3 Mins
When an employee heads off to a sunnier climate but still wants to work from home, how does that impact your company? What are the tax implications? What about pensions? And National Insurance? Henderson Loggie’s been there and brought back the t-shirt, so read on for the low-down if you have employees preparing to live la dolce vita…
First considerations
What does your employee actually do for you? For example, if they are negotiating or establishing contracts with overseas clients, you may have to set up what’s called a ‘permanent establishment’. This means the employee may have to register as a taxpayer in their chosen country and as an employer, you may be required to run a payroll there, register for corporation tax, and possibly other licences and registrations too, which all costs money, of course. It’s an administrative burden with compliance issues attached.
If you don’t do this, however, you run the risk of a financial penalty, as well as the cost of fixing everything, which could run into a lot of money. It’s worth getting it right from the off, so make sure you are speaking to your tax advisors before you agree to remote working abroad!
Want to keep your employee on the UK payroll?
Taxes and social security are usually paid in the country in which an employer is registered. However, when employees work overseas, the overseas territory can claim taxing rights. The rules around this are complex and are further complicated by the fact that the rules for tax and social security are different and not always consistent in approach. You may, for example, have to run a payroll in the overseas territory just to pay local social security and not have to pay local taxes, which means paying local experts for their services.
You can ask your employee to run the payroll for you and then reimburse them, but this may depend on the skills of your employee.
In EU countries, this is can be a relatively simple thing to arrange; it becomes more complex when you’re further afield, essentially. But, perhaps because of Covid-19, working overseas is becoming more of a popular option.
Henderson Loggie has employees who’ve taken this option; we’re not just tax specialists, we’re actually employers of people who’ve opted to work overseas, so we know all about it from the sharp end. Our affiliates in lots of different countries help us, so if you need payroll specialists abroad, please contact us and we can put you in touch.
Think about your timeframe
If you’re thinking about taking the plunge and working overseas, consider how long you want to be there. Know the pension rules of that particular country – will you want to draw a pension while you’re there? HMRC has various reciprocal agreements with a number of countries – have a look at the list on their website.
Does it make a difference where you pay tax?
Yes, it does. Considering whether you become a non-resident in the UK, and domiciled abroad could make a big difference to your retirement, particularly when it comes to Inheritance Tax. This is where it pays to take advice from the specialists in the field, so that you and your family don’t lose out because of a tax rule that you didn’t know about.
Let’s wrap up
Whether you’re an employee or an employer, whatever your age, if you’re thinking of working abroad, you currently employ people who do, or people who’re thinking about doing so, Henderson Loggie can help you. Our experienced tax specialists will support you, and save you time, stress, and money.
Questions? Just complete the contact form below or call us on 01382 200055, and we’ll be right there as you take your next steps.