CONVINUS Global Mobility Insights - Herbst / Fall 2024 Key Risks: Fines and Penalties: If an employer allows employees to engage in activities beyond the scope of their visa or sends them to the UK without the appropriate visa, both the employer and the employee could face significant fines. Detention or Deportation: Employees travelling without the appropriate visa or engaging in unauthorised activities (e.g., working instead of attending meetings) may be detained by immigration authorities and deported from the UK. This can result in severe reputational damage for the company and disruptions to business operations. Ban from Re-entry: Non-compliance can lead to employees being banned from re-entering the UK for a specified period, which can affect future business travel and long-term plans involving the UK market. Posted Workers Directive Travellers coming to the UK from the European Union (EU) are no longer required to comply with the Posted Workers Directive (PWD) notifications, as the UK is no longer a member of the EU following Brexit. The PWD is an EU regulation that requires employers to notify local authorities when sending workers to another EU country on a temporary basis and ensure that the workers are provided with specific working conditions and protections. Income tax, payroll and UK social security contributions The UK has agreements with numerous countries to avoid double taxation. For countries where no double taxation treaty is in place – employees may be taxable in the UK from day 1, depending on the nature of their activities. Whether short-term stays would trigger full UK tax liability for those coming from countries with which the UK has a comprehensive tax treaty (“Treaty Countries”) depends on: (1) the number of days the employee spends in the UK; and (2) the degree of their integration with the UK company. 28
CONVINUS Global Mobility Insights - Herbst / Fall 2024 However, payroll obligations for short term business travellers from Treaty Countries can be relaxed under a special payroll regime. The regime ignores questions around the employee’s role in the UK for periods less than 60 days. It also offers a reduced compliance burden in line with the total; number of days that the individual spends in the UK. This relaxation only requires entering into a standard form of agreement with the UK tax authorities. However, payroll obligations may apply from day 1 for employees coming from non-Treaty Countries. These may be addressed in a single year-end filing if, again, the employer enters into a relevant standard form agreement with the UK tax authorities. The UK social security contributions or “National Insurance Contributions” (“NICs”) are typically not due for a short-term business traveller. NICs may be necessary where a short-term business traveller stays in the UK for a longer-term period (i.e. over a year). However, the UK has bilateral agreements with many countries that allow for the continuation of the social security contributions for a specified period in the individual’s country of employment. Key Risks: Tax Penalties and Interest: Employers that fail to assess and pay their tax liabilities, are likely to face penalties and interest charges. This includes failing to correctly assess whether the employee meets the tax treaty exemptions. Double Taxation: Employees could end up being taxed twice (in their country of employment and the UK), unless appropriate payroll and/or tax filing actions are taken. Failure to operate payroll: Employers that do not properly account for withholding and payroll obligations (including National Insurance contributions) for employees working in the UK for extended periods may face additional financial penalties. Increased Scrutiny from the UK tax authorities: Non-compliance with tax rules can lead to audits from the UK tax authority (HM Revenue & Customs), resulting in additional complexity and potential risk to the company’s finances. 29
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