Bringing an overseas colleague to the UK for a meeting, project or temporary assignment can create payroll obligations sooner than many employers expect. New HMRC guidance, published on 13 August, warns that even one UK workday may bring an employee’s earnings within the scope of UK Income Tax.
The guidance is especially relevant to smaller firms that do not have a dedicated global mobility team. A founder visiting from an overseas group company, a specialist sent to install equipment or an employee attending a UK project can all require a closer look. HMRC says assuming that a short stay automatically means no UK tax or National Insurance is a common and potentially costly error.
What HMRC has clarified
The new Guidelines for Compliance do not change the law or HMRC policy. Instead, they bring together the practical steps employers should take when an overseas employee performs duties in the UK for a short period.
For a non-UK resident employee, earnings connected with duties physically performed here will ordinarily be subject to UK Income Tax. Relief may be available under a double taxation treaty, but employers should not assume that treaty relief removes the need to consider PAYE. HMRC says taxable employment income can remain PAYE income even where the employee may ultimately claim treaty relief.
There are exceptions. For example, PAYE may not be required where the overseas employer has no UK presence and the employee is not working for anyone with a UK presence. The detailed result depends on the facts, the employee’s residence position and the wording of the relevant treaty.
Why a short visit can still create work
HMRC highlights two arrangements that can reduce administration: EP appendix 4 and EP appendix 8. Appendix 4 can help employers manage PAYE for qualifying short-term business visitors who are expected to receive treaty relief. Appendix 8 is designed for certain visitors who do not qualify for treaty relief. Neither should be treated as an automatic exemption, and the National Insurance position needs to be considered separately.
That distinction matters because double taxation treaties generally deal with Income Tax, not social security. Depending on where the employee normally works, a social security agreement and a certificate of coverage may keep contributions in the home country. In other cases, UK National Insurance can apply from the first day. Employers therefore need to check both tax and National Insurance rather than applying one answer to both.
The records small employers should keep
HMRC says weak tracking and incomplete records are among the most common problems. PAYE records generally need to be retained for at least three years after the end of the tax year. For overseas visitors, useful evidence may include:
- the employment contract and details of the UK duties;
- UK arrival, departure and workday records, supported by travel documents;
- salary, bonus, benefits and share-award information;
- expenses connected with the visit;
- details of cost recharges between overseas and UK entities; and
- documents supporting any conclusion that UK National Insurance is not due.
Cost recharges deserve particular attention. Treaty treatment can depend on which entity ultimately bears the employee’s remuneration. A recharge to the UK business may change the analysis, even where the worker remains employed and paid overseas.
A practical five-step check before the next visitor arrives
- Create a single owner for visitor tracking. Make sure HR, payroll, finance and project managers know who must be told before an overseas employee works in the UK.
- Record days and duties. Distinguish UK workdays from holidays and travel days, and describe what the employee actually does here.
- Check residence and the relevant treaty. Do not rely on a general “183-day rule”; treaty wording and conditions vary.
- Review PAYE and National Insurance separately. Identify whether an appendix arrangement or certificate of coverage is available.
- Keep the evidence. Save the reasoning and supporting documents so the business can answer questions during an HMRC compliance check.
This is an area where a small amount of preparation can prevent a large clean-up later. Businesses expecting overseas colleagues this year should use HMRC’s new guidance as a prompt to test their process before travel is booked, and seek professional advice where the residence, treaty or payroll position is unclear.
