What employers must know

By now, everyone knows that getting again to “regular” will, for many individuals, not contain going again to work in the way in which we did earlier than Covid-19 hit.

Phrases corresponding to “distant working”, “agile working”, and “versatile working” at the moment are used interchangeably to point how the office will look as we begin to ease out of lockdown. However for some, distant working has been – and is prone to proceed to be – extra distant than for others. Profiting from the “do business from home” rule, some staff have returned to their residence nations, moved to take care of aged kinfolk in international nations, or just escaped to hotter climes for the length. For these people and their employers, taking early recommendation on the tax implications of this manner of working is vital to getting the tax proper.

The place will the tax be paid?

The place tax is paid will rely on a number of elements, however an important is the worker’s tax residence standing. The principles are difficult, however at its easiest, in case your worker has been overseas for longer than 183 days, they’ve possible established tax residency within the different nation. If so, the worker will probably be accountable for tax within the nation the place they’ve established tax residency.

When the worker first begins to work within the abroad nation, an investigation must be undertaken to find out if, earlier than the 183 days have elapsed, the worker could possibly be accountable for tax in each the UK and the abroad nation. This can imply the employer will proceed to have withholding obligations within the UK, and the worker could also be uncovered to tax on the identical revenue within the abroad nation. Double tax treaties could come to the worker’s assist, however these will have to be investigated to ascertain which nation has taxing precedence.

Who pays the tax?

The abroad nation could require the employer to register in that nation to pay the worker taxes.

Alternatively, the worker could also be solely liable to pay the taxes. Employers ought to take related in-country recommendation to know the complete place forward of the worker (and presumably the employer) incurring vital liabilities within the international jurisdiction.

It is usually important to know that the worker’s actions within the abroad nation can set up a tax presence for the employer in that nation. If the worker’s duties are such that, for instance, they’ll negotiate contracts for the employer in that nation and bind their employer, the employer could have a taxable presence in that abroad nation. This implies publicity to the related enterprise taxes in that nation. It could additionally imply publicity to different business-type obligations required by the abroad nation, corresponding to licensing and extra forms. If these are unintended penalties that the employer is eager to not endure, then whether or not it’s applicable for an worker to relocate to work out of the country have to be thought-about very rigorously.

Take inventory and resolve any points now

It could very effectively be that neither the worker nor the employer supposed for any adversarial tax penalties or certainly for a taxable presence to be established in some other nation. Now’s the time to consider these issues, be certain they’re working as supposed and successfully, and, if needed, take into account how finest to unwind any abroad distant working


Cathy Bryant

Cathy Bryant is a associate within the Blake Morgan’s company staff specialising in company tax. As a twin certified lawyer, Cathy brings a depth of expertise to her position as an adviser on tax issues in company transactions. Cathy additionally advises on employment taxes – for instance on termination funds made to staff, the applying of IR35 and different employment associated tax issues. She develops share incentive schemes for employers and advises on the construction and scope of those.

The tax implications of remote working abroad: What employers need to know