Taxation Implications for Cross Border Employers & Workers

1. Taxation Implications for Cross Border Employers & Workers Rose Tierney 13/06/2017

2. 1.Tax Implications for Employers employing Cross Border Workers or having staff working on either side of the border. 2. Redundancy, Pensions and Social Insurance in a cross border context. 3. Brexit – what happens next?

3. 1. Employees - Working Across the Border • ROI Resident Employee Taking up Employment in NI • UK Tax year runs from 6 April to 5 April. • Personal Allowance 2017/18 £11,500 (2016/17 £11,000) • Personal Allowance restricted where income >£100,000 • Rates on income • 20% first £33,500 2017/18 (2016/17 £32,000) - basic rate • 40% £33,501 up to £150,000 - higher rate • 45% over £150,000 - additional rate •  Rates on gross dividends • First £5,000 in basic rate bands 0% • Remainder of basic rate band 7.5% • 32.5% in higher tax band • 38.1% in additional rate band.

4. 1. Employees - Working Across the Border • ROI Resident Employee Taking up Employment in NI NIC Rates  • Class 1 Employees • 12% - £157 - £866 per week • 2% - over £866 per week • Employers • 13.8% - over £157 per week • Employed person is generally subject to the legislation of the State in which he pursues his activity • Employed person who is temporarily posted to work in NI for the same employer can continue to be subject to the social insurance legislation of the ROI provided the posting does not exceed 24 months and he is not sent to replace another person

5. 1. Employees - Working Across the Border (a) ROI Resident Employee Taking up Employment in NI • Requirement to File a Tax Return • “Foreign” Income must be returned. The taxes deducted in the UK are available as a double tax credit against the ROI tax and USC on the same income. • Cross Border Workers Relief (Transborder Relief) • ROI residents who commute to work in the UK. • Employment must be held for 13 weeks continuously • Tax must be paid in UK on employment income. • For every week the individual works abroad, he/she must be present in the ROI for at least one day in that week. • The relief can be claimed instead of the double taxation credit whichever is more favourable for the employee. • Separate treatment of spouses may be preferable.

6. 1. Employees - Working Across the Border • ROI Resident Employee Taking up Employment in NI • Double Tax Treaty Relief for Certain Government Workers • The ROI UK tax treaty Article 18 deals gives relief for certain government service salaries and pensions • The relief is that the income is only taxed in the state of employment and not in their home state. • Not all State funded employments are included. • In order to qualify for relief the employee must be rendering services to the government or a local authority and must be discharging services of a governmental nature or employed in an educational institution. • No relief – nurses, IDA etc Relief – Council workers • Inconsistent answers from HMRC & Revenue – case by case basis

7. 1.Employees - Working Across the Border (b) NI Resident Employee Taking up Employment in ROI • Tax year -1 January to 31 December. • A tax credit system applies. Income is taxed at rates and bands then credits deducted. • Joint assessment and married credit only applies to non residents where the entire income of the spouse is taxable in ROI. • However aggregation can be used (TB 67) where the couple would be better off. This will however reduce the credit available against UK tax on the same income.

8. 1.Employees - Working Across the Border • (b) NI Resident Employee Taking up Employment in ROI • Tax Rates on income • 20% first €33,800 (Single) up to €67,600 (Married) - lower rate • Balance at 40% - marginal rate • Personal Tax Credit 2016 €1,650 (Single) €3,300 (Married) • Employee Tax Credit 2016 €1,650 • Earned Income Tax Credit (self employed & proprietary directors & their spouses) €950

9. 1.Employees - Working Across the Border (b) NI Resident Employee Taking up Employment in ROI • Universal Social Charge ("USC") • 0.5% on the first €12,012 • 2.5% on next €6,760 • 5% on next €51,272 • 8% on the balance •  Capped at 2.5% for those aged 70 or over or • those under 70 but holding a full ROI medical card with aggregate incomes of €60,000 or less • No capped rates for NI residents 

