Hiring international talent into the UK: Tax and reporting essentials

Welcome to our comprehensive Doing Business in the UK article series, designed specifically for international businesses and investors looking to establish or expand their operations in the United Kingdom. This series aims to provide you with essential insights and practical guidance on navigating the UK business landscape.

Throughout this series, we will cover the initial setup of your business, understanding business taxes, and the process of registering a UK business. We will also delve into workforce setup, payroll, employment costs and international hiring considerations for businesses employing people in the UK. Finally, we also explore accountancy processes, compliance and management reporting requirements, and discuss the complexities of importing goods and services into the UK.

In Hiring International Talent: What UK Employers Need to Know, we explored immigration requirements. Now, let’s focus on tax and employer reporting obligations when bringing overseas employees into the UK.

Will UK tax apply?

Tax liability depends on:

Length of stay in the UK
Country of tax residence
Nature and location of duties

Short-Term Business Visitors (STBV)

Don’t assume that staying under 183 days means no UK tax or reporting obligations. By default, UK entities must operate PAYE on income earned for duties performed in the UK — even if the employee is paid abroad and qualifies for treaty exemption.

How to simplify compliance:

Sign up for HMRC’s Short-Term Business Visitors Agreement (STBVA) and submit an annual report. Without this, PAYE is mandatory.

Key checks:

Confirm the visitor’s country has a double tax treaty with the UK.
Review treaty wording carefully—interpretations vary.
Understand the UK’s “Economic Employer” concept: HMRC looks beyond contracts to see which entity bears costs and risks. Seniority and time spent in the UK increase the likelihood PAYE applies.

If no treaty exists, assess duties performed. Occasional incidental work may not trigger PAYE but longer stays or senior roles likely will.

Also, check visa or travel authorisation requirements — short stays don’t guarantee work rights.

Short-Term Assignments (up to 12 months)

Employees may qualify for treaty exemption, but if they’ll be in the UK for 150+ days, get HMRC confirmation upfront.

If exemption doesn’t apply, operate PAYE from day one. You may also need to run payroll in both the UK and the home country — creating cashflow and admin challenges.

Other considerations:

Currency and exchange rates
Assignment letters and salary terms
Tax equalisation if UK tax differs from home country
Benefits and allowances — are they taxable?
Insurance and pension plans
Family support and overall cost

BDO’s Global Employer Services team can help plan, budget, and manage compliance.

Long-Term Assignments (Over 12 Months)

Employees working in the UK for more than a year will almost certainly be subject to PAYE from arrival, even if paid abroad. Review assignment duration — extended assignments may warrant a UK employment contract.

Social Security

Don’t overlook social security costs — they vary widely.

EU countries & reciprocal agreements: Employees can often stay in their home system, avoiding UK National Insurance (NIC)
Rest of the world: NIC exemption applies for 52 weeks only; after that, UK NIC is due. If you cover these costs, it’s a taxable benefit.

Local Transfers

Permanent transfers mean UK terms from day one, with PAYE and NIC applied. Consider offering support to help employees navigate UK tax.

Non-Resident Directors

UK directors have legal duties under the Companies Act 2006. HMRC rarely accepts unpaid roles — allocate and tax a reasonable fee via UK payroll. Avoiding UK board duties may remove an income tax liability but could create other risks. BDO can help benchmark fees and structure them efficiently.

As you employ people in the UK, it is important to understand their activities in the UK and determine whether it creates a permanent establishment.