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Accountancy firm RSM has warned businesses that offer employees flexible working overseas need to be aware of certain tax requirements.
It comes as RSM UK’s ‘The Real Economy Report’ found that 33% of businesses have allowed existing employees to work remotely outside of the UK in response to staffing challenges. Labour shortages have also intensified, with over 88% of businesses struggling with employee turnover.
The report detailed that 31% of businesses have set restrictions on the length of time employees can work abroad.
As such, RSM has warned that this raises concerns over the two thirds of businesses with no restrictions in place that may be less aware of the tax implications. Further considerations for businesses include employment law, social security, cyber security and immigration rules.
It also revealed that over half of businesses that have taken on labour from outside the UK due to staffing challenges, have increased the amount of overseas labour that they’ve taken on in the last year. While 79% of these international workers have been sourced from the EU.
Joanne Webber, global employer services partner at RSM UK, said: “Allowing employees to work overseas may seem like a great benefit, but often both employers and employees don’t fully understand what they’re signing up for, and they could be entering a tax minefield.
“For example, one area that can be easily overlooked when a UK employee works abroad is the individual could trigger a corporate presence for the UK company in that country, meaning the business may be subject to corporate tax and associated administration.”
She added: “Current labour shortages are a real concern for businesses, so looking overseas may be their only option. But it begs the question how many of these workers are relocating to the UK or staying in their home country, as this could mean a tax loss to the UK economy. Hiring employees from outside the UK and allowing them to work from overseas won’t necessarily be a simple fix to labour shortages, as it will trigger the same risks that apply when allowing UK employees to work abroad.”
