As the tax year draws to an end, employers are preparing for the year end employment tax reporting requirements. One of the first deadlines for employer reporting to HMRC relates to the Appendix 4 Short Term Business Visitor (STBV) report which must be submitted to HMRC by 31 May 2025. 

Which employees should be included on an Appendix 4 report?

Employees only need to be included on an Appendix 4 report where there is a UK PAYE obligation in relation to them, which is being relaxed due to an Appendix 4 agreement. A PAYE obligation arises where an individual who is either (i) employed by, (ii) working for, or (iii) paid by a company that has a UK PAYE presence and performs duties in the UK. 

Employees can only be included on an Appendix 4 report if they meet one of the two following sets of criteria.  

Criteria 1 – meeting the 60 day rule

• Are tax resident in a country with which the UK has a double tax treaty.  
• Are employed by a non-UK company.
• Spend fewer than 60 days of presence in the UK during the tax year but including “linked periods”. 

Criteria 2 – not “economically employed” in the UK

• Are tax resident in a country with which the UK has a double tax treaty.  
• Are employed by a non-UK company and are performing services for that company while in the UK (i.e., are economically employed by a non-UK company). 
• Spend fewer than 183 days if presence in the UK during the tax year. 

To determine whether individuals meet criteria 1 or 2, there are two important concepts that need to be assessed, which are often misunderstood and interpreted. These are linked periods for employees who may meet criteria 1 and economic employment for employees who may meet criteria 2. 

(Individuals who are employed (and economically employed) by a UK company or an overseas branch of a UK company cannot be included on the Appendix 4 report, and they will either need to be included on the company’s UK payroll or on a separate Appendix 8 report.)

Considering the 60-day rule - linked periods 

As outlined above, under criteria 1, where an employee has spent fewer than 60 days in the UK during a tax year but including “linked periods” they can be included on the Appendix 4 report. This is often referred to as the “60-day rule”. The reporting requirements for these individuals are also very limited, including that the employees do not need to be named. 

The counting of days that comprise “linked periods” requires consideration of whether an employee’s UK days form one part of a more substantial period of time in the UK over several trips. HMRC provide guidance on what should be classed as a more substantial period in the UK in Tax Bulletin 68. They state that the following factors should be considered.

• Is there an expectation that the employee will return to the UK when they depart initially?
• How long is the gap between visits in comparison to the length of those visits?
• How frequently does the employee return to the UK?
• How integral to the business are the duties performed?

HMRC also provide several examples of individuals making multiple trips to the UK which highlight the following principles that they apply to the 60-day rule.

• If there is no expectation of returning to the UK during the employees first trip to the UK, even if the second period in the UK is a linked period and the total number of days the employee is in the UK exceeds 59 days, PAYE only needs to be applied in relation to the days spent during the second trip to the UK (once it became clear that the 60 day rule would not apply). 
• Where trips to the UK are unexpected and there is a relatively long gap between trips (7 months in the example provided by HMRC), the periods are not linked. 
• If there is a consistent working pattern where an expectation of an employee spending a set number of days in the UK each tax year is set, the trips and days in the UK will be deemed to be linked. 
• Where an employee is making a number of short trips to the UK without an anticipated pattern or duration from the outset, PAYE does not need to be applied from the first trip to the UK, however should be applied when it becomes clear the 60 day threshold will be met. 

These factors and examples illustrate the importance of reviewing an employee’s trips to the UK when preparing an Appendix 4 report, not only for the current tax year, but also for the previous tax year and any plans for trips in future tax years. In HMRC’s view, once there is a reasonable expectation that an individual will have multiple trips to the UK totalling 60 days or more for a similar purpose, the 60-rule cannot apply to them, and whether they meet criteria 2 to be included on the Appendix 4 report should be assessed. 

Considering the concept of “economic employment”

Economic employment is a concept drawn from OECD commentary that HMRC use to determine whether dependant agent article of the relevant double tax treaty applies to the individuals’ circumstances. While article 15(2) of the OECD Model Convention considers whether the income of that individual is paid on or behalf of a UK resident company or is borne by a UK permanent establishment of a company, for the purposes of the Appendix 4 report, HMRC replace this with the economic employer concept. 

The economic employer concept focuses on whether the employee is sufficiently integrated into the UK host company, for the UK company to be regarded as their “economic employer”. When determining this key points to consider include the following. 

• Which company bears the risk should something go wrong with the employee work? 
• Should a project overrun, which entity would be responsible for any additional costs? 
• Who does the employee report to? 
• Which company controls and reviews the work the employee undertakes? 
• Which company bears the employees costs? 

Working arrangements should be reviewed on a case-by-case basis when preparing an Appendix 4 report and particular care and advice should be taken where an employee has spent a substantial number of days in the UK to ensure that are eligible to be included in the report. 

If an employee is economically employed in the UK, strictly, PAYE should have been operated from day one of work in the UK and so an updated FPS submission should be made to HMRC as soon as practicable. 

Summary 

The Appendix 4 STBV report, and in particular the 60-day rule, can be very helpful in mitigating the administrative burden and complying with PAYE requirements when reporting business travel to the UK by employees of non-UK group companies.

However, there are areas of complexity that need to be reviewed on a case-by-case basis to ensure that employees do meet the relevant 60-day rule criteria, particularly in relation to linked periods, and if the relevant 60-day rule criteria are not met, an appropriate assessment is undertaken as to whether they could be deemed to be economically employed in the UK. 

If you would like to discuss any of the points raised in this note, please get in touch.