Government needs to set guidelines for international border workers to avoid double taxation

UK workers who work across international borders may be subject to double taxation said leading tax and advisory firm Blick Rothenberg.

Robert Salter, a director in the firm’s global mobility unit said: ‘International workers, those who work partly in the UK and those who live and work partly in another country on an ongoing basis, have historically been subject to a well established tax double taxation scheme between countries like France and Ireland which ensure that workers do not pay tax twice now that is at risk.

‘The problem is that the network of Double Tax Agreements and EU regulations are not suitable for dealing with the challenges caused by COVID-19.

‘For example, there is confusion over what should now happen from a tax perspective, if a UK-based employee who lives in Ireland has been furloughed? Should the furloughed salary continue to be UK taxable while the individual remains at home in Ireland?  Or should Ireland, the permanent home of the employee have the only taxing rights on this income?

‘The Government (in cooperation with other countries like Ireland), needs to ensure that clear positions are publicly agreed as a matter of priority. If the Government doesn’t agree clear positions as a matter of priority, individuals and their advisors will face significant problems from an ongoing payroll or tax return perspective.’

He added: ‘HMRC would usually tax cross-border workers based on their actual workdays in the UK, there is no real precedence for the furlough scheme historically. If the UK were to continue taxing these payments, what would happen from an Irish perspective? Would Ireland, for example, accept the UK taxes paid on the furlough wages as a tax credit against the Irish taxes due?

‘Or would the Irish revenue refuse to allow the tax credit relief, on the basis that the time had been spent in Ireland and hence result in actual double taxation for the affected individuals? Similar issues could arise with an Irish legal employee who is now at home in the UK and who is benefiting from Ireland’s Temporary Wage Subsidy Scheme.’

Salter concluded that: ‘The COVID-19 lockdown creates similar issues for those workers who remain active but simply working in a different country (i.e., working from a home office in a different country rather than their regular workplace in the other jurisdiction). For example, the rules around where employee, employer and, self-employed social security is due for such individuals (which are governed by EU / EEA regulations), could easily change.

‘A number of countries like France, Germany, Austria, Switzerland, have already come together and published clear guidance on how tax social security issues will be handled during the COVID-19 lockdown. HMRC and the UK Government have not, they need to provide formal guidance as a matter of urgency. If they don’t, individuals who work cross-border could become liable to double taxation.’


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