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Job Retention Scheme – expatriates and international employees

Important considerations for expatriates on the Coronavirus Job Retention Scheme

The Job Retention Scheme (JRS) is a temporary scheme put in place by the Government to support those workers who would otherwise have been laid-off as a result of COVID-19.

The JRS has been open since 1 March 2020 and is set to run until 31 October 2020.

Employers can use the scheme anytime during this period.

Do expatriates qualify for the Job Retention Scheme?

Yes. On 22 May, HM Revenue & Custom (HMRC) provided some long-awaited clarity on this.

In summary, inbound expatriates will be eligible for inclusion under the JRS provided that an important condition is met regarding cost recharges, in addition to the normal JRS conditions (see below).

Many expatriates working in the UK will have been seconded by an overseas employer who will remain their legal employer throughout the secondment. The fact that such expatriates will continue to be employed and paid by a non-UK employer has previously cast some doubt over whether they can be included in a JRS claim.

However, HMRC have confirmed that, subject to meeting the conditions, such employees are still eligible for the JRS provided that the UK ‘host employer’ (normally a branch or subsidiary of the overseas employer) fulfils the relevant JRS conditions outlined below.

The JRS also applies to tax equalised employees seconded to the UK where they have been included in a Modified Payroll (and ‘Appendix 6’) payroll.

Important consideration – Cost recharges

HMRC have stated that expatriates will not qualify for the JRS where their employer: “can continue to successfully recharge the costs to an overseas entity”.

Given this, it is important that UK employers check where their expatriates’ remuneration costs are ‘borne’ when determining eligibility. The employer that ‘bears’ the cost of remuneration is not necessarily the employer that pays the expatriate.

For example, it is commonplace for secondees from overseas to continue to be paid overseas throughout their period of work in the UK. However, in such circumstances, non-UK employers will often recharge the expatriate’s remuneration costs to the UK host employer.

Therefore, in summary:

  • If an expatriate employee’s remuneration costs are borne by a UK employer (and are not recharged to an overseas employer), then the UK host employer should be eligible to include the expatriate employee in the JRS provided the other relevant conditions are met
  • If an expatriate employee’s remuneration costs are borne by a non-UK employer and are not recharged to the UK host employer, then the UK host employer will not be able to make claims under the JRS in respect of the expatriate employee

What are the key conditions for expatriate JRS claims?

Given the new guidance in this area from HMRC, the key conditions to make claims under the JRS for expatriate employees are:

  • the expatriate’s employer in the UK must operate a UK payroll (registered for PAYE online) and must have a UK bank account
  • the expatriate employees must have been on the payroll at 19 March 2020 and have been included in a payroll submission to HMRC on or before that date. During the period that they are ‘furloughed’ under the JRS, they must not undertake any work for the employer
  • the expatriate employee’s remuneration costs must be ultimately borne by the UK host employer

It is also important to note that expatriate employees (as for non-expatriate employees) should not undertake any work for their employer whilst they are furloughed under the JRS.

National Insurance and pension contributions

Some additional care will be required when making claims under the JRS for expatriate employees when it comes to National Insurance and pension contributions.

Many expatriate employees are exempt from UK National Insurance Contributions under EU Social Security Regulations or a reciprocal social security agreement. Furthermore, in accordance with guidance from The Pensions Regulator and subject to certain conditions, employers are often exempt from auto-enrolment requirements in respect of expatriate employees.

In such cases, and where appropriate, any National Insurance and/or pension contributions should be removed from the JRS calculations and claim. Furthermore, in such cases, no claim may be made in respect of social security costs outside of the UK (i.e. where the expatriate employee remains enrolled in a non-UK social security system) or non-UK pension contributions.

Additional considerations

As with other areas of the JRS, there are several grey areas in this regard, including those situations where remuneration costs are split between the UK and non-UK employer or where the employee is repatriated to their home country during the period that they are furloughed.

Specialist advice may be required when assessing whether expatriate employees may be included under the JRS scheme and employers should take particular care with such cases.

Further guidance on the Job Retention Scheme can be found here.

Would you like to know more?

If you would like to discuss any of the above guidance or have other queries about how you can make the right decisions for the future of your business and your income, please contact your usual Blick Rothenberg contact or one of the partners to the right.

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