Plan to change tax for short-term business visitors
HMRC is consulting on ways to improve the tax and administrative treatment of short-term business visitors from overseas branches, with a view to reducing the administrative cost and burden, and making the UK a more attractive place to headquarter and do business
15 May 2018
The consultation, first suggested at Spring Statement 2018, seeks view on whether changes to the existing rules are necessary and explores two options for changes to the tax and administrative treatment of short-term business visitors (STBVs) from foreign permanent establishments of UK companies.
Currently in the UK an administrative easement is available to UK companies with STBVs arriving from their overseas subsidiaries. The UK company can apply to relax their obligation to operate PAYE on the relevant earnings of an individual who meets certain criteria, under short term business visitor arrangements (STBVAs).
The criteria are being tax resident in a country with which the UK holds a double taxation agreement (DTA); coming to the UK to work for a UK company for less than 183 days in any 12-month period; and being economically employed by a non-resident entity.
However, there is no equivalent easement for UK companies with STBVs arriving from an overseas branch. This means that a UK company with an STBV from an overseas branch will incur costs and administrative burdens that a UK company with an STBV arriving from an overseas subsidiary may not.
The consultation outlines two broad policy options aimed at realising improvements for UK companies.
The first is extending the PAYE special arrangement UK workday rule, an administrative easement that exists for STBVs ineligible for STBVAs (because they work in an overseas branch of a UK company or their home country does not have a DTA with the UK).
The current arrangement has a strict limitation on the number of UK workdays allowed in the tax year, which the government is considering from 30 to 60 UK workdays. This is expected to mean more STBVs will qualify for the PAYE special arrangement and a greater number of UK companies and individuals can benefit from the arrangement’s administrative easements.
The easements mean the UK company can operate PAYE on an annual basis for STBVs covered by the arrangement and does not have to report in real time; and that STBVs are not required to file a self assessment return for their relevant earnings.
HMRC says the associated reductions in administrative process are expected to realise small cost savings for UK companies and affected individuals, and will have no cost for the Exchequer. Under this proposal, all other conditions and features of the PAYE special arrangement will continue unchanged. UK companies will still be required to deduct and pay tax to HMRC and individuals will need to make a claim to double taxation relief (DTR) where they are eligible to do so.
The second, alternative option, is a new tax exemption for STBVs from overseas branches. The intention is to align the effective tax treatment of STBVs from overseas branches to those eligible for STBVAs. HMRC says a new tax exemption would prevent double taxation of the individuals earnings; and remove the requirement on the UK company to operate PAYE, but would have a cost for the Exchequer.
HMRC says the tax exemption would need to be restricted to individuals and circumstances in a similar way to STBVAs. An individual would need to be resident for tax purposes in a country with which the UK has a double taxation agreement; working in a foreign permanent establishment of a UK company and coming to work in the UK for the UK company for a short term or temporary basis; and expected to stay in the UK for 183 days or less in any twelve month period.
The consultation closes on 6 August 2018.