Short-Term Business Visitors (STBV)– Are you compliant?

Are you thinking about taking advantage of the expertise of those based overseas? Do you have staff coming to the UK for short periods of time to undertake specific pieces of work or to attend meetings? Now more than ever, Global Mobility forms a key part of strategic business planning. But there’s often a misconception that no tax liability or reporting requirement exists in relation to short-term business visitors working in the UK, and that tax relief will apply automatically under a Double Taxation Agreement. In reality, there are many factors that impact the tax and social security compliance obligations for your business in the UK. 

Strictly speaking, if an individual physically works in the UK for any period of time, a UK income tax charge may arise in relation to their earnings associated with the UK workdays. Furthermore, if the individual is working for an employer who has a place of business in the UK, then the employer will be obliged to withhold tax via PAYE. As this continues to be an area of focus for HMRC, it is imperative that you have reviewed the position for any visitors working in the UK, are aware of your obligations and remain compliant in the UK. 

What are the requirements for Short-Term Business Visitors?

UK companies and branches will often have an obligation to operate PAYE to collect any income tax due on STBVs’ earnings. However, it’s possible for UK businesses to apply for a for a relaxation of the PAYE requirements in respect of their STBV population. 

There are two key payroll-related relaxations to assist employers in addressing their PAYE obligation in respect of STBVs: 

• EP Appendix 4 (STBV agreement) and 

• EP Appendix 8 (PAYE special arrangement for short-term business visitors) 

What is it and what does it mean?

EP Appendix 4

Providing specific criteria are met, individuals who are primarily employed overseas but work in the UK for short periods of time may fall within the Short-Term Business Visitors (STBV) legislation. This allows for an exemption to apply, removing the requirement for the employer to operate UK PAYE for these individuals. 

For the STBV legislation and exemption to apply, it is important that the following conditions are met. 

• The individual is resident in a country with which the UK has a Double Taxation Agreement. 

• The individual comes to work in the UK for a UK company or the UK branch of an overseas company, or is legally employed by a UK resident employer, but is economically employed by a separate non-resident entity. 

• The individual is expected to stay in the UK for 183 days or less in a 12-month period (the specific period to be considered will depend on the relevant Double Taxation Agreement). 

In addition, the employer must have approval from HMRC to operate this exemption, known as an ‘Appendix 4’ STBV Agreement. The STBV agreement details the additional criteria that must be met in order to apply the agreement. Approval is obtained by applying to HMRC. 

Although there is no requirement to operate PAYE for STBVs, under an Appendix 4 arrangement, HMRC require employers to complete annual reporting by 31st May following the end of the tax year in which the individuals were present in the UK. The level of reporting required is dependent on the number of days that the individual was present in the UK during the year. 

EP Appendix 8

The EP Appendix 4 only relaxes the PAYE requirements for individuals who meet the criteria of a relevant Double Taxation Agreement. It does not cover non-resident employees employed by a foreign branch of a UK company, individuals coming from non-tax treaty countries, or scenarios where the treaty conditions are not met (e.g. due to a recharge of remuneration costs to the UK). In these circumstances, the only option for an organisation is to operate PAYE. 

The EP Appendix 8 Scheme was introduced for employers who are required to operate PAYE for certain inbound visitors that do not qualify for inclusion on the Appendix 4 agreement. Provided the visitor has spent no more than 60 days working in the UK during the tax year, the scheme allows employers to account for the tax due in respect of their visits to the UK for the whole tax year and operate PAYE on an annual basis, with the tax payable and associated payroll reporting to take place after the end of the tax year. Again, the application sets out the criteria for the different categories of visitors. 

Employers are required to make an application to HMRC to operate the scheme, then report, calculate and pay the appropriate tax by 31st May following the end of the tax year. 

Social Security

As well as meeting their tax and PAYE obligations as set out above, employers should consider whether there is any exposure to UK National Insurance for their inbound business visitors. For STBVs employed in the EU or in a country that has a Social Security Agreement with the UK, it will often be advisable to obtain a Certificate of Coverage to ensure that no employee or employer National Insurance is due. 

How can AAB help?

Global tax and social security compliance is increasingly an area of focus for HMRC, and our Global Mobility & Tax team at AAB can help you prepare. We can assist by reviewing your current population and processes for identifying any UK inbound business travel, making the necessary applications to HMRC, and assisting with any annual filing requirements. 

If you require any assistance with reviewing the obligations for your organisation, obtaining an STBV agreement or completing the annual reporting, please do not hesitate to get in contact with Claudia Zwirn, or your usual AAB contact.