Overseas workers in the UK

Tax and social security

If an employee is only intending to work in the UK for a short period, employers generally have no tax issues; they would just deduct UK tax and social security as usual. However, if the stay is more permanent, the employer may have some local tax and social security issues.

Income tax

Typically, the overseas jurisdiction will have taxing rights over the employee when work is being physically performed in their country. The UK has signed double tax treaties with many countries which, dependant on the agreement, could exempt employees from paying tax on their earnings in both jurisdictions. 

The employer will need to consider carefully whether it has a duty to register themselves in the other country to deduct, report, and pay tax before remunerating their employee. 

Social security

Much like income tax, the obligation to pay social security contributions would usually arise in the country in which the employee is physically working. However, this is again dependent on whether an agreement exists between the other country and the UK. It is important for an employer to determine where their employee’s social security obligation resides.

Short Term Business Visitors Agreement (STBVA)

A STBVA can be agreed with HM Revenue and Customs (HMRC), resulting in Pay As You Earn (PAYE) obligations being relaxed in exchange for annual reporting compliance. 

There are two arrangements that can be agreed: Appendix 4 and Appendix 8.

Appendix 4

For individuals to be eligible for treatment under Appendix 4 of the STBVA, they must spend fewer than 183 days in the UK, remain contractually employed outside the UK, and not have costs related to their stay in the UK recharged to the UK-based entity. 

Under the Appendix 4 agreement, the UK-based entity does not have to deduct tax from the individual’s earnings. They must instead submit a report to HMRC by 31 May after the end of the tax year, providing information for individuals covered by the agreement. 

For employees coming to the UK for 6 weeks, the requirements are minimal, and the UK-based entity must confirm to HMRC that the business visitors are contractually employed outside the UK and that their stay in the UK does not form part of a longer period. 

Appendix 8

An Appendix 8 arrangement applies to a STBV coming to the UK for fewer than 60 days, employed by a UK-based employer, and who is not subject to Class 1 NIC liability.

The UK-based employer is required to only file a single annual Full Payment Submission (FPS) for the scheme at the end of the tax year, and the tax due must be paid to HMRC by 31 May following the end of the tax year.

In conclusion, understanding the rules and agreements around short-term business visitors is key to managing tax and social security obligations effectively for international employees.

---

Andrew Neuman is a tax partner with over 20 years' experience advising large corporations, both domestic and overseas, owner-managed businesses, and private individuals on all areas of taxation. Andrew specialises in international tax issues, helping clients to structure activities in a tax-efficient way.