The Office of Tax Simplification has commenced a review on the emerging trends and tax implications of hybrid and distance working.
According to the independent government advisory body, the review will consider whether hybrid, distance and home working models are likely to increase, whether this trend involves more instances of working across borders, and what working across international borders could mean for tax, social security, tax residence and employees’ permanent establishment, or taxable presence.
The consultation also aims to explore accommodation, travel and other expenses as more employees begin hybrid work, such as who should pay for what, whether permanent workplace rules should still apply, the impact on pension contributions and share schemes, and potential risks with changing corporate residence.
The Office of Tax Simplification said it hopes to engage with employers and employees across a range of sectors, as well as self-employed workers who spend time working abroad, employees of overseas employers working in the UK who are not on formal expatriate assignments, and hybrid, distance and home-working UK staff who are either employed or self-employed.
It has asked for responses to be submitted by Friday 25 November.
Lee McIntyre-Hamilton, tax specialist and partner at Keystone Law, said: “While tax regimes internationally have adapted over the years to deal with secondments to and from overseas and short-term business visitors, they are generally not set-up to deal effectively with large volumes of globally remote workers. The fear of many governments is that they are losing out on revenue.
“Many employers are unaware of the plethora of employer compliance obligations that can be triggered overseas by only one employee working remotely. For example, how many UK employers realise that they would be required to operate social security contributions in France where they employee a UK national who works from home indefinitely in that country?”
In its scoping document for the review, the Office of Tax Simplification said: "During the height of the pandemic, technology enabled those in certain sectors and jobs to work remotely. For most people, this took the form of working from home instead of in an office or other workplace. For some, this involved working in a different country to that where they were based. Whilst many are now returning to a fixed workplace, others are not; or are moving to hybrid arrangements.
"Emerging evidence indicates that this includes employees working overseas for employers based in the UK, and conversely those doing work in the UK for overseas employers. These arrangements are different from traditional expatriate assignments, where individuals moved to a different country to work for a set period. Hybrid arrangements may typically involve an individual working in two or more countries, often in residential accommodation, where the location is chosen by the employee and not by the employer.
"This potentially creates a range of tax and social security issues for both the employer and the employees, such as tax residence, cross-border taxing rights, and simple understanding of their rights and obligations. This raises potential new tax and social security issues, and even existing issues would now become relevant to less experienced employers and employees for the first time."
