International tax issues: Get your affairs in order
With the 2021/22 personal tax filing deadline of 31 January 2023 looming, now is the time for individuals and businesses who occasionally or frequently cross international borders for work to get their tax affairs in order.
At Westcotts, we look after a range of matters for international clients and clients with aspects of working globally.
For those people leaving and entering the UK, it is important to remember that if they physically performed work in this country, then HM Revenue and Customs is potentially interested in seeking tax. There are only a few narrow exceptions to this rule for Covid-related matters.
With the ongoing effect of Brexit and people continuing to enjoy the advantages of being able to work wherever they can plug a laptop in, there is still work to be done.
Sorting through the tax affairs of the ‘accidental residents,’ as well as those who took advantage of working from home, where home perhaps shifted to another jurisdiction, at least temporarily.
International tax issues
Very often people are surprised to discover that if they were paid abroad but worked remotely in the UK for a foreign employer providing services to a foreign firm, there could be a tax issue in the UK, regardless of whether they were UK resident or not.
In many cases, the overall worldwide tax burden may not materially differ (unless they were lucky enough to work in a no-tax or low-tax country), but the question of which jurisdiction should receive which slice of tax is an important one.
Just because one country withheld taxes at source, does not mean that is necessarily the country that should keep those taxes.
While many may think it does not matter too much if the overall taxes paid is ‘roughly right’, it can be a harsh lesson to learn when the tax authorities of one jurisdiction catches up and asks for taxes to be handed over, only to find out the other jurisdiction is less keen to hand back overpaid taxes due to the length of time elapsed.
Taking the right advice
Admittedly, in some cases it may not be an issue, but every situation can be different, and you should take advice if you are unsure.
The UK has several rules to avoid double taxation and has lots of double taxation conventions agreed with other countries to alleviate potential double taxation.
An experienced adviser can be vital to ensure compliance across jurisdictions, and in some cases make suggestions that may save you tax.
National Insurance and social security
Although this blog primarily deals with the tax position relevant to remote workers, the National Insurance and social security position can be just as complex and costly without good advice.
Non-workers living off capital or pensioners may have their own similarly related concerns.