What are the tax implications if my employee wants to work abroad?

As more and more employers offer hybrid working, many employers are having to consider similar requests to yours. However, we would urge caution here as there are some tax risks associated with allowing your colleagues to work overseas. 

UK employers with employees working abroad must consider the local tax rules and double tax treaties in the country their employees are working, and these differ from country to country. It will rarely be as simple as just continuing to run the UK payroll and subjecting the employee’s wages to UK PAYE. 

Many, but not all, countries will treat a person as tax resident if they spend more than 183 days in their territory. There are exceptions to this general rule, with the USA being a good example of a country taking a stricter stance.  

In some cases, the employee could find themselves suffering UK PAYE tax charges, plus tax liabilities in the country they are working from.  

As far as the employer is concerned, they can be required to deduct social security contributions in EU members states in some instances. The employer must also be careful the overseas activity of the employee does not expose the company to taxes in the overseas territory. Before allowing employees to work abroad, employers should be mindful they may be taking on an additional administrative burden, which could see them needing to monitor their employee whereabouts as well as payroll processing and payments. In some cases, they may even be exposed to an overseas corporation tax charge. 

Although your employee has made a fairly simple request, there are some serious tax issues to consider, and we would recommend you obtain tailored advice for your circumstances before agreeing to this request. As well as thinking about the tax issues, you should also consider the employment law issues which will arise from this arrangement and speak with your legal adviser.  

Date published 1 Aug 2023

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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