A tale of two countries (or more)

Steve Wade and Sarah Hewson examine the UK Pay As You Earn considerati ons for cross border remote workers

As one of ‘the worst of times’ in recent history, the Covid-19 pandemic has hugely impacted the way people work, accelerating a shift to flexible ways of working across the global workforce. Some UK employees are undertaking their duties remotely outside the UK and some employees usually based overseas are performing duties in the UK.

Whilst Covid-19 is far from ‘the best of times’, it presents an opportunity for businesses to consider the potential advantages of permitting more flexible cross border working and redesigning their policies and processes accordingly. This does mean that there are a number of tax risks for employers, which need to be considered alongside how much flexibility employers wish to offer employees.

About the author

Steve Wade

Steve is an Associate Partner, EY and is a Chartered Tax Advisor and has extensive experience of managing globally mobile employees including: Expatriate Taxation, International Social Security, Residence Domicile, National Insurance, Non Domicile taxation. Steve is a member of CBI Employment Taxes Sub-Committee, Chairman of ICAEW Employment Taxes and NIC Committee and a Member of LSCA Tax Committee.

Sarah Hewson

Having previously practised as a tax lawyer at an international law firm, Sarah Hewson moved to the Big Four to specialise in employment taxes. Sarah utilises her broad range of skills to advise clients on all aspects of employment taxes, including employment status assessments and the interaction with the IR35 rules. Sarah has an active role in the CIOT/ATT, sitting on various committees, as well as being Chair of the London branch of the CIOT.

More by the author...

Steve Wade considers the requirements for a status determination statement and the employer-led client disagreement process

*This article was written prior to the announcement that the implementation of the Off-Payroll Working rules are being delayed to April 2021.

The Government’s review of the implementation of the off-payrolling rules will no doubt have disappointed those who wished the implementation to be delayed. It is, however, now clear that the Government intends to push ahead and implement the new rules in respect of payments made and worked performed after 5 April 2020.

That is the question... Matt Crawford and Sarah Hewson consider the friction that will be caused by the changes to the treatment of PSCs due to take effect in April 2020

Once the proposed changes to the treatment of workers engaged via a personal service company (PSC) take effect in April 2020, disputes between end users, intermediaries such as agencies and individuals engaged via PSCs are somewhat inevitable. This article outlines the key points that businesses will need to consider, and the processes which should be put in place to ensure the effective and timely handling of any disputes.

Steve Wade identifies a range of issues with the HMRC Check Employment Status for Tax (CEST) tool

The 2018 budget release stated that:

“To increase compliance with the existing off-payroll working rules (known as IR35) in the private sector, businesses will become responsible for assessing an individual’s employment status.”

As this reform had been introduced to the public sector from 6 April 2017, it was anticipated that the reform would apply from 6 April 2019 but, following representations, the reform was delayed to 6 April 2020 and will not apply to the smallest 1.5 million businesses. The definition of a small business and other issues are to be the subject of a consultation later this year.

HMRC developed a CEST tool to help engagers make employment status determinations. (CEST standing for Check Employment Status for Tax.)

Steve Wade sets out the key changes

We have seen a raft of changes in the world of payroll in recent years including the introduction of Real Time Information, the payrolling of benefits, dispensation changes, OpRA, termination payment changes, “off payrolling” in the public sector and, of course, the extension of “off payrolling” to the private sector is on the way. One change, which may have been overlooked by tax advisors as it is a change to the Employment Rights Act 1996, is that with effect from 6 April 2019 new legislation will be introduced under which employers will be required to:

Also in this edition

Sofia Thomas highlights the impact that financial difficulties and tax debts can have on mental health

There is a huge amount of stigma around both mental health issues and debt, so when the two collide it can create an almost unbearable situation for individuals. Such anxieties can cause clients to avoid their tax issues until they become almost impossible to deal with.

Acknowledging the importance and intersection of financial difficulty and mental health is the first step for tax advisers and HMRC to best support clients in crisis. The reduced economic activity due to Covid-19 has made this issue even more topical, highlighting the need for a clear policy and plan on how to help and support customers with mental health issues. Advisers need to be of the real and tangible impact of tax debts, as mental health problems are being exacerbated by the current economic climate.

Karl Khan, HMRC’s Director General for Customer Services, answers the questions HMRC is often asked about Self Assessment

2020 has been a difficult year for many of us and with so much to think about it’s easier than ever to forget about the routine things. But forgetting about your tax return could cause you unneeded stress and worry at a time when we could all do without any more of it.

