On 27 July 2022, the wonderfully named government Office of Tax Simplification (OTS) published a 'scoping document' for the review it is going to undertake, examining the tax and social security implications of changing working practices brought about largely due to the pandemic. The scoping document sets out themes which will be covered in a call for evidence on the emerging trends and tax implications of hybrid and distance working.
The practices being considered include home working, hybrid arrangements, employees working overseas for UK employers and employees working in the UK for overseas employers. The review will focus on income tax, NICs and corporation tax and will consider evidence of, and research into, how the trends in working practices are likely to develop over time.
The review will:
- Consider the challenges to employer and employee compliance, how employers' practices are changing to address these new ways of working and the implications for government both in terms of setting policy and operationally.
- Focus on the impact of cross-border arrangements, where work is across multiple countries, including considering the allocation of primary taxing rights, the need for double tax relief, the treatment of expenses and the creation of permanent establishments for corporation tax, as well as the implications for the short-term business visitor rules, overseas workday relief and PAYE.
- Extend to the tax consequences of remote working arrangements on share schemes and pension contributions.
The review will also consider the effect on different sectors of the economy, and states that it will be mindful of international best practice and employment law.
Whilst it will no doubt be some time before any legislation is put in to force, the news of this review will no doubt be welcomed by most employers - the current taxation regime is not consistent with the modern working practices and many employers have found themselves with a choice between adopting non-compliant and slightly risky tax practices (so as to facilitate an employee's requests to work where they wish) and refusing employee's requests, to the detriment of their business, as there is no realistic way of ensuring tax compliance.
