The Office of Tax Simplification has launched a consultation into the tax status of remote and hybrid workers.
The independent government advisory body said the review has been driven by the “seismic change” in working from home in the UK, as well as the fact a significant number of jurisdictions abroad offer “digital nomad” visas for mobile workers.
The outcome of the consultation could have a major impact on where remote workers decide to work, as well as how companies handle employees’ requests for working abroad.
“With the drive to adapt to the changing market, and a breadth of regulations to consider, tax isn’t always the first thing on people’s minds when designing their policies,” the OTS said.
“Even in the UK, rules and guidance around employee expenses, and concepts like permanent workplace, seem designed for traditional ways of working and may begin to feel stretched.”
The OTS plans to engage with a variety of stakeholders on the issue, including employers and employees across a range of sectors and self-employed workers who spend some of their time working abroad.
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The review will look at what working across international borders would mean for tax, social security, tax residence and an individual’s “permanent establishment” (where they reside for tax purposes).
It will also look at how accommodation, travel and other expenses might work as more employees embrace hybrid work – for example who should pay for what, and whether having permanent workplace rules makes sense.
Other considerations include the impact on pension contributions and share schemes, and whether there would be risks attached to changing corporate residence.
Lee McIntyre-Hamilton, tax specialist and partner at Keystone Law, said it was “no surprise” that the OTS is looking into the tax issues surrounding remote and hybrid working.
“While tax regimes internationally have adapted over the years to deal with secondments to and from overseas and short-term business visitors, they are generally not set-up to deal effectively with large volumes of globally remote workers. The fear of many governments is that they are losing out on revenue,” he explained.
“Many employers are unaware of the plethora of employer compliance obligations that can be triggered overseas by only one employee working remotely. For example, how many UK employers realise that they would be required to operate social security contributions in France where they employ a UK national who works from home indefinitely in that country?”
The EU has recently launched discussions with the OECD with a view to potentially updating international tax treaties in this context, he added.
“It is clear that legislators in the UK and globally are scrambling to catch-up with the implications of the new employment landscape.”
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The consultation closes on 25 November 2022.
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