The way people want to work has changed drastically since the Covid-19 (Coronavirus) pandemic. A period of forced hibernation showed even the greatest of sceptics that rather than being confined to office desks, it is possible to work from anywhere.
However, despite employers encouraging in-office working, employees are demanding more flexibility and control over when and where they work, resulting in more requests to work abroad.
Employees can supply their services from abroad, but all parties must understand that local employment legislation may apply, and the ability to enforce UK rights may be lost if the individual’s normal place of work is seen to have changed.
The UK has double taxation agreements with many countries, so taxpayers do not pay tax twice on the same income. While agreement terms vary, they typically allow a minimum period of 180 days, during which an employee can work abroad without triggering a tax liability. Provided an employee returns within this period, there may be no additional tax to pay on their income.
Businesses must also consider whether an employee’s presence abroad creates a tax issue at a corporate level. The risk of this is low, however, provided that the employee’s presence does not change the UK business’ residency status, create a fixed place of business, or give them authority to do business and contract on behalf of the organisation.
When considering any move, employees must consider their own tax position. Broadly, you pay tax on worldwide income in the country where you are resident. The UK relies on a statutory residency test to determine whether you are tax resident, so employees should determine for themselves how many days they can spend abroad without paying taxes there.
If an employee remains a UK tax resident, then payroll should remain unchanged. Employers should understand their social security obligations to people based abroad, as often staff can be retained in the UK social security system when they are out of the country for up to two years.
Post-Brexit, employees must recognise the limits that most European countries impose – typically six months – on the time a visitor can stay. Some countries are developing digital nomad visas, permitting longer stays for individuals planning to work remotely.
Employees are not the only ones who benefit from working overseas. By empowering people to work abroad, employers can keep them invested while expanding into new markets more easily.
Yvonne Gallagher is a partner and Morag Ofili is a senior associate at law firm Harbottle and Lewis