tax and social security compliance risks

This is primarily an employment law related question, but it is likely that an employee resident abroad will be offered protection by employment laws in the host country. These could include benefits such as minimum wage, paid annual leave and rights relating to termination. Employers should also ensure that the actions of the worker are not going to cause the UK employer to have a ‘permanent establishment’ abroad. For example, if the employee is signing contracts and deals abroad there is a potential risk that a ‘permanent establishment’ could be created. Whether or not a permanent establishment is formed abroad depends entirely on the laws and interpretation of that country. Not all employers reimburse the costs of homeworking, however, there is an opportunity for homeworkers to claim tax relief themselves.

Under this law, you are only allowed to work 48 hours a week over any employment you have. For some people, working less than 48 hours a week isn’t financially viable and you can choose to work more hours by opting out of the regulation. Unlike Income Tax, National Insurance is applied to each of your jobs individually, rather than your total income, as long as they are with different employers. Making sure you are paying National Insurance when you are employed is important as your contributions allow you to qualify for certain benefits and the State Pension.

Tax relief for those working from home

Blake Morgan LLP is a limited liability partnership registered in England and Wales with its registered office at New Kings Court, Tollgate, Chandler’s Ford, Eastleigh, Hampshire, SO53 3LG. It is authorised and regulated by the Solicitors Regulation Authority . The term ‘partner’ is used to mean a member of the firm or employee who is a lawyer with equivalent standing and qualifications. Cathy Bryant looks at all you need to know regarding the tax implications of working from home abroad in an article first published in Business Matters Magazine. Individuals who live in one state and work in another is nothing new, however with businesses being closed and remote working becoming far more prevalent, there is an increased exposure regarding multi-state tax compliance. If you have a question about a government service or policy, you should contact the relevant government organisation directly. Don’t include any personal or financial information, for example National Insurance, credit card numbers, or phone numbers.

Employees working remotely may face additional data security challenges, including increased risks of hacking and cyber fraud, especially where employees connect to unsecure or ‘free to use’ Wi-Fi networks and hotspots. For digital nomad entrepreneurs, structuring your business adds additional layers of U.S. tax considerations, especially with the new rules set out in the Republican tax reform (the “Tax Cuts and Jobs Act” or “TCJA”).

How would the tax work?

However, due to many employees wanting to continue to work from home this may blur the lines of where an employee’s ‘permanent workplace’ is. An employee may be able to claim How Remote Work Taxes Are Paid travel expenses on anything outside of an ‘ordinary commute’ therefore employers need to consider the effects of employees working from home on a more permanent basis.

Each country will however have its own rules about when someone is considered tax resident and therefore liable to income tax in that country. If an individual has been resident in the last tax year and has four or more ties to the UK, the period is only 16 days before they are considered tax resident. Other countries will have their own national law rules and these will need to be considered. If an employee splits their working time between home and the office, then they will have two permanent workplaces and cannot claim tax relief on the costs of travelling between them . They will however be able to get relief on the costs of travelling to any temporary workplace. The employer should also consider its own tax position and whether an employee working remotely from overseas creates a taxable presence of the employer in the host country for corporation tax purposes.

National Insurance

Research from Deutsche Bank shows that one third of people want to continue working two days a week from home once the pandemic is over. Millions of people have shifted to working from home as employers closed offices to contain the spread of Covid-19. Deutsche Bank Research suggests a tax of 5% of a worker’s salary if workers choose to work from home when they are not forced to by the current pandemic. Germany has an elaborate social security system that sees to it that its citizens live comfortably even if they’re sick, disabled, unemployed or retired.

• It is always recommended you get travel insurance, as it’s better to be safe than sorry.
• On the other hand, offering a local package as a matter of course isn’t necessarily the right answer either.
• Seven US states follow a “convenience of the employer” concept whereby an employee who is working remotely and away from their principle place of business is treated as though they are working in the business location and not in the state of residence.
• Employers should also ensure that such employees are also considered as part of the employer’s COVID-19 risk assessment and address issues such as the safety of employees required to travel back to the UK for work related reasons.
• As an example, doing business in the U.S. through an S corporation can be a great planning technique for minimizing self-employment taxes.

Taking advantage of the ‘work from home’ rule, some employees have returned to their home countries, moved to look after elderly relatives in foreign countries, or simply escaped to warmer climes for the duration. For these folks and their employers, taking early advice on the tax implications of this way of working is key to getting the tax right. Each state has its own income tax regulations whereby individuals can be taxed based upon a combination of factors, including where they live, where they work, or even where their employer’s main place of business is located.