Remote working has significantly altered the administration of payroll taxes for cross-border workers between Ireland and the United Kingdom.
In Corporation Tax, VAT, Customs & Payroll Update Crossborder UK & Ireland, Rose Tierney explains that the complexities of managing dual payrolls when staff work from home in different jurisdictions have been exacerbated by the COVID-19 pandemic, leading to a myriad of issues and regulatory challenges for employers.
Remote working across the Irish border or between Ireland and the UK requires employers to adhere to employment duties rather than the residence of the employee or the location of the company. This means that if an employee is based in the UK but works from home in the Republic of Ireland, the employer must manage payroll taxes according to where the work is performed.
The UK and Ireland have established arrangements allowing employees to work up to 183 days across borders before tax obligations arise. However, disclosures are required, and treaty relief under Article 15 is void if employees are residents in the other jurisdiction. Employers must be vigilant in tracking mobile employees' cross-border workdays to ensure compliance with these rules.
A significant point of contention is the 1998 ROI relief for foreign employment, which excludes remote workers since it necessitates commuting. Despite calls for adaptability to facilitate remote work, the government has been hesitant to amend regulations, resulting in potential legal issues for employers and compliance difficulties.
For example, social insurance liabilities shift to the employee's home jurisdiction if they carry out 25% or more of their duties at home. This means that the employer is responsible for running the payroll in the employee's home jurisdiction and deducting the appropriate social insurance contributions on the entire income.
Furthermore, companies face foreign employer obligations regardless of an employee's residency. If an employee is not a resident of the Republic of Ireland but carries out duties there, the employer must set up payroll from day one. Conversely, if the employee is a resident, certain treaty exemptions apply, such as the 60-day and 183-day rules, which dictate when notifications must be made and when tax deductions should commence.
The issue of remote working has also highlighted the need for a robust tracking system for mobile employees. Without accurate tracking, employers can struggle to determine the exact number of days an employee works in each jurisdiction, leading to potential non-compliance with tax regulations.
The current regulations surrounding payroll taxes for cross-border workers in Ireland and the UK present a complex challenge for employers, particularly with the rise of remote working. While there is a clear framework in place, the practical application of these rules can be cumbersome, and the reluctance of governments to update legislation in line with modern working practices continues to pose risks for both employers and employees.
For the full session, please click here. In this course, Rose Tierney covers the following topics;
Payroll Taxes Update – Crossborder Workers
- Remote Working the current state of play.
- What are the exposures for employers and employees?
- What work is taking place behind the scenes?
- The PE conundrum of remote work
VAT & Customs
- What is the latest on Customs?
- When does a Vat establishment arise in the UK or Ireland?
- When does a VAT establishment turn into a Corporation tax exposure?
UK Change to Corporation tax
- Changing Rates
- Profit Fragmentation Rule
- What impact do these have on groups wanting to set up an Irish company?
- Changes to Dividend Treatment
- UK Basis Period Reform and MTD for Direct Tax
- What’s the latest?
- The need for readiness
The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.