As the annual reporting deadline of 31 May approaches, small and medium-sized enterprises (SMEs) need to be aware of the payroll compliance requirements for short-term business visitors (STBVs) in the UK.
STBVs are most commonly employees of either overseas subsidiaries or parent or group organisations that have been requested to temporarily work in the UK.
When it comes to handling tax compliance for STBVs, UK businesses have two options. They can either operate PAYE tax on the employees’ pay while in the UK or obtain a short-term business visitor (STBV) agreement from HM Revenue & Customs (HMRC).
The importance of an STBV agreement
A double tax treaty can lessen UK personal tax liability for STBV employees. However, an STBV agreement is still necessary to avoid operating PAYE tax and requiring the employee to file a tax return to reclaim it.
An STBV agreement requires only the submission of an annual STBV report to HMRC. Employers with only one or two STBVs a year can alternatively apply for a nil tax code on a case-by-case basis but must operate PAYE until the code is received.
Exclusions
Certain categories are excluded from STBV agreements, such as employees visiting from an overseas branch of a UK entity or from non-treaty countries.
In these cases, PAYE tax is due, but a simplified PAYE arrangement can ease the administrative burden.
Non-resident directors of UK organisations also fall outside STBV agreements’ scope. HMRC expects employers to operate PAYE for these directors when they visit the UK to perform board duties.
Expenses
Expenses related to these visits and UK National Insurance on earnings and expenses may also be subject to PAYE. UK board duties performed outside the UK can generate UK corporate tax risks.
STBV non-compliance is a top concern in PAYE audits, with penalties for unpaid PAYE tax reaching up to 100 per cent of the unpaid amount.
Employers with STBVs should enter an STBV agreement as soon as possible.
Reanda UK is a subsidiary of leading independent accountancy firm Grunberg & Co Limited. Our aim is to help businesses and individuals to navigate the UK’s world-renowned business and tax infrastructure, and to support them with their international ambitions. To find out how we can help you, please contact us.