As referenced in our March UK Tax Round Up, HMRC has now published its consultation on possible changes to the current administrative process covering the tax treatment of short-term business visitors ("STBVs") to the UK. STBVs are individuals who are not UK tax resident but make business trips to the UK. When such an individual comes to work in the UK for a UK company, the company must, in principle, operate PAYE on the individual's earnings.
The consultation aims to simplify the tax treatment of STBVs with a view to minimising the administrative cost associated with them and ensuring that the UK is an attractive place to headquarter a business.
Under the current rules, an administrative easement is available for UK companies with STBVs from overseas subsidiaries. This easement, known as "EP appendix 4", allows UK companies to enter into arrangements under which the company does not have to operate PAYE and applies, broadly, where the STBV is not subject to UK tax because he or she benefits from the terms of a UK double tax treaty. This process is not currently available for STBVs coming from overseas branches of a UK company or to certain other STBVs, such as those who are tax resident in a country which does not have a double tax treaty with the UK. Where a STBV is ineligible for an arrangement under EP appendix 4, a PAYE special arrangement, introduced in 2015, allows the UK employer to operate PAYE on an annual, rather than a monthly, basis for a STBV who spends 30 or fewer workdays in the UK in the tax year.
Two main proposals are outlined in the consultation document; one in relation to EP appendix 4 and one in relation to the PAYE special arrangement.
EP appendix 4 - introducing a new, specific exemption for STBVs from overseas branches of UK companies. This is intended to align the effective tax treatment of STBVs from overseas branches with those from overseas subsidiaries under the EP appendix 4 arrangements. Such exemption would prevent double taxation of the individual's earnings and remove the need for the UK company to operate PAYE. PAYE special arrangement - extending the UK workday rule from 30 to 60 days. This extension will allow more STBVs who are ineligible for an EP appendix 4 arrangement to benefit from the PAYE special arrangement.
The consultation ends on 6 August 2018.
These changes would not affect the operation of national insurance contributions, which have their own exceptions.