Share plan reporting: HMRC update on Short Term Business Visitors

Broadly, if an overseas individual travels to the UK and provides services to a UK business that isn’t their employer (a ‘host employer’), the UK host employer should, strictly, operate PAYE in respect of remuneration paid to the individual by the overseas employer. However, if an applicable double tax treaty provides that no UK income tax would ultimately be due on the individual’s employment income, and certain other conditions are also met, short term visitors to the UK may be covered by an Appendix 4 STBV agreement with HMRC.

Where an Appendix 4 STBV agreement applies, the host employer is not required to operate PAYE but instead must provide certain information to HMRC following the end of the tax year, the level of information required being determined by the number of days spent in the UK by the relevant STBV.

Some employers may have taken the view that, as Appendix 4 STBV agreements are intended to ease the UK host employer’s administrative burden where no UK income tax is due, share awards held by Appendix 4 STBVs do not need to be included in the host employer’s annual share plan returns. However, the recent update to their published guidance confirms that HMRC do not share this view and expect such share awards to be included in the share plan returns each year.

For 2025/26 and subsequent tax years, companies should confirm what impact the requirement to include share awards held by Appendix 4 STBVs will have on their share plan annual return process. For employers with significant numbers of Appendix 4 STBVs, HMRC’s new guidance is likely to result in a significant increase in the administrative burden associated with the annual share plan return process. Specific points to consider include:

• Whether a share plan return obligation as ‘host employer’ does arise – some individuals are included in an Appendix 4 STBV agreement on a prudent basis, or to avoid undertaking a detailed analysis as to whether the relevant UK company or branch does indeed meet the definition of a ‘host employer’ with an employee share plan reporting obligation (though, if not, a share plan reporting obligation might, strictly, arise for another group entity in any case);
• How all relevant Appendix 4 STBVs will be identified – appropriate information flows must be in place to ensure that those responsible for the completion and submission of the annual share plan returns are aware of the relevant Appendix 4 STBV population;
• What events relating to Appendix 4 STBV’s share awards will need to be reported – this could require analysing overseas share plans to confirm the nature of the award, and associated tax points under UK law, and therefore when reportable events will arise;
• How share awards held by relevant Appendix 4 STBVs will be tracked – reportable events will arise in relation to share awards where an individual has UK workdays at any point over that award’s vesting period, and not only if they have UK workdays in the tax year in which the award is granted and/or the tax year in which it vests. For example, if an award was granted in July 2022 and vests in July 2025, the 2025/26 ERS return should include details of an employee who was an Appendix 4 STBV at any time between the dates of grant and vest of that award; and
• Whether other STBVs are being correctly treated for withholding and reporting purposes – not all STBVs who are within the charge to UK income tax will qualify for an Appendix 4 STBV agreement. Some might qualify only for an Appendix 8 PAYE special arrangement for STBVs which relaxes, but does not remove, the host employer’s PAYE obligations, and some STBVs must be paid subject to PAYE on the strict basis.

For earlier years where the annual share plan annual returns have been submitted (returns for 2024/25 should have been submitted by 6 July 2025), HMRC can impose penalties of up to £5,000 for returns that contain a material inaccuracy which is not corrected without delay. ‘Material inaccuracy’ is not defined but might be taken to be an inaccuracy that is significant enough to affect HMRC’s ability to determine the relevant tax due. As no UK income tax ultimately arises in respect of share awards held by Appendix 4 SBTVs, employers might conclude that their omission from earlier years’ share plan returns does not give rise to a material inaccuracy for these purposes.

We have extensive experience helping companies to comply with their employee share plan and STBV reporting obligations. Please contact the authors, or your usual KPMG in the UK contact, to talk through any of the issues discussed in this article.

For further information please contact:

• Alison Hughes
• Mike Lavan