Where a UK company is part of an international group, it will be common for group employees to visit the UK to perform duties for the UK company. Where these visits form part of a secondment arrangement, resulting in the employee becoming UK tax resident, the UK company’s obligations are likely to be clear – UK income tax and national insurance (if applicable) will need to be deducted via Pay As You Earn (PAYE) when their secondment commences.
However, not all organisations will be aware that a PAYE obligation also exists where group employees visit the UK and perform duties here on a short term basis. These visits could be for a number of days, weeks or months and the UK company will be treated as the employee’s ‘host employer’ for UK tax purposes.
For Short Term Business Visitors (STBV), the basic position is that the UK company must operate PAYE in relation to the visiting employee’s UK workdays – the obligation applies even if the UK company has not incurred the associated salary cost.This can be a considerable compliance burden as companies must monitor their visitors and UK workdays to ensure that PAYE is operated correctly under Real Time Information. There is no de-minimus and a single UK workday would be caught.
The good news is that the PAYE obligation in respect of income tax can be removed if the UK company is able to enter into a STBV agreement with HM Revenue & Customs (HMRC).A STBV agreement will be available if the UK has a Double Tax Treaty in place with the employee’s home jurisdiction, which provides that their salary should not be subject to double taxation. The STBV agreement acts to modify the basic PAYE requirement to reflect the income tax relief available under the treaty.
For the agreement to be effective, the relevant employee must not spend more than 183 days in the UK in any 12 month period and the UK company must not bear the cost in respect of their UK workdays (although HMRC have stated that the latter requirement is relaxed if the employee spends less than 60 days in the UK). Even with an agreement in place, it is still necessary to maintain detailed records of UK visits and a report must be made to HMRC in respect of employees who worked in the UK for more than 60 days – this is due for submission by 31 May following the end of the tax year.
It is important to note that the STBV rules are not restricted to visitors from group companies – if an employee of an external organisations visited the UK to perform duties for the company, this could also be caught. UK employers should therefore consider all visitors when reviewing the position and establishing if an STBV agreement is required.
Unfortunately the national insurance position of the visiting employee is outside the scope of the STBV agreement and must be considered separately. The exposure to national insurance contributions (for both the employee and employer) will be dependent on the number of days spent in the UK by the employee and the terms of any social security agreement in place between the UK and their home country. The UK has a wide ranging agreement in place with other EU/EEA member states and there are also many individual agreements with other countries.