³ÉÈËÓ°Òô

View the related Tax Guidance about Global mobility

Homeworking

HomeworkingIntroductionThe developments in information technology and communications have seen an increasing popularity in employees working from home. There are a number of tax consequences associated with home working which are outlined below..In 2022, the OTS undertook a review into hybrid and distance working. This constituted a policy paper in July 2022 and accompanying call for evidence in August 2022. The scope of this work was wide ranging, including:•implications of cross border working•permanent workplace rules•accommodation travel and expensesThe subsequent Hybrid and distance working report: exploring the tax implications of changing working practices was published by the OTS in December 2022. It recognised that home and hybrid working arrangements are here to stay. Whilst many employers favoured extending the tax relief system to allow for travel between home and work, the potential costs of such a move was also acknowledged. More realistic may be the support for further potential HMRC easements and de minimis exemptions in cross-border situations, both from the employee tax and social security standpoint, and any employer ‘permanent establishment’ concerns. The Government’s response to the report is awaited.What is homeworking?There is no statutory definition of what constitutes a home worker, nor a single collective set of principles which guide what can and cannot be claimed as a tax deduction. Instead, an individual has to identify allowable expenditure using the various general and specific rules around expenses.There are some specific exemptions which are addressed further below. Where none of these apply, the general rules for expenses

Pension contributions and global mobility ― overview

Pension contributions and global mobility ― overviewIntroductionMost people working in the UK contribute to a registered pension scheme, and this tends to be a UK-based scheme. However certain people, including those working in the UK on secondment, may be contributing to pension schemes that were established outside the UK.Similarly, those who decide to emigrate from the UK may continue to be members of registered pension schemes or they may wish to transfer their rights under these schemes to a non-UK pension scheme.This guidance note provides an overview on the matters to consider in these situations.Note that, in relation to the application of the UK tax treatment to non-UK schemes, it is necessary to look at the definitions in the legislation very carefully. There are a lot of different terms for non-UK schemes in the legislation, some with very similar names, but each have different conditions and potentially different tax treatment and so it is easy to get confused. These terms are discussed in detail in Simon’s Taxes E7.201DA.Living overseas and retaining membership of or joining a registered pension schemeSince 6 April 2006, membership of a registered pension scheme has been open to anyone regardless of where they are resident. Neither is there any restriction on the amount that can be contributed by an overseas resident individual, or by an employer in respect of overseas resident individuals. However, relief from UK income tax may not be available or may be restricted on contributions made by the scheme member and /

Foreign self-employment

Foreign self-employmentSTOP PRESS: The remittance basis is to be abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. The legislation is included in Finance Bill 2025. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.Trading in another jurisdiction involves many issues, only some of which involve taxation. Advice should be taken, not only in relation to tax but on the wider business implications. For an overview of the points to consider for certain jurisdictions see Tolley's Global Mobility: Personal Taxes. For example Tolley's Global Mobility: Personal Taxes, IR2.8. which covers the Republic of Ireland.This note deals in broad outline with the tax issues facing a self-employed person who is trading overseas. It then considers some issues that are specific to partners.The tax regime in the overseas country is also very important. Its specific rules, and the ways in which the two systems interact should both be explored before decisions are taken. This note does not discuss any tax issues that might arise in other jurisdictions.Is there an overseas operation?A sole trader or partnership that is based in the UK and merely sells goods or services to customers overseas is not normally subject to foreign taxes on profits. To be taxable there must generally have a permanent establishment. Different rules may apply for VAT, see below.A

Outbound employees ― payroll issues

Outbound employees ― payroll issuesKey points•the default position for individuals leaving employment under the RTI regime is to include their date of leaving in the FPS submission and provide the employee with a form P45•for employees leaving their UK employment to start overseas work under a new employment con-tract with an overseas entity, or for individuals transferring to a new payroll scheme within the UK, they should be marked as leavers in the same way as the basic position.•where an employee will remain on UK payroll but is expected to perform all of their employment duties overseas, a No Tax (NT) code can be applied for from HMRC in order to exempt their earnings from PAYE•where an employee will continue to have some UK employment duties but will otherwise be expected to be non-resident in the UK, a s 690 arrangement can be agreed with HMRC in order to restrict PAYE to portion of their earnings in line with an estimated percentage of UK employment duties•where some of the individual’s employment duties will be performed overseas and some in the UK but the individual is likely to remain UK tax resident, it may be appropriate to apply for an Appendix 5 arrangement with HMRC whereby foreign taxes paid can be claimed as a credit in a real time basis on monthly UK payroll•national insurance is not subject to the same rules as income tax and social security should only be paid in one

Tax equalisation

Tax equalisationIntroductionTax equalisation is widely used by multi-national companies or groups moving employees from one country to another. It is not a statutory concept but is an arrangement between an employer and employee.The idea behind tax equalisation is that an employee accepting an assignment somewhere other than in his home country should neither be better off nor worse off from a tax perspective as the result of the move. The individual will continue to be subject to an equivalent level of tax as if he had remained in his home country. The system can apply to those leaving the UK and to those coming to the UK.A similar system can cover social security contributions, though this is relatively rare as many expatriates remain in their home country social security regimes and are exempt in the host state, in which case there is no need to equalise the net earnings arising from applying the two countries’ contribution rates. Further, a higher level of contributions will generally generate a higher entitlement to state benefits such as a pension in retirement and the employer may be less inclined to protect an employee against higher costs if higher benefits are received in consequence.The main advantage of tax equalisation as a tool in facilitating international assignments is that the risk of higher rates of tax and, sometimes, social security contributions in the country of assignment is carried by the employer rather than the employee. This removes an important potential source of financial anxiety that

