For many of us, the COVID-19 pandemic has revolutionised how and where we work. So if, with the benefit of modern technology, we can now work from home with such ease, what’s to stop ‘home’ from being in another country?
Picture it now: you are working from your laptop on the veranda of your Italian villa. Having pressed ‘send’ on your last email of the day, you pick up your glass of chilled ‘vino bianco’ and join your family by the pool for an evening of ‘al fresco’ dining. What could be better? And what’s to stop this from being a reality? After all, does it make any difference to our employers if, when working from home, our ‘home’ is in a foreign country? Well, the simple legal answer to this question is a resounding ‘yes’.
So what’s the problem? In a word, it’s ‘tax’. If a British-based business employs an employee living abroad, complicated issues can arise as to whose employment taxes need to be paid? An employer might assume that if they simply deduct UK employment taxes and account to HMRC accordingly, this will be an end to the matter. This is not necessarily the case. Even a single employee working abroad from their home office may be regarded by the local tax authorities as having created a fixed place of business sufficient to trigger a requirement to pay local taxes. In such circumstances, an employer might be obliged to set up a local payroll in the foreign country and deduct and account for local employment taxes. What an administrative headache!
The tax issues alone might be sufficient to discourage a lot of employers from employing people living abroad. But if you add to this the potential immigration issues, data protection concerns and general confusion over whose laws govern the employment relationship, for many more, this will all be too much.
Do you know where your employees are?
Of course, we ought to consider the fact that, at any given time, we might not know where our homebased employees are. So if you have employees who work entirely remotely, have you clearly agreed their place of work? Do they know that they have to be based in the UK? Is it possible that they are working from abroad without you even realising?
If you haven’t updated your records in a while, is now the time to get your employees to confirm their current home address (especially those who work entirely remotely)? Do you need to make it clear to staff that if they intend to move house, they need to let you know? After all, if you find out that one of your employees has been spending most of their time in another country and you have continued to tax them under UK tax laws, where does this leave you? Well, it leaves you with a potentially tricky international tax headache, which you would no doubt prefer to avoid.
Need a hand?
If you are thinking of employing someone based abroad (or have just found out that you are doing so), please get in touch. We would be happy to provide you with further guidance on what to do and what to look out for.