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Cross Border Employment Issues - news article image

Cross Border Employment Issues

8 Mar 2016

4 minute read

Every now and again, a client will casually mention that they have someone who ‘pops over to work in the UK office from time to time’ usually followed up with the sweeping comment ‘but they’re here less than 183 days, so it’s fine’.

This is an assumption that can create a compliance headache for employers and is an area HMRC treat as low hanging fruit during compliance health-checks and enquiries.

Whilst, ultimately, the individual may not be due to pay any UK taxes on those days that they pop over to the UK, this cannot be taken for granted either from a withholding perspective or from the perspective of the individual’s personal tax position.

This is especially true where the individual is a Director or stakeholder in the business.

Short Term Business Visitors

Since the introduction of the Real Time Information reporting requirements, the initial position regarding ANY individual working in the UK is that full withholding is due from the very first day. This is the case regardless of where the individual is paid and can create the need for a UK payroll to be operated on a shadow basis in the UK.

Strictly, employers can dispense with withholding only in cases where they have an EP Appendix 4 (Short Term Business Visitors) agreement in place with HMRC. This agreement allows an employer to make a judgement on relevant individuals meeting the following criteria:

  1. The individual is in the UK for no more than 183 days in the tax year, and
  2. The individual is resident in a country with which the UK has a double tax agreement in place, and
  3. Costs relating to the individual’s employment are not recharged to the UK by the overseas entity or paid by the UK entity

If the above criteria are satisfied, an annual return can be made to HMRC detailing the individuals’ information. This report is generally due to HMRC by 31 May following the end of the relevant tax year and the employer must be able to demonstrate that they have a tracking mechanism in place to monitor business trips to the UK.


Directors visiting the UK will almost always be subjected to UK taxes on their UK workdays. Whilst ‘incidental’ duties can potentially be exempted up to a 30 day limit, HMRC argue that a Director is key to the operation of the business and it cannot therefore be claimed that they are performing duties which are incidental to their home country role. 

Directors should always therefore be placed on a UK payroll, either a UK payroll operating under strict RTI or a Modified Scheme operating under relaxed RTI.

Modified PAYE Schemes

Where an employee or Director is responsible for paying their own UK taxes, a standard UK payroll must be used. In the situation where an employer is paying the individual’s UK taxes on their behalf, a Modified Scheme can be used. This is a separate payroll established under EP Appendix 6 and allows in-year estimates to be used in determining monthly/quarterly Modified PAYE withholding. The final position is then reconciled via the preparation and submission of the individual’s Self-Assessment tax return.

A major benefit of operating a Modified PAYE scheme is the ability to use in-year estimates rather than converting a reporting monthly on a Real Time basis. Additionally, P11ds can be filed using a January 31st deadline, allowing an extended period to determine and quantify overseas benefits and expenses.

National Insurance/Social Security

It should be borne in mind that National Insurance may be due on an individual’s UK earnings and this cannot therefore be ignored by the employer. Any individual working in the UK on a temporary basis should apply in their home location for a Certificate of Coverage for Social Security purposes.

This can be applied for in respect of the European countries in addition to those countries with which the UK has an agreement in place for social security and ensures that the individual remains liable to social security in their home location for a specified period (generally no longer than 5 years, although there are certain exceptions to this).

Similarly to PAYE, it is possible to apply to operate an EP Appendix 7 (Modified NIC) Scheme in cases where an individual is liable to UK social security and this is being settled on a grossed up basis by the employer.

Cross Border Employment Issues - news article image

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