eligible.The individual will also be required to produce at the year end a certificate of continuing residency from their home country (or in the case of US a copy of a utility bill for the relevant period).
The position for treatment of employees employed by branches has been an ongoing issue, and HMRC will not treat a branch as a separate legal entity to the respective company.This means that an employee of the branch by definition must also be an employee of the parent company.This means that the standard STBV exemptions will not be applicable in this case and PAYE should be operated from day 1.Whilst some discussion exists on whether a de minimus number of days would be considered by HMRC for incidental days, no confirmation on this is forthcoming, and again an advance agreement with HMRC would be required.
In the absence if this, individuals would have to be included on payroll, whether local or modified, with an 0T tax code, and consider whether they are entitled to a refund through self assessment at the year end.For EU citizens the income based on UK days may be less than the personal allowance and therefore a reclaim of taxes could be made, but for other nationalities such as US citizens no reclaim of tax would be permissible and a foreign tax credit claim would be required in their home country for the UK taxes paid.
In order to benefit from the PAYE exemption, an employer must put in place some form of internal reporting system to keep an accurate record of employees visiting the UK on business. HMRC does not produce guidance on the required method and this should be something that works internally for the company itself.Employees must also periodically report details of visits to a central company administrator responsible for maintaining such records. Failure to maintain accurate records will result in an employer being required to operate PAYE for all business visitors and (where appropriate) file a tax treaty claim for refund of the tax withheld on a tax return at year end, possibly some 18 months later!
The key for any UK employer receiving overseas business visitors (that does not already have a system in place) will be to apply for the Short Term Business Visitor Agreement as soon as possible and introduce and maintain an appropriate tracking system. This is now a “hot topic” in the UK and will always be near the top of the list in the event of an employer compliance review.