Short-term business visitors: March 2017

2 Mar 2017

airplane taking off

A PAYE liability may be triggered where an employee based outside the UK spends even a short amount of time working in the UK. Payroll easements are, however, available in some circumstances to reduce the administrative burden for those with employees coming to work temporarily in the UK.

Short-Term Business Visitor Agreements

Where employees based and employed outside the UK spend time working in the UK, a PAYE liability may be triggered for the associated UK business, even though the employee’s visit to the UK is short.

To reduce PAYE administration, HM Revenue & Customs (HMRC) allows employers to enter into Short-Term Business Visitor Agreements (STBVAs) which means employers do not need to apply PAYE provided certain conditions are met, and on the understanding that specified reporting and tracking processes are followed.

Key conditions for an STBVA to be granted include:

  • The individual coming to the UK must be resident in a country with which the UK has a Double Tax Agreement which includes the dependent personal services/income from employment article (Article 15 in the OECD Model Treaty) – ie the individual must be capable of qualifying for treaty exemption from UK tax on any earnings for temporary work in the UK.
  • The individual must not be expected to stay in the UK for more than 183 days in any 12 month period.
  • The associated UK business must not ultimately bear the cost of the employee’s remuneration.

This last condition is relaxed where the employee spends fewer than 60 days in the UK. In these cases, HMRC will accept that the UK business is not the individual’s economic employer and, therefore, any remuneration costs borne by the UK business can be ignored.

There are other conditions which need to be taken into account before applying for an STBVA. For example, an employee of a UK company who is sent to work for an overseas branch cannot be covered by an STBVA should they return to perform duties in the UK. Equally, such employees would not be covered by the 60-day rule.

However, should the individual be sent overseas to work for a separate overseas entity which becomes their economic employer, they can undertake work in the UK for that overseas employer and be within the scope of an STBVA.

An STBVA must be applied for, and PAYE should be operated where a formal STBVA is not in place.

Short-Term Business travellers

As outlined above, an STBVA is not available where the UK does not have a tax treaty with the employee’s country of residence, or where an existing treaty does not provide for exemption. A further easement, introduced in 2015, allows for reduced payroll reporting for certain short-term business visitors who do not qualify under an STBVA, such as those from non-treaty countries (the Short-Term Business Traveller Concession). This concession applies where non-resident employees work in the UK for fewer than 30 days per tax year. Employers can apply to HMRC to report and pay the PAYE due annually in respect of these employees. This avoids the need to report and pay through the Real Time Information (RTI) system in the relevant pay periods that the employee worked in the UK. Where the employees covered by these arrangements do not have any other UK tax liability, HMRC has confirmed they do not expect the employees themselves to file a UK tax return.

Please note the Short Term Business Traveller Concession does not apply to directors, or where there is a liability to UK National Insurance.

Again, the Short Term Business Traveller Concession must be applied for before the tax year in which it takes effect: in the absence of an agreement, or where individuals from non-treaty countries work for more than 30 days in the UK in a tax year, standard RTI reporting and payment deadlines apply.

Tracking employee travel

Where either an STBVA or Short Term Business Traveller Concession are entered into, employers need to monitor the time relevant employees spend in the UK to ensure that the relevant limits are not breached. This can prove complex in practice, and employers should consider the best approach to collecting and analysing data from internationally mobile employees.

When considering tracking time in the UK, employers should be aware that the definitions of relevant time differ between the two agreements. STBVAs are concerned with total time spent by an individual in the UK in a 12-month period, whether or not they are working (so, for instance, weekend days need to be counted). In contrast, the 30-day period for the Short Term Business Traveller Concession looks purely at UK workdays.

National Insurance contributions

The arrangements above only cover PAYE income tax and do not impact on National Insurance contributions (NICs). However as the employees covered will be employed outside the UK and only present in the UK for short periods of time, it is unlikely that there will be a liability to NICs because of the EU Social Security Regulations, UK bilateral totalisation agreements or the operation of the 52 week exemption for non-UK employees.

However, if there is a liability to NICs, this must be reported under RTI and paid to HMRC for the month the earnings arose. As noted above, if any NICs liability arises, the Short Term Business Traveller Concession is not available.