Short-Term Business Visitors (STBVs) – HMRC publishes updated guidance for compliance (GfC19)

Employment tax in general and expats in particular, whether traditional expats or short-term business travellers, has been an area of increasing focus for HMRC and these new guidelines help clarify HMRC’s expectations of employers with business travellers coming to the UK.

Whilst care always needs to be taken by employers when looking at HMRC’s guidance – it is never definitive law, for example – the new guidance reinforces the fact that this area is a ‘hot potato’ from an HMRC perspective and something which they will be increasingly focusing on over the coming months (and years). The guidance addresses the expectations that the Revenue have with business travellers from a PAYE, Income Tax and social security (National Insurance Contributions (NIC)) perspective, when companies have foreign-based employees working in the UK on even a very limited basis.

Moreover, the guidance acts as a further warning for those companies – perhaps particularly owner-managed and smaller, internationally active SMEs with only limited experience in this area – to understand that many of their common thoughts and beliefs about business travellers may be wrong. For example, many such businesses still assume that there are ‘no compliance issues’, where someone is in the UK for under 183 days in a tax year ‘because the Double Tax Treaty’ will protect them from any UK taxes. However, this is absolutely not the case and even if Double Tax Treaty Relief may be available in due course, this doesn’t eliminate the innate PAYE withholding position or the (potentially quite separate) social security issues which can arise with STBVs.

So what are the particular areas that HMRC would typically want to focus on as part of any employment tax review?

Key focus points for HMRC include:

1. Businesses that have poor (or even no) tracking of overseas business travellers coming to the UK;
2. Unclear, inadequate systems and records to support any tax treaty, PAYE, and NIC decisions which might have been made;
3. Misunderstandings regarding the concept of ‘economic employment’ and no clear tracking of where the employment costs are actually being borne for particular people;
4. A lack of awareness of the particular ‘traps’ associated with particular Double Tax Treaties (e.g. where, for example, a treaty has a ‘183 days in any 12-month period’ clause within it); and
5. A failure to consider NIC separately from tax and, for example, obtain A1 Certificates in appropriate cases

Whilst growing businesses in particular may consider many of these questions simply ‘compliance’ or ‘administration’, the reality is that it is vital that companies understand these issues and ensure that they have clear systems in place to manage their STBVs, if they want to stay compliant from an HMRC perspective. Failure to have proper systems and processes in place for business travellers can have real costs for companies – both in terms of the tax and NIC penalties which may arise but also from a general ‘PR perspective’, whilst also undermining their ‘employment promise’ to their employees.

Therefore, if you are not sure whether you could answer any questions that an Inspector of Taxes might raise in these areas, or indeed the equivalent questions that overseas officials might raise with regarding your UK travellers to other jurisdictions, now could be the right time for a formal review of your systems and processes with regard to STBVs?

Everyone has heard the saying ‘a stitch in time saves nine’ and this is true from a tax and business traveller compliance perspective as in many other areas of life.

Would you like to know?

If you want to discuss this topic in more detail, please contact your usual Blick Rothenberg contact or Robert Salter using the form below.