Keith Gordon looks at a case which concerns the application of the main residence exemption after only a few weeks of occupation

The exemption from capital gains tax in respect of a taxpayer’s only or main residence is perhaps the widest known tax rule in the UK. The alternative view is that the usual absence of any tax charge on the disposal of one’s home means that the possibility of tax being payable escapes most people’s consciousness.

Either way, tax advisers will know that the true position is considerably more nuanced than most people realise. This article discusses the recent case of Core v HMRC [2020] UKFTT 440 (TC) which focuses on the meaning of ‘residence’. At the heart of that statutory word is the requirement that the individual’s occupation of the property must be of sufficient quality to represent a place of residence rather than a mere temporary presence.

Chris Williams considers the complexities of settlements and tax planning to fund a child’s education

There are no special rules that apply to arrangements to fund education costs for family members – which is just as well really, when the general settlements legislation applies anyway. A study of the raft of anti-avoidance legislation applicable demonstrates why tax-efficient planning for a child’s education and support is difficult, especially for a parent. This is why the first part of this article is given over to considering what is not possible; once the impossibilities have been eliminated, we are left – to paraphrase a certain fictitious detective – with what is possible.

Helen McGhee considers the legal rights which allow individuals and companies to resist the disclosure of confidential evidence, and the limitations surrounding legal privilege

In the context of tax disputes, privilege is commonly understood as referring to the fundamental legal right which allows individuals and companies to resist disclosure of confidential evidence. Under English law, there are strict rules on when privilege may apply and this article explores two distinct categories of legal professional privilege: legal advice privilege and litigation privilege.

Another form of commonly encountered privilege is ‘without prejudice’ privilege, which operates to prevent statements made in a genuine attempt to settle an existing dispute from being put before the court as evidence of an admission against the interest of the party making them.

Legal advice privilege

Mark McLaughlin looks at a ‘hidden’ appeal route for taxpayers, which is not commonly known

The tax landscape is constantly changing, whether due to legislative changes, new case law or HMRC practice. One aspect of HMRC’s approach that has seemingly changed significantly in recent times is in connection with company reconstructions, and its response to some applications for statutory clearance on the tax effect of transactions such as share-for-share exchanges.

Capital gains tax clearances

For example, on a share-for-share exchange, the vendor shareholders will generally wish to avail themselves of the capital gains treatment in the Taxation of Chargeable Gains Act (TCGA) 1992 s 135 to prevent a ‘dry’ tax charge (i.e. a tax liability resulting from a sale of shares that generates no cash proceeds).

Tax is a constantly evolving area. Many changes have followed trends, such as the increased use of technology, which have continued regardless of the political party that holds office. With the onset of Covid-19 and corresponding increases in public debt as a result of this unprecedented extraneous event, it seems likely that we might see yet further legislation introduced to try to make up gaps in revenue. The government has increasingly looked at employment taxes as an efficient method of raising revenue, unsurprising given that income tax and National Insurance Contributions (NICs) make up about 45% of the UK tax take.

Bill Dodwell asks whether the UK should have a wealth tax, and if so how it should go about it

Two academics and a barrister (Dr Arun Advani, Emma Chamberlain and Dr Andy Summers) – together called the Wealth Tax Commission – have published a report on a possible wealth tax for the UK (see www.wealthtaxcommission.uk). Their work has been supported by a wide range of other, mainly academic, contributors. Their website contains a wide range of background papers, which are well worth reading.

What is a wealth tax?

A wealth tax is a tax levied by reference to an individual’s assets, net of any debt. Unlike a capital gains tax or a gift tax, it is not levied on an event (a disposal or a receipt) but is levied on a one-off or annual basis by reference to the value of an individual’s net assets on a defined day.

Jayne Harrold and Colin Smith consider the development and implementation of new environmental taxes

With the increased public profile of environmental issues, particularly plastic pollution and climate change, tax has become an important policy lever in helping to drive behavioural change. The development and implementation of new environmental taxes means that more businesses will start to fall within their scope.

The EU Green Deal published in December 2019 sets out a number of proposals including a new plastic packaging levy which will take effect from 1 January 2021 and consultation on a carbon border adjustment mechanism to apply carbon pricing in some form to imported goods.

A tale of two countries (or more)

Steve Wade

Sarah Hewson

A ‘secret’ appeal

A tale of two countries (or more)

Self Assessment tax returns: your FAQs

The changing tax environment

The costs of a wealth tax

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A tale of two countries (or more)

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Steve Wade

Sarah Hewson

A ‘secret’ appeal

A tale of two countries (or more)

Self Assessment tax returns: your FAQs

The changing tax environment

The costs of a wealth tax