A Short Term Business Visitor (STBV) is an individual visiting the UK place of business for working purposes from an overseas parent, subsidiary or associated company. Typically, ‘short term’ for this purpose represents a total period not exceeding 183 days.

In a post-pandemic working world, individuals are travelling more frequently with trends shifting towards informal business visitor arrangements (as opposed to formal secondment/local moves), meaning the individual remains contractually employed in the home country.

HM Revenue & Customs (HMRC) are aware of these trends and the difficulties businesses face tracking and managing international travellers. As such, it is important those overseeing this area can demonstrate a robust system is in place firstly for tracking inbound visitors and, secondly, for managing the strict UK PAYE regulations linked to their visits.

PAYE requirements

Historically it was possible for a business to self-assess whether a PAYE obligation arose in respect of inbound business visitors. For example, where the business determined the individual was coming from a Double Tax Agreement (DTA) country location and full treaty relief was available, it was acceptable to not apply PAYE withholding.

This approach is no longer compliant and to benefit from a PAYE relaxation where relief under a DTA is available, the receiving UK entity must firstly obtain an Appendix 4, ‘STBV’ Agreement from HMRC. This is a one-off application and should be made by the receiving UK entity.

In the absence of such an agreement the strict position is that PAYE income tax withholding should apply from day one of the individual’s UK working duties. If this has not been applied, HMRC may seek unpaid PAYE, levy penalties and charge interest for late payment.

Appendix 4 ‘STBV’ agreement

Should the UK business receive inbound visitors from overseas treaty countries (note the UK’s treaty network is one of the world’s largest, spanning over 130 countries), we would recommend obtaining an STBV Agreement from HMRC. Obtaining such an agreement provides the business with peace of mind in respect of relaxing the ordinarily strict PAYE regulations.

It is important to note that this relaxation applies where relief under the DTA is available and so the following conditions of the UK/overseas country treaty must all be met:

• The individual is resident in a country with which the UK holds a DTA;
• The individual comes to work in the UK for a UK company or branch of an overseas company;
• The individual expects to stay in the UK for 183 days or less in any 12 month rolling period;
• The UK company or branch will not bear remuneration costs linked to the UK workdays.

Annual STBV reporting

Once an STBV Agreement is in place, there is an annual reporting requirement to notify HMRC of inbound business visitors to the UK entity. The level of detail required for each business visitor varies dependent on the number of days the individual has visited the UK. It stands to reason that the increased level of trips during the tax year; the increased level of detail required via the report.

Johnston Carmichael’s Global Mobility team is well placed to obtain such an agreement from HMRC and once in place, we have software tools readily available to assist with travel data analysis and making the required report submission to HMRC. This is due by 31 May following each tax year-end.

Additional points to note

There are some important points to be aware of in terms of specific exclusions from the STBV Agreement which we would be mindful of when working with our clients, as follows:

1. The UK must hold a DTA with the individual’s home country of residence that includes an ‘Income from Employment’ Article.
2. The UK adopts the ‘economic employer’ test to consider whether a company is the employer of an individual for UK tax purposes. This principle goes beyond the legal contract position and considers which entity ultimately bears the risks and rewards of the employment duties.
3. Although DTA conditions reference a specific exclusion of remuneration costs borne by the UK company, where the individual is in the UK during a tax year for less than 60 days (including linked periods of work that can span tax years), relief may still be available.
4. The terms of the STBV Agreement specifically excludes UK office holder duties carried out by Non-Resident Directors. As a result, no relief is available for these duties and UK PAYE operation should be reviewed separately for these populations.
5. Finally, the STBV Agreement relaxes PAYE withholding in respect of UK income tax only. Independent rules govern Social Security (and UK National Insurance exposure/liabilities), and so this area should be considered separately.

Concluding thoughts

Clearly there is great value in a UK business holding an STBV Agreement with HMRC. As well as relaxing the ordinarily strict PAYE income tax withholding obligations (where the treaty conditions are met), utilising such an agreement demonstrates a compliant mindset to HMRC in respect of managing compliance requirements associated with a globally mobile workforce.

Where relief under the DTA does not apply, it is also possible to enter an Annual PAYE Scheme with HMRC and make only one PAYE calculation/tax payment per year – this is an area we can discuss per our client’s requirements and is another useful PAYE relaxation tool to consider.

Please get in touch with our Global Mobility specialists to discuss compliance requirements related to international business traveller populations.