Short Term Business Visitors (STBV): UK rules, reporting and compliance (incl. Appendix 4 exemption)

Short term business visitors rules and conditions

*In order to successfully apply for an Appendix 4 to HMRC and to obtain the short term business visitor exemption from operating a UK payroll, the following conditions ought to be met:

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

Moreover, in order to successfully apply for an Appendix 4, HMRC will usually want to be satisfied that:

– companies will have a system in place to accurately track and record employees visits to the UK for business trips;

– employees will periodically report details of their UK visits to the company and in particular they do not spend more than 30 days intermittently in the UK in a 12-month period without reporting it to their employer.

Records to be kept under this arrangement fall within Regulation 97 IT (Pay As You Earn) Regulations 2003 and must be retained for inspection for the stated time limits.

Additionally, the Appendix 4 short term business visitor agreement (STBVA) is denied to employees visiting for work from overseas branches of a UK entity.

The 60-day rule

At a high level, the 60-day rule means that a cross charge to a UK entity, which, per the applicable DTT, would normally deny tax relief to the STBV, is not conclusive, if the period of work in the UK is 60 days or less.

In order to be eligible for this rule, employees need to be on an overseas payroll and the 60 days (or less) must not form part of a more substantial period.

Further information can be found in a Q&A clarification on Non-Residents Working In The UK For Short Periods: The “60-Day” Rule.

Risks for short term business visitors to the UK

Not maintaining accurate records of days in the UK may result in:

– the employer being required to operate a UK payroll (PAYE) for all business visitors; and

– potentially, the employee having to file a treaty claim for a refund (FTC) of the tax withheld in the UK on their home country tax return at year.

This might in turn have the unexpected consequence of a cashflow problem arising for the individual as a result of:

1. having to pay taxes in the UK through the payroll (for being a non payroll exempt short term business visitor); and

2. then having to wait for up to 18 months for the foreign tax credits to wash through when filing their home country tax return. 

Ultimately, this issue will need to be managed by structuring the short term business visits as an actual assignment and therefore by operating a shadow payroll under some kind of tax equalization / protection policy and with the individual becoming a de facto expat, albeit accidentally.

Should the conditions for payroll exemption no longer be met after Appendix 4 has been successfully applied for, HMRC ought to be notified without undue delay to ensure payroll regularization and to avoid potential penalties.

FAQs on Short-Term Business Visitors (STBVs)

What happens if the foreign company has no entity in the UK?

If the foreign employer has no entity in the UK and there is no other UK host employer, then there is no UK entity which can be deemed to be the economic employer (see definition in the OECD’s commentaries to Article 15 section 8.14) of the individual and therefore no UK payroll is required.

Nonetheless, taxes may still be due in the UK by the employee which means they will need to be settled via the employee filing a UK tax return. Additional details can be found in CWG2: further guide to PAYE and National Insurance contributions. 

Are there any alternatives to applying for Appendix 4?

If the sending company has only one or two employees affected, they may want to apply to HMRC for an NT code for the individual/s instead.

Furthermore, if the Appendix 4 conditions cannot be met, for instance because the STBV is from a country with which the UK has no DTT, a special arrangement exists that allows companies to apply for Appendix 8 instead.

Appendix 8 however, only applies to any STBVs who work in the UK for 60 days or less during the UK tax year. 

What about social security contributions for short term business visitors?

Social security contributions are treated separately in terms of reporting and payroll requirements.

If the STBV is from a country with which the UK has a social security (totalisation) agreement and an A1 Certificate or Certificate of Coverage has been obtained, then UK social security contributions can be ignored.

However, special attention needs to be paid to individuals short term business visits (or to individuals sent on an assignment) to the UK from countries with which the UK has no social security (totalisation) agreement. 

In those circumstances, individuals are only exempt from UK social security contributions for the first 52 weeks.

After the initial 52 weeks period is over, even with an Appendix 4 being granted, a UK payroll will likely still need to be operated for the purpose of reporting and paying the UK national insurance contributions.

Are there different PAYE and social security contributions rules applicable to STBV Non-Resident Directors (NRDs)?

Yes. NRDs remuneration is treated differetly and is typically subject, on an apportionment basis, to UK PAYE even for very short stays of presence in the UK (i.e for board meetings) with no possibility to apply for an Appendix 4 exemption.

Again, UK social security contributions are not due if the employment country has a social security (totalisation) agreement with the UK and an A1 Certificate or Certificate of Coverage has been obtained.

Failing that, HMRC also have a special concessions in place which exempts social security contributions for NRDs from countries with which the UK has no social security (totalisation) agreements.

This special social security contributions concession is granted only on the conditions that:

• the only work the NRD does in the UK is to attend board meetings; and –
• the NRD attend no more than 10 board meetings in a tax year, and each visit to the UK lasts no more than 2 nights at a time; or
• they only attend 1 board meeting in a tax year, and the visit to the UK lasts no more than 2 weeks.

If an A1 Certificate / Certificate of Coverage cannot be obtained and the above special concession conditions cannot be met, after the initial 52 weeks period is over, UK national insurance contributions will also be due for NRDs.

Any other factors to consider for short term business visitors to the UK?

Attention should also be paid to the activities carried out by the individual/s in the UK in order to avoid inadvertently triggering a de facto Permanent Establishment of the foreign entity and thus exposing it to UK corporate taxation. 

Finally, although briefly explained above, companies and employees should be aware of the full social security contributions implications when visiting the UK even for short business trips only lasting less than 30 days.

Given the complexities around STBV rules, it is recommendable to engage the expertise of a niche expat tax and global mobility specialist to advise on the best approach to follow for the individual circumstances of each short term business visitor.

P.S. Not sure how all of the above applies to your cross-border situation? In 2 minutes, our free quiz analyses your specific circumstances and delivers your personalised risk report.