Recognising the additional burden on UK employers, an agreement annexed to Annex 4 allows for a relaxation of the usual PAYE rules for business travellers to the UK and allows the UK company to assess for itself whether taxes are due. Second, the agreement now clarifies the position on what is commonly referred to as the „60-day rule.” Under the 60-day rule, exemption from income tax is still allowed in the UK under a tax treaty, even if the costs of the employee`s remuneration are charged to the UK company, provided that all other conditions are met. This is done on the basis that the employee`s visits to the UK are less than 60 days. UK employers who have not yet reached an STBV agreement should do so as soon as possible to mitigate interest rates and potential penalties for PAY that do not work. Under UK tax law, an employer is required to withhold funds known as Pay as You Earn (PAYE) for all employees, including international employees, who visit the UK. This is the case unless there is an exemption on the basis of contract facilitation and it has been requested under short-term business travel agreements (STBVs) (often referred to as Annex 4 agreements). If no agreement has been reached, full retention must be applied. HMRC has announced the revision of the STBV agreement in two respects. If you don`t have an STBV agreement, it`s not too late.
You can submit an application and an annual report before the deadline of May 31, 2018 if you have the required data for the 2017/18 tax year. To help you with reports, please read our related content on short-term reports from business visitors. In many cases, however, there is a double taxation treaty that will reduce the UK`s tax liability. HMRC recognises this by allowing UK companies and organisations to sign an STBV agreement. First, the agreement was extended to persons legally employed by an employer based in the United Kingdom but economically employed by an employer not established in the United Kingdom. If the home country entity is an international branch of a UK company, HMRC does not treat that branch of the UK entity as a separate legal entity under the STBV agreements. This means that an employee of an international branch of a UK company is considered a UK employee under the relevant tax treaty. In these cases, standard PAYE exceptions do not apply and visiting staff must be included in the UK payroll for all days they work in the UK, whether or not the costs are completed. While there is a discussion about whether a small number of days would be considered incidental by HMRC, there is no confirmation of this, and again, prior agreement with HMRC would be required.
This news has since been repeated several times and HMRC has confirmed that any company or organisation that receives business visitors who do not have an agreement and do not operate PAYE will be subject to penalties and interest. Below, we`ve given some additional tips on how to comply with short-term business visitors. Since April 2013, HMRC has intensified its practice. PayE withholding is due from the first working day in the UK, unless the employer has an STBV agreement. Without the agreement, there is a risk of PAYE default penalties, interest and additional controls if PAYE is not retained. If the conditions are met, a UK employer can ask HMRC not to operate PAYE on the basis of the short-term income of business travellers. This is called the Short-Term Business Visitor Agreement (STBVA) or the Schedule 4 Agreement. By entering into this agreement, HMRC grants the employer an exemption from not operating PAYE for visitors to the UK who are eligible for a tax exemption under a double taxation agreement. The UK company or organisation undertakes to track who visits the UK and to submit an annual submission to HMRC (by 31 May after the end of the tax year) indicating the number of visitors and the length of their stay in the UK. Before delving deeper into this topic, let`s first determine what we mean by short-term business visitors (STBV). For employment purposes, STBVs are persons who make business trips to the United Kingdom but are not resident for tax purposes in the United Kingdom. Whether a person is a resident of the United Kingdom generally depends on the number of days they spend there during the tax year.
Many employers mistakenly assume that a short-term business visitor is taxed in their home country and therefore there is no tax liability in the UK or reporting obligation for the UK host employer. This is rarely the case. This Agreement shall remain in effect until one of the parties (Employer or HMRC) amends or terminates it. If an STBV is present in the UK for less than 60 days and that period is not part of a longer period or presence, PAYE can be avoided even if the remuneration costs are borne by a branch or permanent establishment of the foreign employer in the UK. However, as we have already mentioned, there must be an STBV agreement. If a business visitor spends 60 days or more in the UK and the costs are charged or paid by the UK company, there is an automatic obligation to withhold pay for that person and they must be included in the UK payroll (local, obscure or modified) to ensure full compliance. These individuals are not eligible for the STBV designation. We recommend that all companies that regularly send employees to the UK make written arrangements with employees to gather the necessary information.
We can provide such agreements upon request. HMRC has confirmed that employers who already have an STBV agreement are not required to sign a new agreement; The existing agreement will remain in force. However, UK employers with short-term business travellers should consider the following: Four conditions that must be met for concessions to be applied are: If the above conditions are true, the company cannot operate PAYE for the persons concerned.. . . .