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Short term business visitors

16 August 2016

HMRC continues to focus on businesses with short term business visitors through its specialist team.

A re-cap of the issue

The operation of PAYE on the earnings of short term business visitors (ie, employees of an overseas subsidiary, parent or other group company or organisation coming to work temporarily in the UK) has been a topic much debated with HMRC. That is, until 2014, when HMRC announced that UK resident employers with short term business visitors have a choice; they either:

  • Sign up for a short term business visitor (STBV) agreement, or
  • Operate pay-as-you-earn (PAYE) tax withholding.

This message has been re-iterated many times since then and HMRC confirmed that all companies or organisations receiving business visitors that did not have an agreement and failed to operate PAYE would have an exposure to penalties and interest.

However, in many instances, there is a double tax treaty available which will mitigate the UK tax liability. HMRC recognises this by allowing UK companies and organisations to sign up for a STBV agreement.

When entering into this agreement, HMRC grants a dispensation to the employer not to operate PAYE for those visitors to the UK who qualify for exemption from tax by virtue of a double tax treaty. The UK company or organisation agrees to track who is visiting the UK and to make an annual submission to HMRC (by 31 May following the end of the tax year) reporting the number of visitors and the length of their stays in the UK.

Alternatively, for employers with only one or two business visitors a year, an application for a NT code on a case by case basis could be made. However, PAYE should be operated until the code is received.


HMRC announced the revision of the STBV agreement in two key ways.

First, the agreement was extended so that it now includes individuals who are legally employed by a UK resident employer but are economically employed by a non-UK resident employer.


This extension will apply to a UK employee assigned to work outside the UK for a non-UK resident entity, which is considered to be the employee’s economic employer (ie, the non-resident employer bears not only the costs of the employee’s remuneration but also the risks and rewards of the employee’s work), and the employee returns to the UK for short visits to perform duties solely for the non-UK employer.

Second, the agreement now clarifies the position on what is commonly referred to as the ‘60 day rule’. Under the 60 day rule, exemption from income tax in the UK by virtue of a tax treaty will still be allowed, even where the employee’s remuneration costs are recharged to the UK entity, provided all other conditions are met. This is on the basis that the employee’s visits to the UK amount to less than 60 days.

The rule does not apply where the employee’s presence in the tax year totals less than 60 days but is part of an actual or anticipated longer period of presence of 60 days or more.

When counting the 60 days, past visits and future anticipated visits need to be taken into account to establish whether the 60 day rule applies or not. As a result of the clarification on the 60 day rule, the reporting categories are now as follows:

  • Visiting employees covered by the 60 day rule who spend 1 – 30 days in the UK
  • Visiting employees covered by the 60 day rule who spend 31 – 59 days in the UK
  • Visiting employees not covered by the 60 day rule who spend 1 – 90 days in the UK and other visitors to the UK for 60 – 90 days.


HMRC confirmed that any employers who already have a STBV agreement in place are not required to sign a new agreement; the existing agreement will remain in force. However, UK employers with short term business visitors should consider:

  • Whether the extension of the agreement to cover certain UK employees applies to them and, if so, take steps to include these UK employees in their STBV tracking process.
  • Whether their tracking process needs to be refined so that they can determine whether an employee is covered by the 60 day rule or not; i.e. does their system allow them to track whether an employee’s presence in the UK in one UK tax year is part of a more substantial period covering more than one UK tax year?
  • Updating their reporting templates to cover the new reporting categories.

UK employers who have not yet put a STBV agreement in place should do so as soon as possible to mitigate potential interest and penalties for failing to operate PAYE correctly.

HMRC focus areas

Recognizing the potential revenue collection, HMRC has set up a specialist team to review companies with short term business visitors and we have seen this result in:

  • Increased employer compliance reviews of businesses with an international profile but no existing STBV Agreement in place.
  • Focus on the PAYE and NIC position for non-resident Directors (who HMRC consider are outside the scope of a STBV Agreement as they are UK office holders).
  • Greater scrutiny of recharge arrangements and HMRC’s Expatriate tax team cross –working with their Transfer Pricing colleagues in light of the recent developments in Base Erosion and Profit Shifting (BEPS) rules.

How can we help?

BDO can help employers further understand their obligations, provide guidance on preparing and submitting a STBV application to HMRC and advise on tracking and monitoring employee presence in the UK. We can also assist with identifying potential PAYE exposure for earlier years and, should there be a need to make a disclosure in relation to prior years, help in minimizing penalty charges. In conjunction with our Transfer Pricing colleagues we can assist with the employment and corporate tax implications of your cross border workers.