In today's global economy, business travel is an essential part of the job for many individuals. Employees regularly cross borders to attend conferences, meet clients, explore investments, and more. For employers, managing the tax compliance needs of their business travelers can be complex as each country has unique requirements that must be understood and followed.
This article delves into the intricacies of sending short-term business visitors (STBVs) to the United Kingdom (UK), offering valuable insights for companies navigating this process. STBVs encompass a wide range of individuals, including employees based in one location for payroll purposes but regularly working in other countries and professionals who travel between countries for work. However, SBTVs exclude statutory directors of a UK entity.
Below, our UK tax specialists explain key considerations for STBVs traveling to the United Kingdom, including tax withholding rules, the 60-day rule, and employer reporting obligations. By reviewing these key considerations, companies can ensure they meet UK tax regulations for their business visitors and avoid non-compliance penalties.
Short-Term UK Business Visitor Arrangements
UK Withholding Tax: Pay As You Earn (PAYE)
Under UK tax law, an employer has an obligation to withhold funds, known as Pay as You Earn (PAYE), for all employees, including international employees visiting the UK, from the first day of their visit.
PAYE withholding is required unless an exemption based on the income tax treaty in place is available and has been applied for under the STBV arrangements commonly known as Appendix 4 agreements.
This arrangement provides that PAYE can be disregarded if the individual is:
- Resident in a country with which the UK has a Double Taxation Agreement under which the Dependent Personal Services / Income from Employment Article (Article 15 or the equivalent) applies;
- Coming to work in the UK for a UK company or the UK branch of an overseas company, or are legally employed by a UK resident employer but economically employed by a separate non-resident entity;
- Expected to stay in the UK for 183 days or less in any consecutive twelve-month period; and
- Not dependent on the UK company to bear their costs of their remuneration (e.g., salary, wages, benefits, allowances, expenses), and no remuneration costs are recharged to the UK.
Any employer with business visitors to the UK should consider applying to His Majesty's Revenue and Customs (HMRC) for the Appendix 4 agreement to exempt STBVs from inclusion in UK payroll. Employers should note, however, that even if the PAYE exemption is correctly applied for and granted, they may still have the additional requirement to file an annual report of all business visitors to the UK. The level of information required is based on the total number of days the STBV spends in the UK during the relevant tax year.
Navigating the complexities of STBV arrangements can be challenging. At GTN, our tax advisers can help you navigate the requirements and provide practical solutions to ensure compliance. For more information about STBV rules or to discuss the best way to mitigate tax for your business travelers when they are in the UK, contact our STBV Team or complete our contact form.
The 60-Day Rule
Where an STBV is present in the UK for less than 60 days, no PAYE is due on that individual’s earnings (the 60-day rule).
PAYE can be avoided even if the remuneration costs are borne by a UK branch or permanent establishment of the overseas employer. However, this treatment is dependent on an STBV agreement being in place.
If a business visitor spends 60 days or more in the UK and the costs are charged to, or paid by, the UK entity, there will be an automatic obligation to withhold PAYE for that individual. They must be included on UK payroll to ensure that full compliance is met.
To consider whether the 60-day period has been exceeded, employers must take the following factors into account:
- Is there an expectation that the employee will return to the UK when they depart initially?
- How long is the gap between visits compared to the length of those visits?
- How frequently does the employee return to the UK?
- How integral to the business are the duties being performed?
It is important to note that this threshold should not be considered in isolation each tax year. HMRC can still consider that individuals have exceeded the 60-day limit if it is known they will spend more than 60 days in the UK over a longer period (known as a “linked period”).
STBV arrangements do not apply to business travelers from overseas branches of a UK entity which is then deemed to be the ultimate employer (and the treaty exemption does not then apply). Instead, employers with STBVs in this category can apply for a separate special arrangement which allows the reporting of taxable earnings in month 12 of UK payroll, provided that no more than 60 workdays have been spent in the UK.
Employer Reporting Requirements
Employers are required to submit annual reports to HMRC detailing their business visitors to the UK. The deadline for filing these employer reports is May 31 each year.
Different reporting requirements exist depending on the number of days individuals have spent in the UK.
To ensure ongoing compliance and timely submission of the appropriate data, companies should:
- Introduce and maintain an internal tracking and reporting system to accurately record employees visiting the UK on business.
- Continue to understand the nature of the business travel.
- Stay on top of all relevant exemptions.
- Apply for all relevant STBV arrangements in a timely manner.
Tax Advice for STBVs in the UK
Sending employees to the United Kingdom, even for short visits, may trigger important tax compliance obligations for companies. As outlined in this article, withholding rules, the 60-day threshold, and reporting requirements are complex, and non-compliance can lead to penalties, audits, and other issues. By reviewing the key considerations provided in this article, companies can be better prepared to meet regulations for short-term business visitors to the UK.
Due to the tax and compliance complexities, we recommend seeking expert guidance to avoid potential mistakes. GTN’s tax advisors are highly knowledgeable regarding UK requirements and can offer personalized advice related to compliance for your business travelers. By collaborating with specialists, companies can navigate this complex area smoothly to mitigate any compliance issues or pitfalls.
To discuss your specific situation and get help managing UK tax rules for your short-term business visitors, contact GTN today. Our team is ready to help you remain in full compliance as well as avoid any negative repercussions from non-adherence to important UK tax regulations.
