The Coronavirus lockdown has seen thousands of UK-based workers leave the UK for at least part of the lockdown period. They continue to work overseas which means that many of these UK workers will now become liable for tax and social security payments in the overseas countries where they live.
It means that HM Revenue & Customs (HMRC) will have to refund the UK taxes, and potentially National Insurance charges, which have been paid in the UK because the individuals involved are becoming non-resident in the UK and their core tax and social security rights are held to be in the other location.
Alternatively, HMRC may need to provide tax credit relief in the UK for the taxes which have been legitimately paid in the overseas jurisdiction, where UK-based employees are now living. For example, if someone remains UK resident but is held to also be taxable in another overseas country at the same time because of the amount of time they have spent abroad.
The above issues will produce a significant fall in personal tax and National Insurance Contribution (NIC) receipts for the 2021/22 and 2022/23 UK tax years for the Government. More worryingly, the success of home working in the past 18 months may result in a permanent loss of revenue to HMRC as increasing numbers of highly skilled UK employees chose to relocate at least partly to holiday homes abroad and spend more of their working time in those locations rather than in the UK. Many global companies have encouraged employees to work ‘from anywhere’, as a means of attracting and retaining global talent.
The Covid lockdown has seen some UK tax-residents who usually work overseas as ‘commuters’ in countries such as the Netherlands, Switzerland, or the Republic of Ireland, spend more time in the UK than would usually have been the case. This will result in some additional revenue for HMRC. However, this additional revenue will be wiped out and exceeded by those now choosing to work abroad.
Longer term, if global teleworking does prove to be the new normal – the reality is that the UK is likely to be a big loser from such a development. Many highly skilled UK employees in the UK have international links of one sort or another, and this combined with challenges in regards to the ‘quality of life’ in the UK – particularly in London and the Southeast, with overcrowding and high house prices – could easily see many workers decide that it is better to be based overseas and only come to the UK on an ‘as needed’ basis each month.
It is often the most highly-skilled – and highly paid – individuals who have the most opportunity to work from overseas as a global teleworker. Hence even having a relatively small number of such UK-based workers become internationally mobile, and outside the UK tax net, in part or in full, could have a massively disproportionate impact on the Treasury’s ongoing tax receipts.
Would you like to know more?
If you would like to discuss the above or how it may affect you, please get in touch with your usual Blick Rothenberg contact or Robert Salter, using the details on this page.
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