Tax issues and the future of work
The future of work: a hybrid model
There has been a lot written and proposed about what the future of work looks like, but there appears to be a general consensus on two points. Firstly, that the next three years will be very different to the years leading into March 2020, and secondly that for a large number of people who were previously office-based workers, the future is likely to be a hybrid model of office-based and remote work.
That change will have associated tax issues to consider and plan for.
The future would appear to be a hybrid/remote working arrangement, where employees could continue to be based away from the primary workplace for the majority of their time but have the ability to avail of a remote workspace in a hub in their locality and close to their home where possible.
From here they can work and be productive while being able to physically separate their personal home life from work life. It could also shift larger businesses away from the idea of having one central location and towards a local or regionalised approach where they have local hubs for employees in that region.
Travel & subsistence expenses
It has been long established that employers can reimburse employees for the costs of business journeys (through receipts for actual expenses or using approved flat rate allowances) but not including travel to your “normal place of work”. As an employer, you may now need to review arrangements with employees to clarify what the normal place of work is, where you have employees based partly in your main office, partly at home, and partly from a remote working hub. It is important to ensure that you understand what the normal place of work will be in future and consider any changes needed to your existing policies around this.
Remote working tax relief
Where you are an employee working remotely you can claim a tax deduction for a portion of your home utilities and broadband expenses.
However, your employer could also pay you a fixed sum (note that only one of the reliefs can be used) of €3.20 per day spent working remotely. Again this is something that employers should now consider as part of their overall benefits package and remuneration arrangements with employees.
International workers
If any of a business’s workforce decides to relocate to another jurisdiction for part of the year, and this is facilitated by the business in the context of flexible remote work arrangements, the business will have several tax matters to consider.
Firstly, will the business have any tax obligations as an employer with employees based in that other jurisdiction? Most countries have specific rules detailing employer obligations with respect to payroll taxes depending on the length of time the employee spends in the country. This can have related implications for payroll for the business where they may be able to avoid paying Irish payroll taxes for the employee.
The business will also need to consider whether the presence of the employee in that jurisdiction creates a taxable presence or permanent establishment for corporate tax or VAT purposes, which can lead to tax obligations and additional administrative cost in that jurisdiction.
Where an employee will spend any time working abroad in another jurisdiction, this should be reviewed in the context of the tax obligations prior to finalising the terms of the arrangement.
Tax residence
For the employee who is spending time working in another jurisdiction, they will need to consider the impact of this on their own personal tax filing position, distinct from the employer’s obligations. Depending on the number of days spent working in another jurisdiction, you may be obliged to make tax filings and/or pay additional liabilities from working abroad. This can have related implications for social security contributions.
Our tax team can provide you with expert knowledge and support to ensure that the complex compliance requirements of employment tax and payroll are met. Contact our team to discuss your needs.
That change will have associated tax issues to consider and plan for.
The future of work: a hybrid model
COVID-19 has resulted in a dramatic movement of people out of offices and into homes and remote working hubs, from cities and large urban centres back to villages and towns, and even from Ireland to other jurisdictions.The future would appear to be a hybrid/remote working arrangement, where employees could continue to be based away from the primary workplace for the majority of their time but have the ability to avail of a remote workspace in a hub in their locality and close to their home where possible.
From here they can work and be productive while being able to physically separate their personal home life from work life. It could also shift larger businesses away from the idea of having one central location and towards a local or regionalised approach where they have local hubs for employees in that region.
What are the tax implications?
There are many tax implications that will need to be considered by employers and employees as we transition to this hybrid/remote working setup. We outline some of those below:Travel & subsistence expenses
It has been long established that employers can reimburse employees for the costs of business journeys (through receipts for actual expenses or using approved flat rate allowances) but not including travel to your “normal place of work”. As an employer, you may now need to review arrangements with employees to clarify what the normal place of work is, where you have employees based partly in your main office, partly at home, and partly from a remote working hub. It is important to ensure that you understand what the normal place of work will be in future and consider any changes needed to your existing policies around this.
Remote working tax relief
Where you are an employee working remotely you can claim a tax deduction for a portion of your home utilities and broadband expenses.
However, your employer could also pay you a fixed sum (note that only one of the reliefs can be used) of €3.20 per day spent working remotely. Again this is something that employers should now consider as part of their overall benefits package and remuneration arrangements with employees.
International workers
If any of a business’s workforce decides to relocate to another jurisdiction for part of the year, and this is facilitated by the business in the context of flexible remote work arrangements, the business will have several tax matters to consider.
Firstly, will the business have any tax obligations as an employer with employees based in that other jurisdiction? Most countries have specific rules detailing employer obligations with respect to payroll taxes depending on the length of time the employee spends in the country. This can have related implications for payroll for the business where they may be able to avoid paying Irish payroll taxes for the employee.
The business will also need to consider whether the presence of the employee in that jurisdiction creates a taxable presence or permanent establishment for corporate tax or VAT purposes, which can lead to tax obligations and additional administrative cost in that jurisdiction.
Where an employee will spend any time working abroad in another jurisdiction, this should be reviewed in the context of the tax obligations prior to finalising the terms of the arrangement.
Tax residence
For the employee who is spending time working in another jurisdiction, they will need to consider the impact of this on their own personal tax filing position, distinct from the employer’s obligations. Depending on the number of days spent working in another jurisdiction, you may be obliged to make tax filings and/or pay additional liabilities from working abroad. This can have related implications for social security contributions.
Where to go from here?
As a business and employer you should now review all of your arrangements with employees in terms of expenses and other remuneration to see if any change is necessary due to remote working arrangements. As an employee you should seek advice on any obligations arising from working in another jurisdiction and any opportunities for tax relief that may arise.Our tax team can provide you with expert knowledge and support to ensure that the complex compliance requirements of employment tax and payroll are met. Contact our team to discuss your needs.
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