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UK staff working remotely abroad could raise 'fundamental' tax problems

Tom Belger
·Finance and policy reporter
·2-min read
RHODES, GREECE - JUNE 28: Tourist woman at the beach with a notebook laptop, surfing in the internet and working in the five stars Hotel Atrium Thalasso Spa Resort and Villas with its swimming pools, restaurants and beach on June 28, 2015 in Lahaina, Rhodes, Dodecanes, Greece. (Photo by EyesWideOpen/Getty Images)
A business group highlighted anecdotal evidence of more staff working remotely abroad. Photo: EyesWideOpen/Getty Images

A shift towards more employees working remotely overseas for UK-based organisations could become a “fundamental issue” for the tax system in future, a leading business group has warned.

The pandemic has seen millions more staff working from home, and some of the rise in remote working is widely expected to outlive the coronavirus pandemic.

The Confederation of British Industry (CBI) has received “anecdotal” evidence from member firms that some of their employees had taken the opportunity to work remotely from overseas.

Andrew Titchener, head of tax policy at the lobby group, gave evidence before MPs on the issue at a Treasury select committee hearing on “tax after coronavirus” on Tuesday.

He was asked by Conservative MP Steve Baker if the government should be concerned about the potential consequences of the “offshoring” of UK jobs, and whether it should intervene.

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Titchener said the government should focus primarily on reviewing how the tax system may need to adapt if such trends continued. He told MPs more employees were asking: “I have a laptop and internet connection, so why can’t I work from anywhere?”

“It might be sensible to think about how the labour tax system adapts to it now, rather than in 10 years’ time when this has all happened,” he said.

Potential problems include “people creating a taxable presence for their employer” in another country. There could be difficulties establishing where staff where should be on payrolls, and what individual and corporate taxes and social security obligations and entitlements they should be subject to, according to Titchener.

The CBI also highlighted the trend in written evidence to the committee. “What might this mean for the tax system, in particular the international tax system, if many more people were to ‘work from anywhere,’ and therefore what are the implications for the structure of both individual and corporate taxation?” it asked.

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Titchener said the limited scale of the trend so far meant it was not an immediate problem, but it had the potential to be a “fundamental issue” in future. Reviewing it and acting now could prevent some of the difficulties and need for catch-up seen with taxes at a corporate level on firms with global footprints, he added.

UK residents are currently taxed by the British government on all of their income, even if it has been made and taxed already overseas. Reliefs often apply in countries Britain has double taxation agreements (DTA) with, however.

Under UK law, workers are classed as “resident” if they spend 183 or more days in Britain during a tax year, “work full-time in the UK” or only have a home in Britain.

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