Tax Talk: COVID-19 – Are you part of the ‘new normal’?
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However, there are still implications arising from the global pandemic that need to be addressed: people working where they normally wouldn’t be; changes in working patterns; increased delivery times for projects (meaning that people will be in countries longer than anticipated) and more generally a consideration of whether the traditional assignment model continues to be fit for purpose.
There has been some guidance issued by HMRC in terms of UK tax residency and COVID-19 being categorised as qualifying under “special circumstances” but more information is needed so that companies and their employees do not inadvertently find themselves in complex and costly positions in terms of tax and social security obligations.
HMRC have confirmed that they will be issuing an FAQ document imminently in respect of internationally mobile employees and this is eagerly awaited so that businesses can make the necessary arrangements/plans.
In the meantime, below is a summary of the most recent feedback from HMRC on COVID-19 and mobile individuals.
The Statutory Residence TestHMRC has confirmed there would be no changes extending the exceptional circumstances legislation beyond 60 days in any one tax year when assessing UK tax residency as it is a statutory rule. There will be no leeway in the legislation pertaining to working in the UK for more than 30 days and there are no plans to change the legislation in respect of a “significant break”.
Appendix 8 payroll for visitors from non-Treaty countries and from overseas branches of UK companiesHMRC confirmed it does not expect any relaxation in terms of the 60 UK workdays permissible for inclusion in the Appendix 8 payroll. Whether or not an individual qualifies will be clear from the current guidance.
HMRC has been looking at various deadline extensions for all taxpayers in view of the COVID-19 crisis. Whilst some deadlines for niche populations such as globally mobile individuals have been extended, other deadlines have not.
HMRC is encouraging taxpayers to file on time, where possible. However, if filing is impossible because of COVID-19, then the guidance regarding “reasonable” excuse should be consulted.
This guidance has been updated in relation to COVID-19, advising that HMRC will consider coronavirus as a reasonable excuse for missing some tax filling obligations. If anyone has been affected by coronavirus, they should mention that as part of their appeal, and it will be looked at on a case by case basis.
Claims can be made for inbound expats if the conditions of the scheme are met. The position regarding outbound expatriates is under review and comment will be provided soon.
Coronavirus Job Retention Scheme (CJRS)
Economic Impact Payment – US individualsThe vast majority of Americans in the UK will be entitled to an economic impact payment from the US. It is $1,200 per individual and $500 for each qualifying child. HMRC does not view these payments as subject to UK tax.
People who commute may find themselves working in unexpected places, different to their usual circumstances and working pattern. Care is needed to make sure tax and social security filings and payment requirements are met. Workers who commute, living in one country and working in another for part of their week, are often taxable in both countries but one country will take a tax credit for tax paid in the other country.
Germany and other counties in Europe are taking the approach that if, for example, an individual typically works in Germany, but is now homeworking in the UK due to lockdown, that income will stay taxable in Germany. To date, Germany has reached agreement with France, Austria and Switzerland.
Where there is no agreement (as is currently the case for the UK) clients may end up in a situation where Germany claims they are taxable in Germany, and under UK rules they are also taxable in the UK (as they are working in the UK on those days).
If Germany is treating such individuals as taxable on their normal German workdays, it won’t give a tax credit for the UK tax paid on the same income, so individuals may end up double taxed. HMRC is looking into this issues.