Important considerations for business visitors to the UK

Having employees who work outside of their home country or not where your company is based is increasingly common; however the importance of complying with the UK tax authorities’ rules on short term visitors to the UK should not be overlooked.

The challenges become even harder to manage when you have non-UK resident directors visiting the UK, where the risk profile and complexity increases significantly.

International groups and visitors from overseas

According to the EY 2023 Attractiveness Survey, the UK led Europe in 2022 on total job creation, demonstrating its attractiveness to international companies setting up subsidiaries.

When multinationals set up a UK subsidiary, it is commonplace for employees from sister or parent companies to visit the UK as part of business trips.

Whilst companies often recognise the need to consult local HR, Payroll and Tax experts when sending employees over on longer term secondments and assignments, what many companies overlook is the potential obligation to report and withhold UK Pay As You Earn (PAYE) and National Insurance Contributions (NIC) on much shorter stays and visits to the UK.

What is a ‘short term visit’ to the UK for tax purposes?

The UK tax authorities, HM Revenue & Customs, view any visit to the UK for business purposes which is less than 183 days in total over a 12 month period as requiring consideration from a tax perspective.

Why isn’t a double tax treaty enough?

For employees who are only visiting the UK for a limited period of time, there is often the misconception that providing there is a double tax treaty in place between the two countries that the employee is moving from and to, that no tax liability or reporting requirement exists. This is unfortunately not the case, and a PAYE obligation will often arise from the first day the employee works in the UK.

Should I implement a Short Term Business Visitor Agreement?

Most companies who send employees to the UK for short visits put in place a Short Term Business Visitor (STBV) agreement with HM Revenue & Customs (HMRC) to exempt them from the need to operate PAYE on these stays.

This is most commonly in the form of an EP appendix 4 agreement, or in rarer cases an EP appendix 8 agreement, for countries that do not have a Double Tax Agreement in place with the UK.

If an EP appendix 4 agreement is in place, then PAYE will not need to be deducted. Instead, the company will have to keep detailed records of the visitors they have to the UK each year and make an annual filing with HMRC no later than 31 May to declare the number of days people have stayed. The filing requirements differ depending on the number of days that any individual has been in the UK during the tax year, increasing in complexity and detail as the length of stay increases.

A STBV agreement can only be put in place with HMRC if a business visitor is expected to be in the UK for less than 183 days over a 12 month period, and their costs for being in the UK are ultimately borne by the company from which they have visited.

Do I need to have a STBV for each individual employee?

A STBV agreement is submitted in the company’s name and so will not need to be submitted for each new business visitor that comes to the UK. If no business visitors come to the UK at all in the year, no filing is required to be made with HMRC.

What about Directors?

One area not covered by a STBV agreement is visits from directors who are non-resident in the UK.

It is a regular occurrence within international groups for directors to be employed and paid by one company, but to hold directorships in at least one other, or in some cases several, of the group’s businesses across a range of countries. Costs relating to remuneration or travel and subsistence costs may be borne in or cross-charged to the UK, but even where they are not, UK reporting obligations will arise, which are likely to include operation of PAYE and NIC.

The complexity lies in understanding the purpose of business visits to the UK, and whether the UK trip is in the capacity as director. In the absence of clear information to the contrary, the assumption from HMRC will be the visit was in their capacity as a UK director.

If a director who is not resident in the UK is a statutory director of a UK group company, they are an ‘office holder’ in that company and any UK duties (board meetings or wider director responsibilities) will trigger a PAYE liability. Therefore, even if a non-resident director has historically attended UK board meeting remotely, if they attend even one meeting in-person, an obligation to operate PAYE and report for RTI (Real Time Information) purposes will arise.

What does this mean from a payroll perspective?

When it comes to the operation of PAYE, HMRC disregards that an individual may be paid for non-UK directorships which relate to the company’s other overseas offices. When in the UK, HMRC consider the PAYE obligations for those duties to fall on the UK company.

The company will therefore need to obtain details of the overseas remuneration to calculate the PAYE payable for the time in which the employee is in the UK.

Given the seniority of the individual, this may be difficult to obtain; however the absence of agreeing a particular method or percentage of withholding PAYE means that technically 100% of a director’s worldwide remuneration should be taxed in the UK.

What are the social security implications for directors on short visits to the UK?

The social security position differs to the income tax position, with both the company and employee potentially liable to pay social security in both the UK and their home country in full, without any relief available for the double charge.

Whether or not the UK duties of a non-UK-resident director trigger UK National Insurance Contributions depends on the director’s country of residence and whether there is a social security agreement between the UK and that country. This agreement is referred to as a ‘certificate of coverage’ (known as an ‘A1 certificate’ in the EU) and can be obtained from the director’s country of residence to provide exemption from UK social security.

In cases where HMRC perform an inspection or audit, the certificate of coverage will need to be evidenced.

Are there any concessions available?

For countries with which the UK does not have a social security agreement there is a limited administrative concession which may relieve the obligation to operate National Insurance Contributions. Broadly, the concession can apply if the individual:

• makes brief visits to the UK (two nights or less)
• attends board meetings only
• attends no more than 10 board meetings a year (or a single board meeting of up to two weeks).

Unless the terms of the concession are met in full, then UK social security remains due, and all UK directorships need to be taken into account for this purpose.

How easily can HMRC identify non-compliance?

The fact that a company’s directors – whether resident or non-resident in the UK – are all listed on Companies House means it is very straightforward for HMRC to check whether there is potential non-compliance.

The Companies House public record will hold information on all directors’ nationalities, and true country of residence, even if the address given is a UK registered office address (such as that of the UK company itself). Cross checking this data against the company’s PAYE RTI submissions can immediately highlight that no PAYE is being operated on one or more of the non-resident directors in a tax year. As with any failure to operate the correct payroll and social security where required, interest and penalties will almost certainly be charged, with HMRC also potentially scrutinising other areas of compliance (including other taxes, such as VAT and Corporation Tax).

Getting the tax reporting position wrong can also result in a strained relationship with the director who may understandably be disappointed to have their name associated with non-compliance, even if inadvertent.

How ZEDRA can help

Our team of experts based in the UK and around the world have decades of experiencing helping companies navigate a wide range of global expansion issues including global mobility and managing an international workforce. Although the STBV arrangement outlined above is unique to the UK, other countries operate their own rules for business visitors, so it is always important to seek advice before sending employees or directors overseas regardless of the length of stay.

Contact Sean O’Sullivan to find out how we can help you in the UK and beyond.