Between changing immigration and business travel rules as a result of Brexit, and the rise in remote working due to the COVID-19 pandemic, businesses need to be more conscious of global mobility considerations than ever before. Below, we have set out the three primary concerns facing businesses at the moment and over the next 12 months.

Short Term Business Visitors

This is a hot topic for HMRC and will be even more so when business travel recommences, on the basis that we are now operating in a world in which the UK is no longer part of the EU.

Overseas business travellers undertaking employment duties in the UK will be subject to UK PAYE withholding from day one, unless the UK “host employer” has an EP Appendix 4 Agreement in place with HMRC which enables them to relax their withholding obligations. The agreement applies to overseas business visitors who meet the criteria of the agreement (primarily, they are resident in a country with which the UK had a double tax treaty; there are no costs borne by or recharged to the UK entity; the individual spends less than 183 days in the UK).

If the agreement is in place, the UK company has a requirement to file an annual report with HMRC confirming that they are monitoring the overseas business travel and providing information on their overseas business visitors. The more days the individual spends in the UK, the more information needs to be provided to HMRC as part of the report. Without this agreement, then all business visitors into the UK will be required to complete arrival documentation, be added to the UK payroll and have UK PAYE withholding deducted and paid across to HMRC. This is the case even if, ultimately, exemption from UK income tax can be obtained under the appropriate double tax treaty.

In order to make the claim for a repayment of PAYE withholding, the individual must file a UK income tax return. Now that the UK is no longer part of the EU and work permit documentation will be required for all overseas business visitors, the communication channels and collaboration between the Border Control and HMRC will be stronger.

One point to note on the EP Appendix 4 agreement is if a non-resident director of a UK company undertakes their UK director duties in the UK, then the UK company will always have a UK PAYE withholding obligation in respect of these individuals. The EP Appendix 4 agreement does not typically provide protection for non-resident directors, on the basis that director duties are always considered substantive and of benefit to the UK Company. If non-resident directors are undertaking their director duties in the UK, then consideration should be given to the employer withholding obligation and how this can be managed effectively.

Remote workers

We are seeing an increase of activity in this area, primarily from clients who are receiving requests from employees to work overseas for extended periods of time or, in some cases, permanently.

We’re also seeing queries coming in whereby companies are looking to engage with individuals outside their country of employing entity. This is becoming more common following the pandemic and the enforced periods of working remotely. A holistic approach to the situation needs to be given across corporate, immigration, people and payroll to ensure the balance between employee welfare and managing any tax risk and exposure for the client and individual employee.

Common areas that should be considered are whether the employing entity has an employer obligation to operate a payroll for payroll taxes and / or social security; does the individual have a right to work in the country or will they need any immigration documentation; will the employment contract still be valid in the overseas location; what is the tax and social security impact on the individual – will they create liabilities in the overseas location? Additionally, if the individual is moving locations permanently, will their current pension provider allow them to continue contributions?

Social Security

Many individuals are enquiring as to whether they have been making social security contributions in the right country. This primarily affects offshore workers and, in the mariner industry, all kinds of factors are taken into account, including the flag that is flown on the ship you are working on. Care needs to be given to ensure that the employer is compliant in paying across the social security contributions to the right authorities and that they have the processes in place to monitor and manage this going forward – given that many of their employees will switch between different locations / rotas, etc.

The area of social security is now also more complex given that the UK is no longer in the EU. Although the majority of agreements for cross-border working in the EU have been replicated, the big change is that for posted workers, home country contributions can only continue for the first two years of posting. There is now no longer any option to extend – previously, it was commonplace that home country contributions could typically continue for the first five years of a posting. This change will now mean that employers need to monitor where their assignees are; manage their contributions; and think about general assignee management – will assignees be on assignments for up to 2 years; if not then what is the cost impact of moving to host country social security for both employee and employer.

Get in touch

Our specialist International Tax team can ensure that you have considered all aspects of global mobility and have the correct procedures in place. Whether you are a business with an international workforce or an individual who works overseas, we can support you with strategic and practical advice. Please don't hesitate to get in touch with me, our International Tax team, or your usual Johnston Carmichael contact.