In the last update of 2022 from the WorkSmarter team, what more festive and jovial subject to report upon than the tax implications of hybrid and distance working?!

Timing of its release this week aside, the Office of Tax Simplification's (OTS) report has been much awaited.  Since the pandemic, many employers have grappled with the complexities of allowing employees to work remotely, particularly abroad.

Key findings of the OTS's report include: 

 

  •  The large-scale move to UK-based hybrid working presents an opportunity (possibly, need) for tax policy changes to the benefits and expenses rules (for instance home to office travel) as well as better guidance. 

 •  Short-term cross-border remote working is becoming more commonplace. All the large businesses the OTS spoke to had introduced policies for short-term (broadly 10-30 days per year) cross-border remote working despite the administration of such arrangements being a "considerable burden". However, only between 2-5% of eligible employees had chosen to work overseas. Compliance issues typically considered included employee tax residence (and withholding implications), employee presence for social security purposes and the risk of creating an overseas permanent establishment (PE). 

  •  Permanent cross-border working arrangements (expatriate assignments were not considered) are less common (mostly from a lack of suitable UK-based employees) and can require additional infrastructure. In addition to the tax compliance issues mentioned above, such arrangements require consideration of who should employ the worker (possibly "employer of record" arrangements), transfer pricing and the UK's short term business visitor rules. 

While relatively few employees currently engage in cross-border remote working, employers anticipate such arrangements will be offered for the foreseeable future. 

 

The report confirms that HMRC has agreed that a UK employer can apply for a certificate of continuing UK NICs liability where an employee has chosen to work abroad (rather than having been posted abroad).   This announcement is certainly one significant step, in that it may address national insurance concerns, though it does not solve any of the wider tax issues.  

 

Ultimately the report sets out the concerns and issues, which were not unknown, but promises government intervention to seek to address and clarify those concerns.

Until then, tis the season to be jolly...

Wishing all of our WorkSmarter friends, colleagues and clients a very merry Christmas and a Happy New Year.