Business visitors coming to work in the UK


When is tax due and what obligations do employers have?

A UK Tribunal case held that exemption from UK tax was not available where a UK-based company suffered the costs of an overseas employee. Companies sending employees to work in the UK for even short periods of time should review their current arrangements to make sure that they are not subject to penalties for non compliance. This Global Insight provides an overview of the current rules.

When is UK tax due? The general rule is that income is taxable in the UK if an individual is physically present here when performing the activities that he is paid for. If certain conditions are met however, no UK tax will be due in accordance with international tax treaty agreements.

Treaty condition 1: less than 183 days in the UK
This is simply a process of counting days spent in the UK. It is important to read the specific treaty to determine the period to measure those days. Is it in a UK fiscal year (6 April to 5 April) or in any 12 month period? Any part of a day counts as a day.

Treaty condition 2: the employee is paid by (or on behalf of) an overseas employer

(a) Who is the ‘employer’?
This can be problematic. A legal employment overseas does not necessarily satisfy this test. For instance, the employee may have been seconded by the overseas employer to work for a UK company, or the overseas employer may carry on a business of hiring out staff to other companies. The company that obtains the benefits and bears the costs / risks in relation to the work undertaken by the employee might be described as the “economic employer”.

In a UK tax case, the Tax Tribunal considered who was getting the benefit of employee services concluding that although contractually the overseas company was the employer, the UK company was effectively acting as employer in all but name and therefore the UK company was considered the “economic employer”. UK tax was due.

(b) Who pays the employee; are costs borne in the UK?
If costs or fees charged by the overseas employer to the UK company represent the costs of the employee for the services that they provide to the UK company then guidance indicates treaty relief is not available as the UK entity takes the economic value of the employee’s work and cost.

If the fee charged for the services has no relationship with the remuneration of the employee or is only one of many factors taken into account (e.g. a consulting firm charges a client on the basis of an hourly fee for time spent by one of its employee and that fee takes account of the various costs of the enterprise) then it is likely that remuneration has not been recharged.

Treaty condition 3: Costs are not borne by a “permanent establishment or fixed base” in the UK
This treaty condition is not met where a recharge is made to a branch. HMRC accepts however that a permanent establishment cannot be said to bear the cost unless it is charged against its profits without a corresponding credit such as via a management charge.

Other considerations

  • “60 day rule”.  HMRC’s view is that if the individual is present in the UK for less than 60 days, then treaty relief is likely to be available even if costs are borne in the UK provided that the individual continues to remain answerable to their home country employer, they do not have a senior role in the company and the 60 days does not form part of a longer period of UK presence.
  • UK benefits such as accommodation. Where benefits are paid by the UK employer, the treaty conditions will not be met in relation to those UK benefits because they are not paid by the overseas employer (unless there is a corresponding recharge to the overseas employer).
  • Avoidance cases. HMRC have said that treaty claims will not be admitted where payment by an overseas company forms part of an arrangement to avoid UK tax. This may include cases where the employee is nominally employed by a company which exists to provide services to the UK or where an employee has taken up a new formal employment with an overseas company at the time of assignment. These cases may be reviewed “critically” by HMRC.

Corporate tax. Review any corporate tax implications including which country and which company the corporate tax deduction should be for taken for the employee related costs.


If employee costs are borne in the UK, the current view is therefore that treaty conditions are unlikely to be met and UK tax due. Conversely, if an employee is seconded to the UK and works for the benefit of the overseas employer, the overseas business meets all remuneration and the individual does not exceed 183 days in the UK then treaty relief should be available and no UK tax is due.

An employer will usually be required to operate UK wage withholding (“PAYE”) if UK tax is due. An employer should also be aware that the above treaty conditions only apply to income tax therefore they should also review if employee and employer UK social security tax (“National Insurance”) is due.

With the introduction of payroll Real Time Information (RTI) and a harsh penalty regime for companies and individuals that fail to register for tax or declare taxable income, companies should review their current short term business visitor arrangements to ensure that they and their overseas employees and directors are compliant; build a robust process for identifying, tracking and managing business visitors to the UK and consider getting a Short Term Business Visitor agreement with HMRC to relax certain PAYE obligations.