As businesses seek out new markets and technology allows people to work in one country but live in another, cross-border mobility is growing. In the last 18 months HMRC has increased its focus on international business travellers.
The traditional assignment framework is changing as international travel becomes more commonplace. Rather than sending individuals to a location for two or three years and tax equalising them, businesses are looking for less costly alternatives. That means more flexibility from employees and an expectation for them to travel more widely.
It is mandatory for any UK company that receives employees from a subsidiary or overseas branch in a double tax treaty country to have a Short Term Business Visitors Arrangement (STBVA) with HMRC. The alternative is to add the individuals to UK payroll, capturing all visits of one day or more. We have also seen the introduction of a special arrangement payroll for visitors from non-treaty countries or overseas branches of UK companies who have fewer than 30 UK workdays.
Further changes for Short Term Business Visitors
After recent consultation HMRC extended the special arrangement payroll, which will now be known as Appendix 8, to those who visit for up to 60 days (effective from April 2020). Furthermore the filing deadline will be 31 May following the tax year end to align with the STBV filing deadline, in order to ease the reporting burden on employers.
It is not just the UK that’s focusing on business travellers. It is of worldwide interest. The US has developed a platform that allows someone to log on to the US immigration website, enter passport details and generate a report that details visits to the US. Meanwhile the UK is identifying people (via an entry in their passport) who visit frequently from the US, and they will be subject to more scrutiny at immigration.
Rules for non-resident directors
HMRC’s development of its short term business visitors regime has highlighted the number of non-resident directors of UK companies who come to the UK for work purposes. Directors are not covered under an STBVA, as HMRC deems all director duties to be substantive in nature.
Different rules apply for non-resident directors. They will almost always be considered taxable in the UK when they work here, and this means obligations for both the company and the individual. Different tax treaties treat director income in different ways. So it’s important to seek professional advice and consult the appropriate treaty to check.
Implications of Making Tax Digital
HMRC recognises the complexity of individuals working cross border. For that reason it has said that this will be the last area to tackle in the development of its digital tax revolution. For example, there are various issues connected with sharing confidential
information and whether HMRC would ever be able to capture the ‘whole picture’ digitally. The jury is still out on that one.
Off payroll rules for private sector
The 2018 budget extended the off-payroll rules (IR35) to private sector workers (effective from April 2020). Many companies employ people through personal service companies to work on special projects. These rules will apply to those who come from overseas or are contracted outside the UK.
Senior Accounting Officers beware
The SAO regime is another development that is bringing employment tax and mobility to the fore. That’s because an SAO is personally liable if things are not correctly reported and this is an area which can fall into the cracks between HR and payroll. It is a wise SAO, therefore, who targets this area of tax to ensure compliance.
Brexit or no Brexit
When, or perhaps if, the UK leaves the EU HMRC will continue to take a keen interest in the global mobility and tax arena. That’s because they see it as a lucrative source of revenue. We have seen Requirement to Correct (RTC) and other offshore disclosure projects, which have targeted people with offshore assets around the world. The OECD/G20 BEPS project, the international collaboration to end tax avoidance strategies, has focused on the tax being paid where the profit is generated.
We expect more initiatives like these, particularly as the exchange of information between countries gathers pace.
If we leave the EU, the tax treaty framework will remain (although it may be subject to change) as this is OECD based. But what of social security agreements between the UK and EU countries and the validity of A1/ certificates of coverage for mobile employees? HMRC and the Department for Work and Pensions have been noticeably silent on how they expect to take things forward. Clearly more work is needed.
