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PAYE Manual

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PAYE operation: international employments: EP appendix 4: criteria for short term business visitors

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Short Term Business Visitor Arrangement

The CWG2 Employer Further Guide to PAYE and NICs advises employers that it may be possible to relax strict PAYE requirements for employees on short-term business visits to the UK, and tells employers to contact their HMRC Office.

This arrangement provides that PAYE can be disregarded in certain circumstances.

If an employer has only one or two employees potentially affected they may like to consider applying for an NT code (see PAYE81625) on an individual basis instead.

Conditions

This arrangement must only be applied where individuals are

  • Resident in a country with which the UK has a Double Taxation Agreement under which the Dependent Personal Services / Income from Employment Article (Article 15 or the equivalent) is likely to be competent
  • Coming to work in the UK for a UK company or the UK branch of an overseas company, or are
  • Legally employed by a UK resident employer, but economically employed by a separate non resident entity
  • Expected to stay in the UK for 183 days or less in any twelve month period

Provided that it can be shown that for specifically named employees whose presence in the UK is 60 days or more, the UK Company or branch will not in fact ultimately bear the remuneration specified.

Where agreement is reached and in all other aspects the employee falls within the guidelines, then that part of the remuneration not ultimately borne by the UK Company or branch can fall within this arrangement. See also the three ‘Notes: Definitions’ below regarding employees receiving some remuneration that is ultimately borne by the Company or branch and some which is not.

These arrangements will not apply where the expense of the remuneration is passed on to another UK Company or branch and not recharged overseas.

For those whose presence in the UK is 59 days or less, it is only necessary to show that the employees were paid via a non resident employer’s payroll.

This arrangement must not be applied where individuals are employed by a UK resident employer including an overseas branch of a UK resident employer except where the individuals are sent abroad to work for a separate non resident entity and return to perform duties in the UK solely for that non resident employer. Such individuals are not covered by the 60 day rule.

Notes: Definitions

  • Where used in this arrangement, the term remuneration has its widest possible meaning and includes salary, wages, benefits, allowances and expenses
  • Where an employee otherwise falling within this arrangement receives remuneration borne by companies in different countries then
  1. Remuneration not ultimately borne in the UK - falls within this agreement
  2. Remuneration ultimately borne in the UK - does not fall within this agreement unless the presence in the UK is for 59 days or less and those days do not form part of a longer period (see below) or HMRC Office has agreed a dispensation for it. It is therefore possible for an employee falling within this arrangement to also have a PAYE liability. If otherwise appropriate this PAYE liability can be met using modified PAYE procedures as described in EP Appendix 6, PAYE82002 
  • ‘Ultimately borne’ means the company finally bearing the cost after all recharging of any nature

Although employee remuneration ultimately borne by the UK Company (except in b above) is not normally covered by this particular arrangement, the OECD commentary provides examples of situations where the UK Company would not be regarded as the economic employer and treaty exemption may therefore apply,including where the employee is present for 60 days or more. Employers may request agreement from HMRC for specified circumstances where these arrangements may be applied and PAYE deductions need not be made. Failing such agreements, a separate claim for treaty relief should be made by the employee. This further relaxation is initially for a trial period and may be withdrawn.

Notes: Double Taxation Treaties

  • Some Double Taxation Treaties (for example that with Italy) specify 183 days in a tax year. When looking at residents of those countries therefore this is the test to apply and not the 183 days in any twelve month period now more commonly used
  • The Double Taxation Manual (DT1920 to DT1924 inclusive) is relevant to this arrangement and should be consulted initially in cases of doubt
  • Full Payment Submissions do not need to be completed for EP Appendix 4 employees

Notes: Method of counting days spent in the UK

The method of counting days should follow the OECD commentary ‘days of physical presence’ method. Under this method, the general principle is that any day during any part of which, however brief, the person is present in the UK counts as a day of presence for the purposes or computing the 183 day period. As such

  • Any part of a day, day of arrival, day of departure, and all other days spent in the UK such as Saturdays, Sundays, national holidays, holidays before during and after the period of work, short breaks (training, strikes, lock-out, delay in supplies), days of sickness (unless they prevent the individual from leaving and that individual would otherwise have qualified for the exemption) and death and sickness in the family should be included in the calculation
  • Days spent in the UK in transit in the course of a trip between two non-UK points should be excluded from the computation
  • Days during which the taxpayer is a resident of the UK and not treaty resident abroad should not be included in the calculation. The conditions in the treaty are for remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State and does not apply to a person who is resident and works in the same State

For example, if a person is a resident of the UK but is hired by an employer in another State, moves to that State where they become resident and is subsequently sent to work for a short period in the UK by his employer, we would only include days in the UK after the taxpayer became a resident of the other State for the purposes of computing whether they had exceeded 183 days in the UK. Days in the UK when the taxpayer was a resident of the UK should not be included.

Similarly if a non-resident taxpayer is seconded to the UK for a short period by their employer and subsequently moves to and becomes a resident of the UK, days in the UK after they became a resident here should not be taken into account for the purposes of the calculation of the 183 days.

