BEERG Newsletter - UK: Remote office employees’ tax affairs to be reviewed

It was only a matter of time before it happened. The UK’s Office of Tax Simplification, an independent adviser to the government, is to examine issues involving the taxation of employees working remotely from other countries. 

The number of employees looking to extend holidays or spend time working in another increased following the switch to remote during Covid has jumped significantly, raising tax and social security issues, such as whether these employees become liable for such payments in the country from which they are working. 

If “digital nomad” employees were judged to be liable to income tax and social security contributions in the country from which they were working, it could also raise questions about whether the company now had an “establishment” there, possibly leaving itself open to corporate taxation and other legal obligations.

“Very few jurisdictions are aggressively policing this at the moment but, as hybrid working becomes the norm, a crackdown will come over the next few years as these workers will be seen as a lucrative additional source of tax revenue,” Tim Stovold, head of tax at accounting firm Moore Kingston Smith told the Financial Times.

The OTS review, to be published next spring, will examine the tax and social security implications for companies and employees of working across borders, as well as homeworking in the UK. It will also assess the role of “digital nomad” visas offered to attract mobile workers in more than 40 jurisdictions. It would seem that the focus on the enquiry will be more on British workers heading abroad and less on the few workers from elsewhere who seem to want to work remotely from the UK.