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United Kingdom

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An individual’s liability to income tax in the United Kingdom (UK) is determined by residence status for taxation purposes and the source of income derived by the individual. Income tax is levied at progressive rates on an individual’s taxable income for the year, which is calculated by subtracting allowable deductions from the total assessable income.

Key message

Extended business travelers are likely to be taxed on employment income relating to their UK workdays. Employers also need to exercise care and should consider whether a Short Term Business Visitor (STBV) agreement with the UK Revenue Authorities is required to relax the employer reporting obligations.

Income tax

Liability for income tax


The UK tax year runs from 6 April in each year to 5 April the following year. Up to and including the 2012/13 tax year (i.e. up to 5 April 2013), an individual’s residence was determined by reference to UK case law and guidance from Her Majesty’s Revenue & Customs (“HMRC”), the UK tax authority.

From 6 April 2013 the UK introduced a statutory residence test (“SRT”).

The SRT is made up of the following types of tests:

  1. Automatic overseas tests;
  2. Automatic UK tests; and,
  3. A sufficient ties test.

Automatic overseas tests

An individual will meet the conditions of the automatic overseas test if one of the following conditions applies:

  • The individual has been resident in the UK for one or more of the previous three tax years and will spend fewer than 16 days in the UK in the tax year; or
  • The individual has not been resident in the UK in any of the previous three tax years and will spend less than 46 days in the UK in the tax year; or
  • The individual works sufficient hours overseas in the tax year (there is a specific statutory test to determine this), spends fewer than 91 days in the UK in the tax year, and no more than 30 days are spent working in the UK.

For these purposes a workday is a day with more than three hours of work and may include travel time. An individual is generally treated as being in the UK for a day if present in the UK at midnight.

Automatic UK tests

An individual who does not meet any of the above tests will be regarded as automatically resident in the UK if:

  • the individual spends 183 days or more in the UK in a tax year; or
  • the individual has a UK home for at least 91 consecutive days, at least 30 of which are in the relevant tax year (whether consecutively or otherwise). Additionally, the individual has to be present in the home on at least 30 days in the tax year - whether consecutively or otherwise. Finally the individual has to have no homes abroad throughout the 91 day period in which they are present on 30 or more days in the tax year; or
  • the individual works sufficient hours (there is a specific statutory test to determine this), in the UK over a period of 365 days during which more than 75% of workdays are UK workdays and at least 1 of those days occurs in the relevant tax year.

For these purposes a workday is a day with more than three hours of work and may include travel time. An individual is generally treated as being in the UK for a day if present in the UK at midnight.

If none of the automatic overseas tests and none of the UK tests are met an individual must consider the sufficient ties test to determine their UK residence.

Sufficient ties test

If the above tests are not satisfied, particular ties that an individual may have with the UK and the number of days that the individual spends in the UK have to be considered.

The ties considered are:

  • a family tie;
  • an accommodation tie;
  • a work tie
  • a 90-day tie; and
  • a country tie (only considered when the individual has been UK resident in one or more of the previous three tax years).

The more ties an individual has with the UK, the fewer the number of days that can be spent in the UK before the individual establishes UK residence for a tax year. KPMG’s SRT flowchart can be found here (PDF 152 KB).

Ordinary residence and non-ordinary residence

Under the pre-6 April 2013 rules, UK tax law also included the concept of “ordinary residence”. This was broadly for individuals whose intention to remain in the UK for a significant period of time (broadly three or more years) or otherwise met one of the relevant tests. Where an individual was classed as not ordinarily resident (particularly relevant for extended business travelers coming to the UK) they could claim certain UK tax advantages such as overseas workday relief (“OWR”).

The concept of ordinary residence was abolished with effect from 6 April 2013 (with a very small number of exceptions including transitional rules). The impact for business travelers who were regarded as not resident and not ordinarily resident in the UK under the old rules is limited.

OWR is kept as a relief from 6 April 2013 for non-UK domiciled new arrivers. The relief applies for the year of arrival and the next two tax years.


A person’s domicile is, broadly, the individual’s permanent homeland. The majority of foreign nationals employed by foreign employers who are extended business travelers or working on secondment to the UK should not be regarded as domiciled in the UK.

The taxation of non-domiciles has been amended recently. However, for globally mobile secondees, who tend to have stays of limited duration, the impact has been relatively minor. The primary exception to this are those born in the UK with a UK domicile of origin and who now assert a foreign domicile of choice. Such individuals should seek professional advice immediately if they are already in the UK and before arrival if they are contemplating moving to the UK as the position is now less favourable than before and in some cases materially worse.

Significance of residency and domicile

A non-UK resident is subject to UK tax on UK-source income.

An individual who is resident but non-UK domiciled can receive UK tax relief for days worked outside of the UK in their year of arrival and the two subsequent tax years, if the individual is taxed in the UK on the remittance basis and meets certain other tests (as discussed above, this is called OWR).

Where the remittance basis is claimed, a resident but non-UK domiciled individual is subject to UK tax on foreign income and capital gains only to the extent that they are remitted to the UK. UK source income and UK capital gains are taxed as normal on the arising basis i.e. in the year in which they arise.

