Working Remote Tax Implications in the UK

Racism and unequal access to green spaces are just two reasons people of colour spend less time in nature. It could open the door for some immigrants – but employment discrimination isn’t black and white. During pandemic-era how are remote jobs taxed lockdowns, companies were forced to find virtual alternatives to once-essential business trips. As video calls became standard, technology provided a reasonable stand in for face-to-face client meetings.

The OTS would like to thank Claire McEvoy who led the work on the report, supported by Emma Baylis, Rownak Choudhury, Mark Frost, Zoe Judd, Deborah Liddle, Julia Neate, Andy Richens and Graham Spencer, guided by OTS Head of Office James Konya. The OTS is also very grateful to the members of the OTS Board for their helpful steers and insights, and those in HM Treasury and HM Revenue & Customs for their interest and engagement in the report and its outcomes. Should you want to discuss the issues these new ways of working present from a tax standpoint, and possible solutions, please get in touch. Organizations near state borders often hire employees from other states who commute to work across state lines.

The tax risks of working remotely from overseas

If you reside in multiple states and have a home in each of them, the place where you spend most of your time is often your domicile state (where you live). For example, if you spend 183 days in one state and 182 in another, you’ll be billed for the former, as it’s technically where you spend most of your time living. Because each state has its own tax rules, knowing the differences between these states is vital.

If you’re employed, one of the easiest ways to check if you’re eligible to claim this tax relief is by using the government’s online tool. You’ll be guided through a series of questions to gauge your circumstances, and if you’re eligible to claim you can do so online. You’ll need a Government Gateway ID (if you don’t already have one, it takes roughly 10 minutes to set up), your National Insurance number and either a recent payslip, P60 or UK passport. If you worked from home before the pandemic, the rules on claiming expenses were broadly the same as they are now.

How remote workers can save on taxes

However, these regulations are only applicable if it is not feasible to stay in the UK National Insurance system if the remote working agreement is projected to last beyond two years. When directors and executives work remotely in another country, this can present a risk for a company to have dual residence. However, it is necessary here to observe any tax treaties that might apply and how the assessment of effective management is conducted in the relevant countries. If you work at a larger company, for example, they can assign you to an office outside of convenience rule states so you can avoid being taxed by a state you aren’t in, Stanton said.

If you offer taxable employee benefits such as employee stipends, you’ll also need to report the additional taxable income to the states that require it. This is because taxable benefits are additional income and must appear on an employee’s Form W-2. This affects the total amount of taxable wages and withholdings for your employees’ individual income tax.

Taxes for remote workers based in another country

Employee classification and location matter most when setting up remote employee work taxes. However, some states use “convenience of employer” rules that require you to pay taxes in your state, not the employee’s state. Additionally, double taxation risks, such as those for employees who commute across state lines, can still exist in some states.

• Most groups consulted by the OTS considered establishing a local subsidiary to employ individuals or asked an existing subsidiary to employ them.
• Then, this state will be the localized place of service for the employee regardless of where the employer’s organization is based.
• If you’re considering or already working with a remote team, this article will help you understand the fundamentals of payroll and taxes when dealing with a remote workforce.