Join TRC at the Worldwide ERC® National Relocation Conference in San Diego, May 15-17, 2013

What’s the best kind of meeting experience you can imagine? We think it’s one where you spend some concentrated time with your smartest peers, comparing notes and discovering some amazing solutions to your biggest challenges. That’s what you’ll find at Worldwide ERC’s National Relocation Conference!  The Conference will help you manage your business and your career for optimal success, in a fast-paced, lively learning environment that draws the best and brightest professionals and speakers.

Join TRC’s Jerry Funaro for the interactive corporate session, “Tiered Policies…or Tired Policies”, and learn how your peers have updated their programs to meet today’s recruiting and retention objectives.  Enjoy a complimentary chair massage at the TRC Relaxation Station and visit us at Booth 500!

Corporate first-time attendees are eligible for FREE registration (up to a $1695 value)! Contact Jerry Funaro, Vice President, Global Marketing at jfunaro@trcgm.com or +1.203.925.2001 for more information.

Her Majesty’s Revenue & Customs (HMRC) is proposing to amend the U.K.’s Short-Term Business Visitors (Appendix 4) agreement. Many companies use Appendix 4 agreements to reduce the burdens of payroll withholding and reporting requirements in respect of short-term business travellers to the U.K. who benefit from relief under double taxation agreements.

Overview

The current Appendix 4 agreement divides business travellers into four categories for reporting purposes based upon the number of days the employees have spent in the United Kingdom. Broadly, the greater the number of days spent in the U.K., the greater the reporting requirements. The proposed changes are significant. The biggest change will be the requirement to inform HMRC of individuals who are likely to spend over 150 days in the U.K. as soon as “… it can reasonably be anticipated that the employee will be present in the U.K. for more than 150 days.”2 This is even if treaty relief will be due. The other change proposed is that dual residents will be able to be included in the agreement.

Those businesses that already have an Appendix 4 agreement will not have to sign a new agreement, but will be sent a new agreement when the Appendix 4 report for 2012/2013 is filed.

During a recent meeting of the Joint Forum on Expatriate Tax and National Insurance Contributions, HMRC expressed the view that employers that do not operate withholding on the basis that treaty relief is due without an agreement with HMRC should obtain such an agreement. This is particularly important with the introduction of Real Time Information (RTI) as HMRC will be expecting compliance with the agreements and potential penalties will apply for non-compliance. Under RTI HMRC will be able to check whether employers are being compliant on a monthly basis. (For more details on the introduction of RTI, see Flash International Executive Alert 2012-214, 30 November 2012.)

KPMG Note

We understand that the new agreements will be kept under review for two tax years to address any problems that arise in practice following the introduction of the Statutory Residence Test and RTI in April 2013.

Key Changes

With effect from 6 April 2013, the main changes are as follows:

1. Appendix 4 agreements apply to dual residents where the employee is treaty resident in the overseas state (previously the employee had to be non U.K. resident).

2. Under the new RTI payroll reporting regime, employees covered by an Appendix 4 agreement will not be included in the monthly submissions to HMRC.

3. The agreement has to be signed by the business and has to be authorized by HMRC.

4. Reporting for the 1 to 30-days, 31 to 60-days, and 61 to 90-days categories are unchanged.

5. 91 to 183-days category split into 91 to 150-days and 151 to 183-days categories with the following reporting requirements: “Visitors to the UK 91 to 150 days: For an employee in the UK for a period of 91 days but not exceeding 150 days in the tax year PAYE can be disregarded provided that (a) all of the information requested for visitors up to 90 days is provided and in addition (b) in the case of non US citizens and Green Card holders the employee provides a statement from the overseas Revenue authority confirming residence in the other state for tax purposes throughout the period in the UK. This statement should be passed to the HMRC Office by 31 May following the end of the relevant overseas tax year. This arrangement is only provisional until the relevant certificate is received. In the case of US citizens it will only be necessary for the employee to provide evidence of continuing residence in the US.”3

6. New category of 151 to 183 days. As noted in the draft agreement “Visitors to the UK 151 to 183 days: Applications will be made on a named individual basis for authority to include the employee in this arrangement. The application will be made as soon as it can reasonably be anticipated that the employee will be present in the UK for more than 150 days. The application will include (a) all of the information requested for visitors up to 90 days and confirmation that the statement from the overseas Revenue authority will follow by the relevant 31 May, and (b) a statement by the employee giving reasons why he/she considers himself/herself to be treaty resident in the treaty partner country by reference to the appropriate article in the relevant Double Taxation Treaty.

Helpsheet HS302 provides more information about dual residence generally and the tests to be applied to determine the country of tax residence.

HMRC will consider the circumstances and will (1) notify the employer that the individual can be included in the Appendix 4 arrangement, or (2) authorise code NT and issue a Self Assessment Tax Return, or (3) confirm that PAYE should be applied and issue a Self Assessment Tax Return.”

KPMG Note

The introduction of the statutory residence test from 6 April 2013, may mean that more individuals are considered dual residents. HMRC seems to have recognized that this may increase burdens on employers and, therefore, have now included such dual residents in the Appendix 4 agreement.

The introduction of RTI means that HMRC for the first time will be able to monitor how U.K. withholding is operated each pay-day and hence will be able to determine whether employers are following the terms of the agreement. It is, therefore, essential that employers have systems and processes in place to track and monitor their short-term business visitors.

Source: KPMG

Immigration (Corporate)

Companies must include intentions of foreign sponsorship in the due diligence process surrounding acquisitions. Most nations are increasing their scrutiny of who will be working in their country, why, when and for how long. The current economic difficulties have made many countries redouble their efforts to support national economies and to protect employment for their own citizens as much as possible. Not surprisingly, the administrative hurdles related to immigration have grown, and details regarding validity, rate of pay and roles and responsibilities are required. TRC advises clients to plan at least three months in advance for any international assignment.

Immigration (Individual)

Immigration laws are being more strictly enforced than in the past, and penalties can be steep. Increased post 9/11 scrutiny of border crossings and the amount of time spent in countries makes it much more likely that those who are not in compliance with local immigration laws will be detected. Some dodgy practices, such as working on tourist visas, have become even riskier than in the past, and can result in immediate deportation and even denial of future entry. All employees working in a foreign country must have the proper documentation and visa to support it. Failure to do so could result in fines or imprisonment for the employee and / or the employer.

Tax Treaties

Many countries have tax treaties in place with other nations to outline and identify when and under which circumstances taxes are due. Typically, an employee may work in another country for a certain number of days before a tax liability becomes due. It is important to keep careful track of the number of days worked in a foreign country, and to enlist the help of global tax experts to ensure compliance with the myriad requirements. Penalties can be severe.