The recent changes modify the rules for:

  • non-UK domiciled individuals who have been resident in the UK for 15 out of the previous 20 tax years; and,
  • those resident in the UK who are born in the UK with a UK domicile of origin and who now assert a foreign domicile of choice.

In both cases, the remittance basis of taxation is no longer available from 6 April 2017 but the effect on the globally mobile secondee population is expected to be small (albeit for those in the latter category, the impact could be materially adverse).

Definition of source

The remittance basis rules and the source rules that accompany the remittance basis are highly complex and specialist advice should always be taken in advance.

For example, for OWR purposes, employment income (salary) can generally be apportioned between UK and non-UK duties based on workdays.

But OWR is only available for the first 3 years in the UK and once OWR is no longer available, salary can no-longer be apportioned into UK source and foreign source based on workdays – all salary from a UK employer is treated as UK source. 

Once OWR is no longer available, only salary from an employment with a foreign employer where the duties of that employment are performed wholly overseas can be treated as foreign source for the remittance basis.

In the past this led to “dual contracts” being adopted. Since 6 April 2014, specific restrictions have been introduced to prevent avoidance in this area.

Tax trigger points

Technically, there is no threshold/minimum number of days that exempts the employee from the requirements to file tax returns and pay tax in the UK.

To the extent that the individual qualifies for relief in terms of the employment income article of an applicable double tax treaty, there should be no UK tax liability. The treaty exemption will not apply if the UK entity is viewed as the individual’s “economic employer”. In general, if an employee has a foreign employer, the UK will not take the “economic employer” position if the employee is in the UK for less than 60 days in a tax year and that presence does not form part of a more substantial presence in the UK.

Care should also be taken when claiming treaty relief for UK residents also claiming the remittance basis, as the denial of relief due to remittance clauses may result in a higher tax charge in the individual’s home country/territory.

Types of taxable income

All earnings, whether in cash or in the form of a benefit-in-kind, provided by an employer to an employee are taxable unless specifically exempted. Typically, travel expenses to and from the UK (and accommodation) would not be taxable for an extended business traveler.

Tax rates

There are various allowances available. The primary allowance is the personal allowance of 12,500 Pound sterling (GBP) (which is subject to tapering once earnings exceed GBP100,000). The other main allowances are the Savings Allowance (GBP1,000 or GBP500 depending on income levels) and the Dividend Allowance ((GBP2,000). How these allowances interact can be complicated.

For the year ending 5 April 2020, earnings above the available allowances are taxed at 20 percent on the first GBP374,500 of taxable income and 40 percent on the next GBP112,500 of income and 45 percent thereafter.

The above rates apply to most UK taxpayers however, different rates apply to Scottish taxpayers (a discussion of who is deemed to be a Scottish taxpayer is outside the scope of this note but broadly it depends on whether the individual has a main home in Scotland – advice should be sought).

In Scotland the personal allowance is the same as the rest of the UK (GBP 12,500) but the rates are as follows:

  • 19% on earnings above the personal allowances up to GBP2,049.
  • 20% on the next tranche of earnings from GBP2,050 to 12,444.
  • 21% on the next tranche of earnings from GBP12,445 to 30,930.
  • 41% on the next tranche from GBP30,931 to 150,000
  • 46% thereafter.

Social security

Liability for social security

Employers and employees who are liable for social security in the UK pay it with no upper limit. It is likely, however, that most extended business travelers would not be liable for UK social security. This could be for a number of reasons, including:
  • they remain in their home country/territory’s social security system under the European Economic Area (EEA) rules; or
  • they remain in their home country/territory’s social security system under a reciprocal agreement with the UK; or
  • they arrive from a non-agreement country/territory and are exempt from UK social security for the first 52 weeks they are in the UK.

Compliance obligations

Employee compliance obligations

Tax returns that are filed electronically are due by 31 January following the tax year-end, which is 5 April. Paper returns have an earlier deadline of 31 October following the tax year-end.

If treaty relief applies and the employer has entered into a short-term business visitors agreement with HMRC, individual tax returns do not have to be filed merely to claim the treaty relief, and the Pay-As-You-Earn (PAYE) withholding obligations can be relaxed, subject to certain conditions being met.

Employer reporting and withholding requirements

Employment income is subject to tax and social security withholding under the PAYE system. If an individual is taxable on employment income, the obligation to withhold rests with either the employer or, if the employer is not operating withholding, it rests with the ‘host’ employer. All employers are now required to report their payroll information to the UK Revenue authority in “real time”. Setting up a new payroll and a new employee to report in real-time can take some time. Therefore it is recommended that employers seek advice as soon as they intend to send an employee on secondment. For short term business visitors, it is recommended that employers obtain a “short term business visitors” agreement with the UK Revenue authority, in order for the payroll reporting obligations to be relaxed for such employees.

For short term business visitors (STBV), it is highly recommended that employers obtain a “short term business visitors” agreement with the UK Revenue authority, in order for the payroll reporting obligations to be relaxed for such employees.