Notes: 60 day rule

Employees resident in a Double Taxation Agreement country who remain on the foreign payroll may be treated as employed by a foreign employer where they are present in the UK for a period of less than 60 days (counted as above) and that period does not form part of a more substantial period of presence in the UK. In such cases, therefore, treaty relief may apply if the other conditions for it are met. The rule also applies where the employee’s remuneration costs are borne by the a UK branch or permanent establishment of a foreign employer. The rule does not apply where the employee’s presence in the tax year is for less than 60 days but it is part of an actual or anticipated longer period of 60 days or more, which need not be continuous and must take into account past visits and expected future return visits to the UK. Tax Bulletin 68 provides further information.

General principles of an EP Appendix 4 arrangement

1. It applies where there would otherwise under PAYE regulations be a requirement on the part of the host employer, UK branch or legal employer to make PAYE deductions
   
2. It only applies to employees who have not become UK resident for tax purposes or if UK resident, are treaty resident in the treaty partner country
3. In all cases involving short-term assignment of employees to the UK, the employer will put in place some form of internal reporting system to keep as accurate as possible a record of employees visiting the UK on business. It is expected that this system will have the following minimum requirement
  * Employees will periodically report days spent in the UK on business to the central point controlling this arrangement
  * Employees should not spend more than 30 days intermittently in the UK in any 12 month period without reporting to that central point
4. All records that are kept under this arrangement are within Regulation 97 IT (Pay As You Earn) Regulations 2003 and so must be retained for the time limits that apply and produced for inspection
5. Where liability is subsequently found to arise on payments of PAYE income made to an employee, the employer will be expected to pay the tax that ought to have been deducted from or otherwise paid in respect of each payment. Late payment of PAYE tax will attract interest in the usual way. Late filing and late payment penalties will not apply where HMRC accepts that the employer backdated the PAYE and filed the FPS as soon as could be reasonably expected following a change in circumstances preventing an employee from being included in this arrangement
6. Should it become apparent that PAYE is not being applied in the case of employees who do not satisfy the relevant criteria, HMRC reserves the right to insist that PAYE be operated strictly for all employees from day 1
7. Any employee who cannot fulfil the conditions set out below should have PAYE operated from day 1
8. The treatment for NICs purposes of employees coming to the UK is covered in the CWG2 Employer Further Guide to PAYE and NICs

The time limits given in EP Appendix 4 are administrative only and are over-ridden by any legislative time limits. For example if a taxpayer needs to complete a Self Assessment return then the normal rules relating to Self Assessment apply.

Visitors to the UK covered by the 60 day rule for 1 - 30 days

No requirements for either employer or employee to fulfil other than where the period is part of a longer period of 60 days or more.

Visitors to the UK covered by the 60 day rule for 31 - 59 days

For an employee who spends no more than 59 days in the UK during the tax year, PAYE can be disregarded provided it is confirmed that

  1. there is no formal contract of employment with the UK employer
  2. the 59 days do not form part of a more substantial period. (See DT1922 and above regarding the 60 day rule.)

All visitors to the UK not covered by the 60 day rule for 1 - 90 days and other visitors to the UK for 60 - 90 days

For an employee in the UK for not more than 90 days in the tax year, PAYE can be disregarded provided that the employer supplies the information below by 31 May following the end of the tax year

  • Full name of employee
  • Last known UK and overseas addresses of employee
  • Nature of duties undertaken
  • Date commenced
  • Date ceased
  • To which country a tax return covering worldwide income is submitted

And confirms that the UK Company does not

* Ultimately bear the cost of the employee's remuneration
* Function as the employee's employer during the UK assignment. (See DT1922 for further information)

Visitors to the UK 91 to 150 days

For an employee in the UK for a period of 91 days but not exceeding 150 days in the tax year PAYE can be disregarded provided that

  1. All of the information requested for visitors up to 90 days is provided and in addition
  2. In the case of non-US citizens and Green Card holders, the employee provides a statement from the overseas Revenue authority confirming residence in the other state for tax purposes throughout the period in the UK. This statement should be passed to the HMRC Office by 31 May following the end of the relevant overseas tax year. This arrangement is only provisional until the relevant certificate is received.

In the case of US citizens and Green Card holders it will only be necessary for the employee to provide evidence of continuing residence in the US. (See DT19861A for further information.)

Visitors to the UK 151 to 183 days

Applications will be made on a named individual basis for authority to include the employee in this arrangement. The application will be made as soon as it can reasonably be anticipated that the employee will be present in the UK for more than 150 days. The application will include

  1. All of the information requested for visitors up to 90 days and confirmation that the statement from the overseas Revenue authority will follow by the relevant 31 May
  2. A statement by the employee giving reasons why he/she considers himself/herself to be treaty resident in the treaty partner country by reference to the appropriate article in the Double Taxation Treaty

Helpsheet HS302 provides more information about dual residence generally and the tests to be applied to determine the country of tax residence.

HMRC will consider the circumstances and will

  1. Notify the employer that the individual can be included in the Appendix 4 arrangement, or
  2. Authorise code NT and issue a Self Assessment tax return, or
  3. Confirm that PAYE should be applied and issue a Self Assessment tax return
Signed:…………………………………………… Print Name:…………………………………………………
   
Position:…………………………………………… Date:……………………………………………………………

Authorised on behalf of HMRC:

Signed:…………………………………… Print Name:…………………………………………………
   
Date:……………………………………………  

Applications should be sent to

HMRC Personal Tax International
Operations SO733
PO Box 203
BOOTLE
L69 9AP