Out-Law / Your Daily Need-To-Know

Tax specialist Chris Thomas tells HR News about the tax issues which can arise for employees working from home overseas 

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    International mobility – tax issues

    As we know, Covid-19 has resulted in an unprecedented amount of home working but an issue that has received relatively little attention is working from “home” when “home” is overseas. We know that plenty of employees have made that request to their employer, perhaps because that country happens to be their home nation or maybe their family is based there. If that situation does arise then you need to be aware that it throws up of employment issues, as well as immigration and tax issues, which need careful consideration before you agree to the employee’s request to work from home when home is outside the UK. Surprisingly perhaps, the HR press hasn’t really covered this in any detail. Back in May HR Magazine did look at the impact of coronavirus on workforces and global mobility but didn’t look much further than the obvious visa and work permit hurdles. The CIPD’s People Management asks: “How should HR deal with requests to ‘home work’ from overseas? but gives a relatively cursory answer to that question. More generally, the BBC asks the question: “Coronavirus: Can I work from home overseas?” but mainly deals with the travel restrictions and getting permission from your employer to go. So let’s take a look at one of the more important issues we are seeing cropping up with our own clients which is the tax risk. Tax is complicated in this situation give there are two sides to that particular coin – the tax laws of the UK which apply when that individual works abroad on a temporary basis, and the tax laws of the country they visit. To help with all of that, on the line tax specialist Chris Thomas:

    Chris Thomas: “So something we're seeing a few questions on at the moment is employees who are working in other countries on a temporary basis as a consequence of the COVID-19 crisis. So whilst on the one hand there's probably less of your traditional international employee mobility because there are obviously restrictions on travel and a lot of employees have perhaps not been working overseas business trips and such in the way they might typically, what we're seeing instead is employers wrestling with either employees who are temporarily based overseas because they kind of got stuck there as a consequence of the pandemic and they may now have been there for a number of months which may be starting to give rise to tax issues, or on the other hand, they're seeing more requests coming from employees asking, without any particular business need for it, but just employees asking if they can work from another location, perhaps because perhaps they're from another country and their family is there and they want to be with them at this time, particularly if, frankly, they could be working from anywhere because the offices closed. So we are seeing a number of questions around that and I think it's just important that when those conversations are being had with employees about what is and is not possible, and we appreciate a lot of employers will want to be quite accommodating around this, it is just important to think about what tax and social security considerations might flow from that, and that will partly be a question of the position in the UK. So particularly with regard to social security, the special rules within the EU, and usually, if it's just a short period of time, the UK position won't, won't change if it's just a few months, but if we're talking about periods longer than that, it potentially could do because their residence position could change, but perhaps more critically, it really is important to be thinking about coordinating advice from the other jurisdiction in which the employee is working because there could very well be local tax implications there, which is just important to be aware of, because otherwise you could be sort of bitten by that unexpectedly some months down the line.”

    That issue is one of a number of tax issues that Chris has flagged up for HR in recent months during the pandemic. You can find all of them on the Outlaw website.  More to come on this - next week we will look at the employment and immigration issues around this.

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