Globe-Trotting Employees

As Brits are increasingly exposed to international travel and meeting people from all over the globe it is inevitable that some of them will fall for that tall, dark and handsome foreign national and want to follow them back to their home country.  At this point, the Brit may have some concerns: will the relationship last? Will I feel like settling down overseas? Do I really want end my job in the UK, especially if I can work from my computer and be anywhere in the world?
 
At this point, UK employees will often approach their employer and ask if they can continue working for the company at long distance. Most employers will look upon this as a mere change of address which benefits both parties: the employee wants to keep working for the company, the employer wants to keep their employee, and so what could go wrong?
 
Before agreeing to this change, the employer should consider the tax consequences of such a move. Firstly, will the employee retain this status abroad? I have seen cases where the individual asks to work on a consultancy basis to give them some flexibility at the start of their new life. However, it may not be possible to continue working for the same company and basically doing the same work with this change of status – depending on how the foreign country views employees and consultants.  Will the UK company have to operate withholding tax, similar to PAYE, in the host country? Social security is another minefield and should be analysed carefully, particularly as both employee and employer contributions are involved. If the individual is the first person working in this country for the company their activities could trigger corporation tax issues for the UK company under the rules relating to “permanent establishment”. 
 
Other points should also be taken into consideration – local employment law, immigration, data protection. My advice to employers  - be well informed before agreeing to these changes, as they may not simply come down to a change of address.
 
Article posted by James Cowper LLP