Many startups hire people from abroad, and then pay for their visa costs when the employee moves over to the UK. Whilst this does seem like a normal business expense, there are some important considerations and nuances to take into account.
If an employer meets the costs of a Visa application, the tax treatment depends on whether or not the individual is already in the UK:
- If the applicant is a non-domiciled individual who is currently outside the UK, no liability to income tax or NICs will arise for that individual.
- If the applicant is already in the UK, amounts paid or reimbursed by the employer will be subject to income tax and NICs, usually through the payroll or year end benefit (P11D) reporting.
In the case of individuals that are outside the UK, HMRC consider the costs of the Visa application to be travel related, and therefore an allowable business expense. However, where the individual is already in the UK, HMRC do not accept that the Visa application costs are travel costs and further argue that the application costs are not incurred “in the performance of the duties of employment”, meaning that they would not be a tax deductible cost for the business.