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.


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.)


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.”


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

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