Permanent establishment implications

A permanent establishment could be created as a result of extended business travel, but this would be dependent on the type of services performed and the level of authority the employee has.

Indirect taxes

The UK imposes value-added tax (VAT), which is a tax on consumer expenditure. Businesses (where they are VAT registered and fully taxable) do not bear the final costs of VAT. They are able to charge VAT on the supplies that they make (output VAT) and recover VAT on purchases that they have made (input VAT).

There are currently three rates of VAT: standard rate (20 percent, which is charged on the provision of most goods and services), zero rate (0 percent, which is charged on food, books, and children’s clothing), and reduced rate (5 percent, which is charged, for example, on fuel). Attributable input VAT is recoverable on these supplies by businesses.

Some goods and services may be exempt from VAT, such as monitoring, tracking and reporting changes in circumstances of those individuals sponsored under the points based system.


Work permit/visa requirements

Below is the current position at the date of writing. However, in light of the United Kingdom ("UK") notification under Article 50 of the Lisbon Treaty of its intention to withdraw from the European Union (EU), this is an area where we expect significant change in the coming months and years. Business travelers should seek advice before travelling to ensure nothing has changed in the interim.

Under current rules, citizens of EEA (including the EU) member states and Swiss nationals do not require permission to work, reside, or visit the UK. If their dependents are non-EEA then there is a requirement to obtain dependent permission before entry.

Restrictions on Croatian National to work in the UK ended in July 2018 which brings their rights to work in the UK in line with other EU citizens.

Non EU nationals will require a visa permitting them to work in the UK regardless of the duration of travel to the UK. The individual will require sponsorship by an employer who holds a valid “A” rated sponsor license to be able to apply for work permission in the UK as well as meet the other requirements of the Immigration Rules prior to travel. If the individual is required to visit the UK, then depending on activities being performed, duration and frequency of travel, along with consideration of previous travel to the UK, they may be able to consider entering as a business traveler. Certain visitors may travel to the UK without prior entry clearance, depending on nationality and whether the individual has an adverse immigration history.

The UK government have placed duties on all employers who hold a sponsor which includes some of the following:

  • carrying out pre-employment checks for all employees;
  • retaining paperwork on personnel files for all employees for a specified period regardless of whether sponsored;
  • carrying repeat right to work checks on all nationals with limited immigration leave;
  • monitoring and reporting sponsored workers if there are changes in circumstances including unauthorized absences exceeding 10 days.

Other issues

Double taxation treaties

In addition to the UK’s domestic legislation that provides relief from international double taxation, the UK has entered into double taxation treaties with more than 100 countries/territories to prevent double taxation, and allow cooperation between the UK and overseas tax authorities in enforcing their respective tax laws.

Transfer pricing

The UK has a transfer pricing regime. A transfer pricing implication could arise to the extent that the employee is being paid by an entity in one jurisdiction but performing services for the benefit of an entity in another jurisdiction. In other words, a cross-border benefit is being provided. This would also be dependent on the nature and complexity of the services performed.

Local data privacy requirements

The UK has data privacy laws. Organizations have a legal duty to keep data private and secure.

Exchange control

The UK does not restrict the flow of sterling or foreign currency into or out of the country/territory. Certain reporting obligations, however, are imposed to control tax evasion and money laundering. Organizations covered by the legislation have a number of obligations, including the requirement to establish the identity of individuals. A bank account cannot be opened in the UK without proof of identity.

Non-deductible costs for assignees

Non-deductible costs for assignees include mortgage interest, alimony, tax return preparation fees, and relocation expenses (unless they are ‘qualifying’, in which case they are exempt up to GBP 8,000).

Employment law

UK Employment Tribunals are increasingly willing to accept that individuals may claim UK statutory employment rights (such as the right not to be unfairly dismissed) where a sufficient connection with the UK can be shown. This could potentially apply to employees who are not UK nationals, or who do not work for a UK registered employer or who do not actually work in the UK. In addition, certain mandatory rules apply where a worker is posted from another EU country/territory to the UK, meaning that the worker will be protected by minimum wage, working time and anti-discrimination legislation.

All information contained in this document is summarized by KPMG LLP, the UK member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on on Income and Corporation Taxes Act 1988; Income Tax (Earnings and Pensions) Act 2003; Income Tax (Trading and Other Income) Act 2005; Income Tax Act 2007; Finance Act 2013; Taxation of Chargeable Gains Act 1992; Taxes Management Act 1970; Social Security Contributions and Benefits Act 1992; Social Security (Contributions) Regulations 2001; and Inheritance Tax Act 1984 (all as amended by subsequent legislation); Her Majesty’s Revenue & Customs (“HMRC”) booklets as follows: “Guidance Note: Statutory Residence Test (SRT), RDR3” published December 2013; “Guidance Note: Overseas Workday Relief (OWR), RDR4” published May 2013; immigration rules on the UKVI website at Apply to the EU Settlement Scheme (settled and pre-settled status)

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