Employee’s working remotely?

Can your employee work remotely from abroad?

If an employee can do their job from home, could they do it from another country? With a laptop, a reliable internet connection and working hours that fit around the team, the practical arrangements may seem straightforward. However, overseas working can create tax and payroll obligations for both the employee and their employer. Before agreeing to a request, it is worth understanding what will change.

Does staying on the UK payroll keep everything simple?

An employee might continue working for the same UK company, serving the same UK customers and receiving their salary into the same bank account. Even so, physically carrying out their work in another country can affect the tax position. The employer needs to establish its obligations in both countries. UK PAYE may need to continue, while overseas payroll deductions or reporting may also be required. Employers should check the correct treatment before changing any deductions.

Will the employee still pay UK tax?

Moving abroad does not automatically make someone non-resident for UK tax purposes. Their position depends on the UK residence rules, including time spent in the UK, working arrangements and relevant connections here. The destination country will also have its own rules. Where both countries tax the same income, relief may be available under domestic rules or a double taxation agreement. The correct treatment needs checking rather than assuming that paying tax in one country settles everything.

What about National Insurance?

National Insurance needs a separate review from income tax. Depending on the country and the circumstances, UK National Insurance may continue, or contributions may be payable under the overseas social security system. A certificate of coverage may be needed where an agreement allows the employee to remain within the UK system. There are also circumstances where UK National Insurance continues for the first 52 weeks of overseas work. There is no single answer that applies to every destination.

Could the business have obligations overseas?

The review should also consider whether the employee’s activities could create a taxable business presence overseas, sometimes called a “permanent establishment”. This does not happen automatically whenever someone opens their laptop abroad. The working arrangements, the employee’s responsibilities and the applicable local law and tax treaty all need consideration. Overseas remote working can therefore raise questions for the business as well as the individual.

What should employers check before agreeing?

Start by gathering some clear information:

• Which country will the employee work in?
• How long will the arrangement last?
• Will they return to work in the UK during that period?
• What duties will they perform, and can they negotiate or sign contracts?
• What permission do they have to live and work there?

Alongside the tax review, consider employment terms, insurance, data security and how the arrangement will work for the wider team. Record what has been agreed, including a review date and what happens if the employee’s plans change.

Plan before the move

Overseas working can offer flexibility and help businesses retain valued employees. Understanding the costs and obligations early gives both sides a clearer basis for making the decision.

At Dominic Hill, we can help review the UK tax and payroll implications and identify where advice from an overseas specialist is needed.

info@dominichill.co.uk
01323 649 509