This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

PAYE Manual

PAYE operation: international employments: PAYE special arrangement for short term business visitors prior to 6 April 2020

Pay As You Earn (PAYE) special arrangement for Short Term Business Visitors (STBV) prior to 6 April 2020

This guidance specifically relates to the previous PAYE special arrangement for STBV before 6 April 2020. From 6 April 2020, legislative changes introduced the new Appendix 8 PAYE special arrangement. Please follow guidance in PAYE81950 for more information.

This arrangement has been agreed under Regulation 141 of the Income Tax (PAYE) Regulations 2003.  This regulation allows HMRC to make arrangements for the collection of tax in respect of PAYE income, if the normal operation of PAYE is considered ‘impracticable’.

The arrangement is contractual agreement between the employer and HMRC.

Why has the agreement been made?

The agreement was introduced following an Office of Tax Simplification report that recommended that there should be more simplification of PAYE procedures for STBV.

Who does it cover?

UK based employers who operate internationally. Many countries will be covered by a Double Taxation Treaty with the UK, but not all.  These employers may also have branches overseas.  It will often be normal business practice to require non-resident employees to come into the UK to work for them and a liability to UK PAYE will arise.

However, in most cases these non-resident employees will only work in the UK for a short period of time usually no more than a few days or weeks.  There can be a significant employer burden in monitoring employee movements and keeping all the records that are required so that PAYE can be reported in real time.  If the employees are eligible for personal allowances, then in most cases there is ultimately no UK tax liability.

The existing rules require HMRC to ensure compliance and make repayment of tax that these non-resident employees have paid.  This arrangement allows the employer to return the information at month 12.  This means that employees with no overall liability do not need to have tax deducted and apply for repayments through Self Assessment.

Non-resident directors of the UK Company must not be included in this arrangement.

What does it cover?

Relevant payments of PAYE income and / or taxable benefits in kind provided to the STBV for the tax year that the agreement is signed and any subsequent tax years until it is either terminated or reviewed.

The UK employer will total all relevant payments made by both the UK employer and home country employer to the STBV for UK workdays in the year and pay the tax due to HMRC.  This will take into account Personal Allowances where appropriate, based on the tax tables at month 12 of the relevant tax year.  If the employee is covered by employer tax equalisation arrangements, the tax must be grossed up within the calculation.

If the UK employer provides a benefit in kind to a STBV, they are not required to prepare a Form P11D in respect of that benefit.  However, they must include the cash equivalent of the benefit and any other benefit provided by the home country employer (calculated in accordance with relevant sections of the Income Tax [Earnings and Pensions] Act 2003) within any month 12 calculations they are making for the PAYE income paid to these employees.

If the employer bears the tax on the provision of the benefit in kind, the amount of the tax must also be grossed up within the calculation.

The arrangement only applies to a STBV whose UK workdays in the tax year total 30 days or less.  This limit will not be relaxed and the employer will not be able to pay any tax via other methods, such as PAYE Settlement Agreement.  The employer must include any 30 UK workdays plus STBV in their regular payroll or, if applicable, in accordance with EP Appendix 6.

The 30 UK workdays do not include those days where only incidental duties were performed in a tax year.  Guidance on incidental duties is in the Employment Income Manual (EIM) at EIM40203.

Employers must determine whether days of travel to or from the UK are to be counted as UK workdays.  Employers may apply the rule of thumb at EIM77020.  However, where the STBV undertakes UK work other than travel on the particular day, overseas workday should be replaced by half UK workday and half overseas workday.

Annual PAYE scheme

HMRC will set up an annual PAYE Scheme to account for the tax on the payments made and the cash equivalent of any benefits provided to these STBV.

The UK employer must report the relevant payments made and / or benefit in kind for the UK workdays provided to one or more STBV(s) in that tax year on an RTI return.  This must be delivered to HMRC by 19 April following the end of the tax year.  The return must be made using an approved method of electronic communications.

Only one scheme is permitted per employer for the STBV(s) covered by this arrangement and pooling of these PAYE schemes is not allowed.

Payment of tax

Tax is due on the payments made and any benefits provided by 22 April following the end of the tax year if payment will be made by an approved method of electronic communications.  If other payment methods are used the due date is 19 April.

Interest will be charged on any tax due which is not paid by the relevant due date.

Employers can make a payment on account if they wish to do so but must not file the FPS until month 12.

Grossing up

The employer must gross up the tax liability on the benefits in kind unless they recover the tax from the employee.  A gross up of tax on PAYE income will only be required where the STBV is covered by employer tax equalisation arrangements.

Late filing penalties and late payment penalties

If the employer has not made a return by 19 April following the end of the tax year in which the relevant payments were made or the benefits in kind were provided, they will be liable to a late filing penalty under paragraph 6C or 6D of Schedule 55 to the Finance Act 2009.  This will be on the same basis as if the return for these STBV were an RTI return under regulation 67B of the PAYE Regulations.

If tax has not been paid over by the due date, the employer will be liable to a late payment penalty under paragraphs 6 to 8 of Schedule 56 to the Finance Act 2009, as though the payment due were a payment within item 2 in the Table in paragraph 1 of that Schedule.

Ending the agreement

Both the employer and HMRC can terminate the agreement.

The employer is entitled to cancel the arrangement by giving HMRC written notice of the cancellation.  This will take effect from a date agreed by the parties or if the parties cannot agree, the earlier of the end of a period of 3 months from the date of issue of the notice or 6 April following the tax year in which the cancellation notice is given.

If the employer terminates the agreement the PAYE Regulations will apply to the relevant payments and form(s) P11D must be prepared in respect of benefits in kind provided to STBV by the UK employer from the date that the cancellation notice takes effect.

If there is

  • a major change to legislation which has material effect on the arrangement;
  • any change to a material fact which was a relevant factor in HMRC’s decision to enter into the arrangement; or
  • any operational difficulty which arises as a result of operating this arrangement.

HMRC can review the arrangement and where it considers the employer has not complied with its terms, it can cancel it by giving a cancellation notice in writing.  Again, this will take effect from a date agreed or, if not agreed, the earlier of the end of a period of 3 months from the date of issue or 6 April following the tax year in which the cancellation notice is given.

Following HMRC cancellation, PAYE Regulations will apply to the relevant payments and form(s) P11D must be prepared in respect of benefits in kind.

Self Assessment

HMRC does not expect employees under this arrangement to submit SA returns unless they have another UK tax liability.

National Insurance contributions

The arrangement is agreed under the authority of the PAYE Regulations and there is no equivalent legislation for National Insurance.  Any STBV who has a Class 1 NICs liability cannot be included and any Class 1 NICs must be paid within the relevant earnings period.

Any requests to review this decision should be referred to the Expat Team within Business Tax & Customs.

2019 to 2020 tax year

Due to the COVID-19 outbreak and accompanying advice from HM Government, HMRC have agreed to extend the deadline for the 2019 to 2020 returns and payment to 31 May 2020.