EPAPP/4 - Criteria for Short Term Business Visitors
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.
You must consider such applications as set out in EP8127 and EP8128. Where appropriate PAYE requirements can be relaxed as set out in this appendix.
Short Term Business Visitors
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 EP8126) 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
- 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 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.
Notes: Definitions
- Where used in this arrangement the term remuneration has its widest possible meaning and includes for example, salary, wages, benefits, allowances and expenses
- Where an employee otherwise falling within this arrangement receives remuneration borne by companies in different countries then
- Remuneration not ultimately borne in the UK - falls within this agreement
- Remuneration ultimately borne in the UK - does not fall within this agreement unless the 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.
- 'Ultimately borne' means the company finally bearing the cost after all recharging of any nature
Notes: Double Taxation Treaties
- Some Double Taxation Treaties (for example that with The Netherlands) 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
- Forms P46(Expat), P85, P85S and P86 do not need to be completed for Appendix 4 employees
Notes: Method of counting days spent in the UK
For periods up to and including 5 April 2009 (2008/09) the method of counting days should be as follows
- When counting to 183 days for these purposes a part day counts as a part day (see the example below*) and days of arrival and departure and all other days spent in the UK should be included in the calculation
*Example: An employee who spends 8 hours working in the UK on three successive days (returning home at the end of each day) can legitimately claim that they have been present in the UK for just one day (3 x 8 hours = 24)
From 6 April 2009 (2009/10 onwards) 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 form the computation
From 2008/09 onwards (this overlaps for a year with the former day counting method), days during which the taxpayer is a resident of the UK 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.
Where the 12 month period during which the 183 day are counted falls partly within 2008/09 and partly within 2009/10 split the 12 month period into parts that that fall before and after the start of the year of assessment and use the appropriate day counting method for each part.
Note: All periods referred to below (30, 60, 61, 90, 91, 183 and 364 days) must be counted using the appropriate method set out above for the year of assessment (or part thereof). In order to quantify the number of days you must check if the period you are considering is
- up to and including 5 April 2009, or
- from 6 April 2009
General principles of an Appendix 4 arrangement
|
1. |
It only applies to employees who have not become UK resident for tax purposes. If the employee becomes UK resident then they are taxable on duties carried out in the UK regardless of how many days they have been in the UK. If they become both resident and ordinarily resident then the UK may tax their world wide income and gains |
|
2. |
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 |
|
|
|
|
|
|
|
3. |
All records to be kept under this arrangement are within Regulation 97 IT (Pay As You Earn) Regulations 2003 and so must be retained and produced for inspection |
|
4. |
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 |
|
5. |
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 |
|
6. |
Any employee who cannot fulfil the conditions set out below should have PAYE operated from day 1 |
|
7. |
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 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 1 - 30 days
No requirements for either employer or employee to fulfill.
Visitors to the UK 31 - 60 days
For an employee who spends no more than 60 days in the UK during the tax year, PAYE can be disregarded provided that it is confirmed that
- there is no formal contract of employment with the UK employer
- the 60 days do not form part of a more substantial period. (See DT1922.)
Visitors to the UK 61 - 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)
- in the last four tax years visits to the UK were less than
- 364 days in total, and
- 183 days in any tax year
(See Residence Guide at RG2.5 for further information.)
Visitors to the UK 91 to 183 days
For an employee in the UK for a period of 91 days but not exceeding 183 days in the tax year PAYE can be disregarded provided that
- all of the information requested for visitors up to 90 days is provided and in addition
- 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 during 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 it will only be necessary for the employee to provide evidence of continuing residence in the US.
- a statement giving the following information is received from the employee by 31 May following the end of the UK tax year
i) What is your Nationality?
a. On what grounds do you claim this Nationality?
b. Where were you born?
ii) In which country do you usually live?
iii) When did you arrive in the United Kingdom?
iv) Have you visited the UK during the five years before the date entered at (iii)?
If so in that time did you spend
c. more than 183 days in the UK in any UK tax year?
d. more than 364 days in the UK in total?
