PAYE for short-term business visitors to a UK subsidiary

A finance director visiting the UK subsidiary for a fortnight, or a product lead sent over from the parent for three months to get a new team running, is still on the parent's payroll in Austin or Bengaluru. The UK company has not hired them and has made no UK payment. UK tax law looks at where the work is done, and a UK PAYE obligation can start on that person's first day in the country, whatever their payslip says.

Why a visit raises a PAYE question

Income tax generally follows the location of the duties. Someone performing employment duties in the UK is within UK PAYE from the first day, and the obligation can fall on whichever UK entity benefits from the work, including a UK subsidiary that never signed an employment contract with the visitor. Without one of the two arrangements below in place, PAYE applies from day one regardless of how briefly the person is here.

The two arrangements HMRC offers

HMRC publishes two ways to relax that default, known by the appendix of the Employer's Further Guide they come from: an EP Appendix 4 arrangement and an EP Appendix 8 arrangement. Both let the UK company settle the position once a year, with no live payroll running for someone who was never meant to be on it.

• EP Appendix 4 covers an employee resident in a country that has a double taxation agreement with the UK, expected to spend 183 days or less in the UK in a specified 12-month period. The UK entity can be the legal employer or only the "economic employer" — the group company that bears the cost and the benefit of the work even though someone else issues the payslip.
• EP Appendix 8 covers an employee who cannot be included under Appendix 4, spending no more than 60 workdays in the UK, provided they carry no UK National Insurance liability. It is the wider net for visitors who do not qualify for Appendix 4's treaty test.

A UK subsidiary expecting a stream of short visits from the parent puts one in place ahead of the first visit.

The workday count and the economic employer test

A workday, for both arrangements, is a day on which the visitor performs employment duties in the UK. A travel day with no work done does not count, and a day spent working from a hotel room does. The economic employer test behind Appendix 4 asks who bears the benefit and the risk of the work, who supervises, directs or controls how it is carried out, where the duties happen, and who the visitor reports to day to day. HMRC weighs the four factors together to answer that question. A visitor who spends six weeks running the UK subsidiary's own sales team, reporting to the UK managing director, can be the UK company's economic employee for this purpose even while the parent issues the pay.

Directors are excluded from both

Neither arrangement can include a non-resident director. HMRC's own compliance checks name including one as one of the errors it finds most often. A director's pay for UK board duties is taxable in the UK from the first board meeting, whatever a treaty says about employees, and that position sits outside either arrangement entirely. The employing people guide covers the director point in full.

Reporting and paying by 31 May

Appendix 4 is reported once a year, after the tax year ends, with each visitor banded by the number of UK days they worked: 1 to 60, 61 to 90, 91 to 150, and 151 to 183. The report is due by 31 May following the tax year end. Appendix 8 runs on the same date for both halves of the obligation: the RTI submission and any tax due are both filed and paid by 31 May. Missing that date is one of the errors HMRC's own compliance checks name most often.

Social security is a separate question

None of this touches National Insurance. Appendix 4 does not cover it at all, and Appendix 8 cannot be used for anyone who has a UK liability for it. Whether the visitor stays in their home country's social security system depends on whether the UK has a reciprocal agreement with that country. It does with the United States and with India, among others, and where it does, a certificate of coverage from the home authority keeps the visitor paying into the home system for the length of the assignment. The secondments and sponsorship service sets out how the certificate of coverage, the visa route and this income tax position fit together for a specific person.

A worked example

An illustration using the thresholds above. Not a named client.

A US software group sends its head of customer success to the UK subsidiary for 11 weeks to launch a new account team, working UK days only, Monday to Friday, with two long weekends spent travelling home. That totals roughly 49 UK workdays, under the 60-workday Appendix 8 limit. She remains employed and paid in Seattle throughout, her UK National Insurance position is covered by the US-UK reciprocal agreement through a certificate of coverage, and she holds no UK directorship. The UK subsidiary includes her on its Appendix 8 arrangement, reports the assignment and settles any tax due by 31 May following the tax year the visit fell in, and runs no UK payroll for her.

A different visitor on the same trip shows the director exclusion clearly. An Indian group's chief technology officer joins the UK subsidiary's board and sits in on three board meetings while he is in the country. His time as an employee on the visit can still go through Appendix 4 or Appendix 8 on the same terms as anyone else's. His director's pay for those three board meetings is UK-taxable from the first one, reported through the UK company's ordinary payroll, because the exclusion for non-resident directors applies whatever the treaty says and however few meetings he attends.

What to do this week

1. List everyone the parent plans to send to the UK subsidiary in the next 12 months, with their expected UK workdays and whether any of them sit on the UK board.
2. Separate the directors from the rest. Their UK board pay goes through ordinary payroll from the first meeting.
3. For everyone else, check whether their home country has a double taxation agreement with the UK, and measure their expected UK workdays against the 183-day and 60-day thresholds to see which arrangement fits, if either does.
4. Check whether the UK has a reciprocal social security agreement with their home country, and whether a certificate of coverage is in place or needs applying for.
5. Put the arrangement in place with HMRC ahead of the first visit it is meant to cover, and set a recurring date ahead of 31 May each year to file the report.

Where the same person is sent over repeatedly, running to several weeks a year, it is worth checking the permanent establishment position too. Someone who moves from training a UK team to closing UK deals on each visit can tip the parent into having a UK taxable presence of its own, a different question from the one this guide answers.