Remote Working Overseas – Tax, HR & Payroll Implications

During the Coronavirus pandemic, it has been mandated by the UK Government that those who could work from home, should work from home. Allowing many companies to continue trading by allowing their staff to work remotely. Now restrictions have been lifted, many employers and employees alike have found that working from home or hybrid working (splitting time between the office and working from home) has many benefits. Advantages include better work life balance, improved mental health, the opportunity to downsize office space and therefore costs & the opportunity to attract new talent from outside of the business’ geographical area. 

Some companies have taken the decision to make working from home permanent for some or all of their workforce. With so many people no longer chained to their daily commute, it opens up the possibility of relocating to different areas of the country. Those with ‘London salaries’ especially, can see their buying potential go a lot further outside of London – evidenced by the vast number of homes in the idyllic Cotswolds being snapped up by Londoners in the past year. 

On that note relocation does not necessarily have to be within the UK. If you or your employees had the opportunity to move to sunny Spain and continue to do the 9-5 in London remotely – wouldn’t you?  

While during the pandemic remote working was a necessity, to make it a permanent arrangement does pose some interesting tax, HR and payroll considerations, especially when crossing international borders. 

Self-Assessment Tax Implications 

Whether you are a director of a company, a sole-trader or an employee, moving abroad isn’t as straight forward as an extended holiday.  

  • Gaining rental income for your UK home or Capital Gains if you sell your property, are both taxable income, which should be reported to HMRC and/or other government agencies in the country you move to within the required timeframes or face penalties and interest being added. 

Corporation Tax Implications 

Each decision taken by employers will need careful consideration as new working environments will present significant tax compliance issues. These are the factors you may not have considered. 

  • Businesses aiming to relocate their headquarters must take tax regulations into account, particularly for employees working abroad.  
  • Employers will need to ensure they comply with tax rules of each country they have a presence, including those with remote workers as having employees in different locations can potentially create a permanent establishment for the employer. 
  • You cannot usually have an employee operate in (most) countries without registering your business and having a locally registered entity for tax purposes. 
  • Organisations must consider their employee’s presence and business activities within another country as this could create compliance issues for corporation tax reporting, sales tax, and business registrations. 
  • The level of information required by tax authorities will also depend on each country, adding another burden for businesses embracing cross-border remote working. 

H.R & Payroll Implications 

Geographical location will have some H.R and payroll implications which will need to be considered.  

  • If an employee lives in a different country, they may be governed by different employment rights and laws, including but not limited to:  

– Minimum wage 

– Statutory holidays 

– Statutory benefits such as sick pay, maternity leave, etc.  

  • The employee could face local requirements for mandatory benefits such as pensions, which the employer will have to set up. 
  • Once you’ve established an employee is going to stay in a particular location, you have to consider whether you are required to run a local payroll. 
  • If different staff members do the same job in different countries and have different working conditions, it would be unfair, leading to staff morale issues. 
  • To tackle the arising tax challenges, businesses will need to establish collaboration between various in-house finance, legal, and HR teams, such as the finance team arranging to pay an employee in a different currency, or the legal team needing to understand the local employment law. 

Final Thoughts 

The pandemic, for some, has led to a permanent move away from traditional office locations to new hybrid or fully remote working arrangements. Whilst there are cost savings involved in doing away with expensive city centre office space, failing to comply with new tax obligations, if employees relocate overseas could have costly implications for employers.  

Overseas remote working it is however, achievable. With the correct research into HR, legal and company tax implications & the collaboration of HR, legal and accounting departments; allowing both employer and employee to enjoy the benefits. 

A company must weigh up the pros and cons of any long term remote working policy to ensure all implications are fully considered. Companies and Individuals must ensure they report their income sources to the relevant agencies and pay any taxes due. 

Here to Help 

If you’d like to find out more about how remote working can benefit or hinder you or your company post pandemic get in touch to speak to one of our experienced accounting team: or 01452 812 491.