CIPP survey on tax and admin treatment of short term business visitors from overseas branches
17 July 2018
The CIPP policy team have published a survey that will support the written response to the HMRC consultation that looks to consider two possible options of how change could be introduced to ease the administrative burden on employers dealing with the tax and administrative treatment of Short Term Business Visitors (STBV) from foreign permanent establishments (“overseas branches”) of UK companies.
It is estimated that the survey will take about 12 minutes to complete and it will remain open until the evening of 27 July when it will close.
The employees of companies with offices across multiple countries are sometimes required to travel abroad on business. This can result in double taxation of the employee’s earnings, with liabilities arising in the country they are visiting and in the country they are resident for tax purposes. In these circumstances, employment taxes can be withheld in two countries at the same time.
The UK has Double Taxation Agreements (DTA) with many countries to ensure an individual will not pay tax twice on the same income. The precise terms of the agreements vary, but they usually work by relieving the individual’s income from tax in the one country or by providing a foreign tax credit in the other. An individual whose earnings have been double charged to tax will usually need to make a claim for Double Taxation Relief (DTR). DTR is available to individuals who are resident in a country with which the UK has a DTA.
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 Pay As You Earn (PAYE) on the relevant earnings of an individual who is:
- Tax resident in a country with which the UK holds a DTA
- Coming to the UK to work for a UK company for less than 183 days in any twelve month period
- Economically employed by a non-resident entity
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 government is considering two broad policy options aimed at realising improvements for UK companies:
1 - Extending the PAYE special arrangement UK workday rule
The current arrangement has a strict limitation on the number of UK workdays allowed in the tax year. The government is considering extending the UK workday rule from 30 to 60 UK workdays. This is expected to result in more STBVs qualifying for the PAYE special arrangement and a greater number of UK companies and individuals will benefit from the arrangement’s administrative easements.
The easements would 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 STBVs would not be required to file a SA return for their relevant earnings.
2 - A new tax exemption for STBVs from overseas branches
The government is also considering an option to introduce a new and specific 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. A new tax exemption would prevent double taxation of the individual’s earnings, and remove the requirement on the UK company to operate PAYE.
In addition to survey data, the CIPP policy team always value hearing from members directly about some of the challenges they encounter when dealing with the administrative and technical burdens of pay and income tax. Please email us if you have experiences that you wish to share or issues that you think would benefit from being raised at the Expat Forum by the CIPP member representative Carol Mason.