The taxman gets tough on international employers
Accountancy & Tax UK withholding tax rules require UK employers to operate PAYE on the salaries of all short term business visitors.
The PAYE withholding is required irrespective of which group company employs the visitor, pays the visitor’s salary, or the length of business trips to the UK. Failure by the UK business to account for PAYE at the right time can lead to interest and penalties being applied.
A Short Term Business Visitor (STBV) agreement can exempt UK companies from this withholding tax requirement. HM Revenue & Customs (HMRC) have recently clarified that STBV agreements will be compulsory with effect from 6 April 2014. UK entities without a STBV agreement in place will be required to withhold UK taxes under the Pay As You Earn (PAYE) regulations for all short term business visitors to the UK.
Who qualifies as a STBV?
HMRC recognises that there are circumstances where an overseas visitor to the UK should not ultimately incur a UK tax liability in respect of their UK visits. HMRC allows UK companies to enter into STBV agreements so that no PAYE is required if certain conditions are met. The main criteria that are applicable are as follows:
- The short term visitor must be resident in a country that has a double taxation agreement with the UK.
- The remuneration of the visitor must not be charged to (or ultimately be borne by) the UK entity.
- The visitor must not be present in the UK for more than 183 days in any 12 month period (this test varies in some double taxation agreements).
Providing the visitors meet these requirements and a formal STBV agreement between the UK entity and HMRC is in place, then PAYE need not be applied. The UK entity must meet annual reporting obligations and have a system to monitor business visits in order to retain the STBV status.
How F&L can help
Our team of experts are able to assess your specific situation and advise on whether the STBV agreement is right for your organisation, assist with the application and provide guidance on the record keeping requirements to maintain your compliance and reporting obligations.
Through our membership of www.geanetwork.com, F&L is able to provide international businesses and their employees with advice on all aspects of global expansion from tax and accounting to HR and benefits.