The Office of Tax Simplification (OTS) has published a scoping document examining the emerging trends and tax implications of hybrid and distance working.

The OTS notes that during the pandemic, technology helped those in certain sectors and jobs to work remotely. For most people, this was working from home instead of in an office or other workplace. For others, this involved working in a different country to that where they were based. Others moved to hybrid arrangements.

Many of these trends have continued with emerging trends of overseas employment different from traditional expatriate assignments. This potentially creates a range of tax and social security issues for both the employer and the employees.

The review will:

  • Look at the extent to which hybrid and distance working is likely to increase and whether this trend involves more overseas working.
  • Consider employees normally based in the UK spending time working overseas and overseas employees spending time working in the UK. 
  • Identify ways in which developments in remote working may make complying with the tax system more complicated.
  • Identify opportunities these changes may offer to reconsider existing features of the tax system. 
  • Focus on Income Tax, national insurance and Corporation Tax.
  • Look at the perspectives of employers and employees.
  • Consider the trends in self-employed hybrid workers.

In particular, the OTS will focus on the tax impact:

  • Working across international borders, including multiple countries.
  • Allocation of primary taxing rights and the need for double tax relief.
  • Tax treaties and social security where there are more than two countries involved.
  • Accommodation, Travel, and other expenses including consideration of who will be paying for these and the relevant tax treatment.
  • Short-term business visitor rules, Overseas workday relief rules and PAYE withholding considerations such as modified payroll.
  • Pension contributions and share schemes.
  • The creation of Permanent establishments for corporate tax.
  • Where relevant, the above as they apply to remote working within the UK.

Useful guides on this topic

Working from home (employees)
What expenses can employees claim for homeworking? Are the rules the same for the self-employed? How do you make a claim? How does the COVID-19 easement work?

Companies: Permanent establishment & residence
What are the rules for determining a company's country of residence? What is central management and control? When does a company create a permanent establishment in another country?

Overseas Workday Relief (OWR)
What is Overseas Workday Relief (OWR)? When does it apply?

Travel (employer’s guide)
How do employers apply the tax rules to travel costs? What is available for subsistence costs? What are the rules on home-to-work travel?

Travel (summary for employees)
What expenses can your employer reimburse? How might travel expenses affect Income Tax and National Insurance Contributions? What journeys are allowable for tax relief?

External links

OTS Scoping document: Review of hybrid and distance working scoping document

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