New guidance from HMRC relating to overseas workers could have significant impacts on aid agencies and other charities that send employees abroad to work, accountancy firm PKF has warned.

The guidance relates to workers who leave the UK to take up full-time jobs in other countries, such as those who may be posted or seconded overseas for two to three years.  According to PKF, there has historically been some uncertainty around the number of days they can return to the UK during any tax year, before being deemed to still be resident here for tax purposes.

But last week HMRC produced new guidance stipulating that if such overseas workers come back to the UK to do any substantive work for ten or more days per year, then they are still considered to be UK resident for tax purposes during that year and thus liable to PAYE and National Insurance.

The upshot is their employers may become liable for the PAYE and possibly National Insurance contributions that should have been paid throughout the employee’s period of absence.

However, confusion could still arise because HMRC has conceded that any of the employee’s activities while in the UK that amount to “incidental duties”, do not need to contribute to the ten-day limit.  PKF partner Philip Fisher said “incidental” was not very well defined, and in the past HMRC has been known to take a strict view on what is incidental and what isn’t.

“Being here for training, or merely reporting back to head office, is considered incidental,” he said, “but returning for a management board meeting or even making one or two important phone calls while here, is not.”

Fisher added: “This issue is likely to be of less significance for those in countries with whom the UK has a double tax agreement, although in many such cases it would still lead to undesirable consequences.  However, many INGO expats will not be working in such countries.

“It is therefore imperative that you let staff and secondees overseas know what they can and can’t do on return trips to the UK without falling foul of the new interpretation as soon as possible.  Once the limit has been breached, there may be no way to recover the position.”