Did any overseas employees visit your UK offices during the 2011/12 tax year? If yes, you may need to submit details to HM Revenue and Customs before 31 May 2012 to avoid potential penalties. In this article, Joanne Kerr looks at the issues and reporting requirements for UK based employers.
Bringing an overseas employee to the UK for a short trip to attend a meeting or a longer stay to work on a UK based project is now standard practice for many international companies. While such employees may be assisting the company for business purposes, filing requirements may arise for the UK employer, which are often overlooked. With this year's deadline fast approaching, now is the ideal time for employers to review their reporting requirements.
Under UK tax law an employer has an obligation to withhold UK PAYE for all employees, including overseas employees visiting the UK (Business Visitors), unless an exemption based on treaty relief is available and has been applied for (and agreed) under the Short Term Business Visitors (STBV) arrangements.
The STBV arrangements were introduced by HMRC as a measure to allow the relaxation of PAYE for Business Visitors who spend less than 183 days in the UK, are resident in a country which has a double tax agreement with the UK and whose costs are not recharged to the UK entity. This prevented the default position of withholding tax for individuals who would then be eligible to file a reclaim through their self assessment tax return under the Dependent Personal Services article of an applicable double tax treaty.
However, employers that wish to take advantage of this agreement must agree to certain conditions and provide additional information about the individuals for whom exemption has been applied, by 31 May following the tax year end.
The first requirement is that an employer must implement a method of tracking all visitors to the UK entity, even where a trip is for only “part” of a day. There is no prescribed method for this, and some employers rely on a visitor book, others use travel planning employees or agencies to help track. The method isn’t important but the tracking must be accurate and in the event of an HMRC audit this is an area that they will undoubtedly wish to review. Furthermore a periodic report of all Business Visitors must be made to a nominated individual in the company with the responsibility for maintaining these records.
Failure to comply may lead to penalty charges and for the company being required to operate PAYE for all Business Visitors without the benefits of the STBV arrangements.
Once the tracking system is in the place the employer must then use this to assess whether they have any individuals in the UK who will fall within the reporting requirements.
Any individuals in the UK for less than 30 days have no further reporting obligations to HMRC and the only tracking required is that which is completed internally.
Any individuals in the UK for more than 30 days will require some form of reporting to HMRC.
To simplify matters, the level of reporting requested by HMRC is split into three main categories: 31-60 days, 61-90 days and 91 - 182 days. The information varies according to category but would typically include details such as nationality and place of birth, UK and overseas addresses, days in the UK, job title and details of role undertaken. Additionally, for Business Visitors in the 91- 182 day category (that are non U.S. citizens), HMRC will also require the submission of a Tax Residence Certificate from the home country.
Care must be taken when using STBV arrangements and it should not be assumed that these can be applied to all Business Visitors. For example, where an individual spends more than 60 days in the UK and the costs are recharged to or borne by the UK entity, the UK employer has an automatic obligation to withhold PAYE for that individual. These individuals do not qualify under the STBV arrangements and will therefore always need to be included on either the local or a shadow (expat) payroll.
If an employer has Business Visitors or think that they will receive any in the near future, they should make an application to HMRC for agreement to operate the STBV arrangements.
Those that have STBV arrangements in place for 2011/12 will need to start reviewing travel calendars for Business Visitors and gathering the data required in order to meet the 31 May 2012 deadline.
We recommend that you contact your tax adviser to review these reporting requirements. GTN can assist with Short Term Business Visitor Agreement applications, online travel calendar tools, and end of year reporting. For more information, please contact Joanne Kerr CTA on +44 (0) 207 100 2126 or via email at email@example.com.