Review status of employees who are currently working from abroad
It is being suggested that employers should examine a practice which has seen a number of employees doing their job from abroad during the pandemic. Over the last year, many businesses have experienced an increase in employees requesting to work from a different country to where they would ordinarily have worked. However, what started as a temporary arrangement has extended for some employees and employers are being urged to review arrangements due to the potential legal, tax and practical implications caused by overseas home working.
If income tax is in another jurisdiction, there may be a payroll withholding requirement imposed on the UK employer in that host country, meaning the UK organisation has to register and maintain an overseas payroll to collect what may be due. For non-UK resident employees situated in the UK, the 2020 HMRC concessions covering a number of exceptional days that employees were stuck in the UK owing to Covid have not been continued. There is now a process for non-UK residents to file a self-assessment tax return together with supporting evidence to verify inability to leave the UK. Additionally, the guidance states that a day spent working in the UK will continue to be treated as a UK workday and therefore constitute a taxable presence.
If these matters are not carefully managed, both employers and employees face additional costs and administrative burdens. To avoid this, some employers have asked employees to return to the employer home country as quickly as possible.
If employers have not done so already, any overseas working arrangements should be documented and they should clarify matters such as the governing law and jurisdiction of the contractual relationship, responsibility for employee risk/losses and responsibility for any local tax or social security payments and personal tax declarations that may need to be made.