The Office of Tax Simplification issued their parting gift on 20 December setting out the complexities associated with hybrid and distance working.
The prevalence of cross-border working arrangements has increased exponentially in recent years, exacerbated by the way covid has reshaped modern working practices. However, the tax rules that govern cross-border working have not kept up with the pace of change, and can be an incredibly challenging legal area for businesses to manage.
Employers can be faced with overseas compliance burdens (e.g. filing local corporate tax returns, operating payroll), and potential tax bills (e.g. overseas corporate tax or social security). Such challenges can arise not only where an employer actively supports cross-border working, but can also be an inadvertent implication where an employee decides to work abroad of their own volition. Often in the latter scenario there can be complex remedial action required (e.g. to disclose unpaid tax, and claim credits in the UK to avoid double-taxation). The complexity can vary depending on the seniority/role of the individual, the jurisdiction they are working, and the length of time they are based there.
The release of the OTS findings on hybrid and distance working identifies many of the challenges of the UK tax system, but much of the focus of the report is on the complexity of the existing rules and the need for either further review, or changes to the rules in a multilateral context (e.g. the OECD framework). It will be interesting to see if the UK government or the OECD pick up the baton in 2023 to tackle the issues presented.