Automatic enrolment ― what types of scheme may be used

Automatic enrolment ― what types of scheme may be usedThe automatic enrolment regime requires employers to enrol workers automatically in a pension scheme that meets at least minimum standards (known as a ‘qualifying scheme’). In the case of a defined contribution scheme, those standards include mandatory employer and worker contributions of at least minimum amounts. In considering what scheme to use, the employer should be aware of the minimum standards that apply for a scheme to be 'qualifying'. The Pensions Regulator has issued detailed guidance for employers to help employers meet their responsibilities under automatic enrolment ('TPR Guidance'), including information on the criteria for qualifying schemes. For further information on the automatic enrolment regime, see the Automatic enrolment ― overview guidance note. For further information on categories of worker, see the Automatic enrolment ― who needs to be enrolled guidance note.Qualifying schemesAs regards to the type of pension scheme nominated by the employer for automatic enrolment purposes, the scheme must be a ‘qualifying scheme’ (ie a scheme that meets certain minimum standards under the automatic enrolment legislation). A qualifying scheme must be:•an occupational or a personal pension scheme•a registered pension scheme under the Finance Act 2004PenA 2008, ss 18–19An occupational pension scheme must have its main administration in the UK. Since the end of the Brexit transition period (30 December 2020) it has no longer been possible to use any non-UK scheme, including one based in an EU / EEA country, as an automatic enrolment scheme ―

Pre-departure planning from an employer’s perspective

Pre-departure planning from an employer’s perspectiveSTOP PRESS: The remittance basis is to be abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. The legislation is included in Finance Bill 2025. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.Key points•NT code or s 690 directive should be considered where the employee will remain on UK payroll, depending on whether duties are expected to continue in the UK•tax equalisation may be considered in order to ensure an employee is no better or worse off from a tax perspective as a result of their duties overseas•security must be considered when planning a move and should review both the costs of such contributions along with the benefits received•should be given to the tax implications of an employee’s move in order to maximise any tax reliefs and/or concessions availableIntroductionPractical issues for payroll operation when employees are leaving the UK are covered in the Outbound employees ― payroll issues and other legislative points in the Reporting requirements on leaving the UK guidance notes.This section considers opportunities for UK employers to improve the tax consequences for themselves or their employees when the latter are about to depart for overseas employment.Ensure that all agreements made between employer and employee are set out in writing in an employment contract

Employment-related securities: internationally mobile employees

Employment-related securities: internationally mobile employeesSTOP PRESS: The remittance basis is to be abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. The legislation is included in Finance Bill 2025. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.General principlesWhere a UK resident employee acquires or is granted the right to acquire employment-related securities (ERS), the employee is subject to certain UK tax and regulatory requirements which apply no matter where the issuer of those ERS or the employer is located.For tax, the basic principle is that the employee is charged to income tax on the value received. The situation becomes more complex where that employee is internationally mobile and the relevant rules are outlined below.Where an event occurs in connection with the acquisition, holding or disposal of ERS, and is chargeable to UK income tax, there is a requirement to report details to HMRC. HMRC can require any ‘responsible person’ (as defined in ITEPA 2003, s 421L(3)) to report. Broadly a responsible person may be the employer, the host employer, or the issuer of the securities (special provisions apply to continental shelf workers). In practice, typically the employer or issuer of the securities (eg the holding company of a group) will make the report. For details of the online ERS reporting requirements, see the Online

NIC on cash earnings ― overview

NIC on cash earnings ― overviewUK National Insurance applies to a variety of different sorts of income. The history and introduction of NIC system is covered in Simon’s Taxes E8.101. NIC is split into different classes depending on the type of income. See the Overview of NIC Classes, rates and thresholds for more on the different classes and rates.This guidance note concentrates on NIC relating to employment income in the UK. As with tax, it is important to understand whether an individual is an employee or self-employed for NIC purposes. See the Categorisation of earners for NIC purposes guidance note and Simon’s Taxes E8.201.For NIC and self-employment, see the Class 4 national insurance contributions guidance note. For international aspects of NIC, see the Global mobility ― overview guidance note.NIC for employeesClass 1 NIC is payable on an employee’s earnings. Earnings are defined as ‘any remuneration or profit derived from an employment’. See Simon’s Taxes E8.232 for more on the interpretation of what is earnings for NIC.Class 1 NIC has two parts:•primary Class 1 NIC. This is the liability of the employee and also referred to as employee NIC•secondary Class 1 NIC. This is the liability of the employer and also referred to as employer NICThe basis of calculation of NIC due on a payment to an employee is based on the concept of ‘earnings periods’. SI 2001/1004, regs 2–9 set out the rules for employees paid at different intervals, namely:•employees who are paid at regular intervals

Tax on cash earnings ― overview

Tax on cash earnings ― overviewSTOP PRESS: The remittance basis is to be abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. The legislation is included in Finance Bill 2025. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.What income is subject to tax via PAYE?Income tax is applied via PAYE to income which counts as ‘employment income’. This note sets out the basic definitions of what is employment income, who it applies to and when. It also sets out the rates of income tax.Who does tax via PAYE apply to?Tax via PAYE applies to employees and office holders in their earnings from that employment or office. Wherever the term ‘employee’ is used throughout the employment taxes module, this will include office holders unless specifically stated otherwise. The definition of an office holder is not simple, but broadly an office is ‘any position which has an existence independent of the person who holds it’. It applies to all statutory directorships. For other cases, consideration should be given on a case by case basis. See Simon’s Taxes E4.201–E4.204 for more. The definition of an office holder should therefore be regarded as including a limited company director, a point which was underlined in the 2023 First-tier Tribunal (FTT) case of Purple Sunset. Here, an employer was liable