The COVID-19 pandemic shattered the traditional office model and ushered in an era of widespread remote work. While many UK companies have successfully adopted hybrid models, a new, more radical trend is now taking hold: the "work from anywhere" revolution. This isn't just about working from home; it's about giving employees the freedom to work from another city, or even another country, for extended periods.
For many businesses, this flexibility is a powerful tool for attracting and retaining top talent in a competitive market. It offers employees an unparalleled sense of autonomy and a better work-life balance. However, while the benefits are clear, the legal and tax complexities are anything but. Allowing an employee to work from a different country, even just for a few months, can trigger a cascade of legal, tax, and immigration obligations for both the employee and the company.
This guide will explore the key legal and tax implications that UK companies must consider before implementing a "work from anywhere" policy.
Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. UK businesses should always seek professional counsel from legal and tax experts before allowing employees to work abroad.
Even with a "work from anywhere" policy, a UK company's duty of care and legal obligations to its employees remain a top priority. Moving beyond UK borders, however, adds several layers of complexity.
A crucial first step is to review and update employment contracts. In the UK, an employee's contract usually specifies their primary place of work. If an employee intends to work abroad, the company must consider:
Jurisdiction: The UK employment contract may not be fully enforceable in another country. The employee could potentially gain additional rights under the employment laws of the country they are working in. This could include different rules around notice periods, holiday entitlements, or even dismissal.
A "Work from Abroad" Policy: To mitigate this risk, companies should create a formal policy that specifies the maximum duration an employee can work abroad, the countries they are permitted to work from, and a clause stating that the UK remains the jurisdiction for all employment matters. However, this clause may not always hold up in a foreign court.
The UK's Working Time Regulations and a company's general duty of care for employee health and safety don't simply disappear when an employee leaves the country.
Working Hours: UK companies must ensure employees working in different time zones are still protected from overwork. This means being mindful of late-night or early-morning calls and ensuring they still get their statutory rest periods.
Health and Safety: A company's duty extends to ensuring the employee's work environment is safe, even if it's their temporary home office abroad. This can be challenging to monitor and enforce, but a clear policy, combined with a self-assessment checklist for the employee, can help.
This is arguably the most significant and complex area of risk for UK companies. A lack of planning here can result in unexpected tax liabilities for both the business and the employee.
The biggest risk for a UK company is unintentionally creating a "Permanent Establishment" (PE) in a foreign country. A PE is a fixed place of business through which a company carries out its business, and if one is created, the company could be liable to pay corporate tax on its profits in that country.
How a PE is created: Simply having an employee work from a different country for a significant period could be enough to trigger PE status, especially if the employee is engaging in activities central to the company's business (e.g., negotiating and signing contracts, sales, management).
The 183-Day Rule: While a common rule of thumb, it's not a universal safe harbor. Many countries have tax treaties that prevent a PE from being created simply by having an employee in the country for less than 183 days, but this is not guaranteed. Each country's tax laws and treaties are different and must be carefully reviewed.
Mitigation: To reduce the risk of creating a PE, companies should limit the duration of work abroad and restrict the types of activities an employee can perform while overseas.
An employee working abroad will almost certainly become a tax resident of that country, which has major implications for the UK's PAYE (Pay As You Earn) system.
Dual Tax Residency: An employee can be a tax resident of two countries simultaneously. This requires an understanding of double taxation treaties to avoid being taxed twice on the same income. The UK has agreements with many countries, but the rules are complex and can be difficult for a company to manage without expert help.
PAYE and National Insurance Contributions (NICs): For employees working abroad, the UK's PAYE system may no longer be appropriate. The company may need to register in the foreign country and withhold local taxes and social security contributions. The rules around UK NICs for employees abroad can be particularly complex and depend on the length of time they are out of the country and whether there is a social security agreement between the UK and the host country.
A UK company cannot simply allow an employee to work from any country without considering immigration laws.
The "Work from Anywhere" Myth: Many employees believe they can work remotely on a tourist visa. This is not true. A tourist visa almost always prohibits any form of gainful employment. Violating these rules can lead to fines, deportation, and an inability for the individual to ever re-enter that country.
Employer Liability: As the employer, a UK company has a responsibility to ensure its employees are legally permitted to work in their chosen location. Ignorance of the law is not a defense, and a company could face significant penalties for non-compliance.
The Right-to-Work Check: UK companies are familiar with the legal requirement to check a new employee's right to work in the UK. This same principle applies to employees working abroad. Companies must ensure their employees have the necessary visas or work permits for their remote location.
While the challenges are significant, they are not insurmountable. By implementing a thoughtful and well-structured policy, UK companies can offer the benefits of "work from anywhere" while managing the associated risks.
This policy should be clear, detailed, and non-negotiable. It should include:
A "Yes/No" List of Countries: Specify which countries are approved for remote work. This should be based on a thorough review of their tax and employment laws, as well as immigration requirements.
Duration Limits: Define the maximum number of days an employee can work from an approved foreign country (e.g., no more than 60 or 90 days per year). This helps to mitigate the risk of creating a Permanent Establishment or triggering tax residency.
Employee Responsibility: Clearly state that the employee is responsible for their own visa, immigration status, and compliance with local laws, but that the company still needs to approve their request to work abroad.
Data Security: Outline the specific data protection and security protocols that must be followed when working from a public network or a foreign country.
Do not try to navigate these complexities alone. UK businesses should establish relationships with:
International Tax Accountants: To assess the risk of creating a Permanent Establishment and to advise on corporate tax and payroll obligations.
Employment Lawyers: To review employment contracts and ensure compliance with local labor laws.
Immigration Specialists: To understand visa and work permit requirements for key countries.
A robust IT infrastructure is critical. Implement policies that ensure:
Secure Access: All employees must use secure VPNs to access company systems.
Device Security: All company devices should be encrypted and have security software installed.
Data Protection: Ensure compliance with GDPR and other data protection regulations, which can be complicated by international data transfers.
The "work from anywhere" revolution is here to stay. It is a powerful tool for UK businesses to attract a diverse global talent pool and offer their employees a modern, flexible working experience. However, this flexibility comes with significant legal and tax responsibilities that cannot be ignored.
Companies that are proactive, that create clear and well-defined policies, and that partner with experts will be able to successfully embrace this new way of working. By carefully navigating the complex international landscape, UK businesses can empower their employees without exposing themselves to unnecessary legal and financial risks, solidifying their position as modern, forward-thinking employers.
