Short-term business visitors
Short-term business visitors (STBVs) are individuals who are not resident in the UK for tax purposes but make working trips to the UK.
There are two PAYE scenarios that apply to STBVs:
Working for a UK company, the UK branch of an overseas company or an overseas company
https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye82000
Where the below criteria are met, the UK employer can apply to HMRC for a Short Term Business Visitor Agreement (STBVA) which relaxes the obligation to deduct and report PAYE for STBVs.
This applies when the employee is:
- resident in a country with which the UK has a Double Taxation Agreement (DTA) and a competent 'Income from Employment' article
- 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 twelve month period
There is also an additional condition regarding payment of remuneration:
- <60 days in UK - UK company must show the employee is paid via an overseas payroll scheme
- >60 days in UK - UK company must show it will not ultimately bear the cost of the remuneration
Providing these criteria are met, PAYE does not need to be deducted. Instead, an annual report can be filed detailing individuals included within the agreement. This must be done by 31st May following the end of the tax year.
There are different reporting requirements depending on the number of days that the employee is in the UK. Details of these can be found on the HMRC link above along with a copy of any relevant forms to be sent to HMRC.
One important point of note is that if an employer only has one or two employees potentially affected they may like to consider applying for an NT tax code on an individual basis instead of applying for a STBV agreement.
Working for an overseas parent, subsidiary or associated company of a UK company or where STBVA criteria not met
https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye81950
In this case, PAYE is due from the employees first day of work in the UK, and the UK company is required to operate PAYE. However, if the operation of a normal PAYE scheme is 'impracticable' a PAYE Special Arrangement can be used which allows collection of tax on an annual rather than monthly basis.
Important points to note:
- Non-resident directors of the UK company must not be included in this arrangement
- The arrangement only applies to STBVs with 60 or less UK work days
- The arrangement does not cover National Insurance, so any STBV who has a Class 1 NICs liability cannot be included
A copy of the application form to be submitted can be found at the above HMRC link.
Upon receipt and acceptance of the application, HMRC will set up an annual PAYE scheme to enable the UK employer to account for tax on the payments made, and the cash equivalent of any benefits provided, to the employee covered by the arrangement.
The above amounts must be reported, and the PAYE paid, to HMRC on an RTI submission by 31st May following the end of the tax year up until the scheme is closed by either HMRC or the employer. If there are no employees eligible to be included in a tax year, a nil submission must be filed by the same deadline.
If it is the case that the employee believes they will not owe tax in the UK, for example because they are entitled to a personal allowance and their salary is expected to be lower than this, they could ask HMRC to operate an 'NT" tax code which means no tax would be deducted from their salary.
Alternatively, on leaving the UK they could complete a P85 for to reclaim any overpaid tax. https://www.gov.uk/guidance/get-your-income-tax-right-if-youre-leaving-the-uk-p85
The STBV rules are complex, so please contact us should you require clarification before welcoming an overseas employee to the UK.