The last 12 months have taught us all to expect the unexpected and Teresa May has reinforced this adage further by her U-Turn call for a General Election. We know there are changes ahead and at BDO we have the expertise and global reach to help you navigate your way through how these changes will impact the tax and social security position of your international assignees. For employers as well as keeping your ears to the ground for future changes, it is crucial you don’t lose sight of ongoing reporting obligations, and as global tax authorities increasingly scrutinise companies with frequent business travellers it is vital that you keep up to date with your filing and tracking requirements.
It is still early days following the invoking of Article 50 at the end of March, but it is important to be forewarned of the potential impact that could be ahead. While The EU countries have bilateral Double Taxation Agreements in place with fellow countries that should not be impacted, there is less certainty around the Social Security position where the EU (and Economic Area Countries) have been bound together by Pan European rules since the early 1970’s. In anticipation of these rules ceasing to apply beyond the next 2 years, the German authorities are already limiting the cover of Social Security A1 certificates until 29th March 2019. We wait to see if any other European countries will follow suit and to understand what rules (other than certain outdated bilateral agreements) are considered as a replacement.
The message is that the UK remains very much open to business and particularly in the tech sector we have seen some significant recent investment into the UK by the likes of Google, Amazon and Facebook. Whether companies are moving people into, or out of, the UK it is essential that the tax and social security aspects are considered to avoid unnecessary leakage of cost.
Short Term Business Visitors
HMRC has placed great emphasis on companies tracking their business visitors to the United Kingdom over the past few years. They have made it clear that businesses have an obligation to ensure they are being compliant and collecting PAYE where it is due. Broadly speaking, where an individual is in the United Kingdom working for the benefit of a United Kingdom company, the income they earn relating to that work is taxable and therefore a PAYE liability arises. The majority of business visitors are ultimately likely to be exempt from United Kingdom tax under the terms of a double tax treaty. An agreement can be put in place with HMRC whereby PAYE need not be operated where it is clear treaty exemption will be due.
Year-end reports need to be submitted to HMRC by 31 May following the end of the tax year to provide the necessary information to claim this exemption however. Without an agreement in place, PAYE must be operated and the individuals need to file Self-Assessment Tax returns to effect any relief under a double tax treaty.
Other territories are also focusing on business travellers and double tax agreements continue to evolve in this area. The Irish authorities have now recently revised their thinking on what constitutes an employer, moving away from where the employment contract sits and bringing it in line with which entity bears the risks and costs involved (the ‘economic employer’). Canada has also updated their immigration rules, requiring visitors to apply for an extension to their authorised period of stay at least 30 days before it expires and applies this in conjunction with its strict tax rules for business travellers.
Hearing further on changes
Against a changing political, economic and social landscape and with tax changes inevitable to follow, it is crucial that you keep up to date for developments for your business and expatriates.
If you have additional questions then why not speak to BDO at our next Bite Size Briefing. You can take a look at our Events to see when the next one is coming up.
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