10. 1.Employees - Working Across the Border (b) NI Resident Employee Taking up Employment in ROI PRSI Rates  Class A • – Employees 4% on all earnings PRSI credit for those earning between €352 and €424 a week – max €12 a week • Employers • 10.75% - on total earnings where they exceed €376 per week • 8.5% - on total earnings where they do not exceed €376 per week 

11. 1.Employees - Working Across the Border (b) NI Resident Employee Taking up Employment in ROI • NI/UK residents required to submit an annual Self Assessment return (Form SA100) to HMRC. • Tax and USC deducted in ROI are available as a double tax credit against the UK tax on the same income. • No equivalent in the UK of Cross Border Workers Relief. Top up must be paid to HMRC. • Double Tax Treaty Relief for Certain Government Workers • - a lot of anomalies – “services of a governmental nature” • - anecdotally inconsistent decisions by Revenue & HMRC

12. 1.Employees - Working Across the Border (b) NI Resident Employee Taking up Employment in ROI • Traps include terminations payments & other reliefs claimed in ROI • Common mistakes – inserting tax paid in ROI as tax deducted on employment in UK – producing a refund from HMRC !!

13. 2. Employers Employing Cross Border Workers (a) ROI Employer Taking on NI Employee to work in ROI • Employee needs PPS number - Proof of Identity and address will be needed. Employee must apply for tax credits by registering for My Account online. • Employer will receive notice of tax credit - P2C - in the ROS Inbox. Until tax credits certificate is received emergency basis of taxation applies. (b) NI employer taking on ROI Employee to work in NI  • Employee needs an NI number - arrange an evidence of identity interview. • Proof of identity and address and the reason for the application will be required by the interviewer. Letter from Employer may be needed. • Form P46 will need to be filed online to apply for the correct tax code for the employee.

14. 3. The Tax Implications of Having Staff Working on Either Side of the Border • (a) NI Employer taking on employees to carry out duties in ROI •  Requirement to register as an ROI employer if employees duties exceed 183 days in calendar year to 31 December. • Register online on ROS or on paper Forms Prem Reg or TR1/TR2. • The 30, 60 day and 183 day Rules • Not required to register if employee spends less than 60 days on duties in ROI in a calendar year and conditions satisfied • Where days spent >60 <183 required to register but not deduct taxes provided conditions satisfied

15. 3. The Tax Implications of Having Staff Working on Either Side of the Border (b) ROI Employer taking on employees to carry out duties in NI (or rest of UK) •  183 day rule - requirement to register as a UK employer if the employee performs duties of employment in NI /UK exceeding 183 days in a tax year (ended 5 April). • If from the outset it is known that the employee will exceed 183 days on duties then employer registration must commence from the outset. • Register as an employer online at www.hmrc.gov.uk.

16. Other Issues • UK operating PAYE Real Time Information (RTI) system. Employers are required to provide online reports which will include details of the employees, the payments made to them and the deductions. This information has to be provided on or before each payday. Penalties can apply. • Irish Revenue propose introduce of Real Time Payroll from 2019

17. Workplace Pension • UK Workplace Pension • Automatic enrolment’ • Every employer must automatically enrol workers into a workplace pension scheme if they: • are aged between 22 and State Pension age • earn more than £10,000 a year • work in the UK

18. Workplace Pension • The law says a minimum percentage of your ‘qualifying earnings’ must be paid into your workplace pension scheme. • ‘Qualifying earnings’ are either: • the amount you earn before tax between £5,876 and £45,000 a year • your entire salary or wages before tax

19. Workplace Pension • Your employer chooses how to work out your qualifying earnings. • You pay Your employer pays Govt pays • 1% 1% 0.2% • rising to 5% rising to 3% rising to 1% of your ‘qualifying earnings’ by 2019

20. Pensions • Cross Border • Ensure payment made to scheme in country where income is • Relief available in UK in some cases under Migrant Member, Transitional Corresponding or DTA • These reliefs are very restrictive and generally only apply where you transfer cross border with the same or an associated employer.

21. Termination Payment ROI • Tax free ex gratia limited to lower of SCSB or €200,000 – lifetime limit • Relief for foreign service • Payments for injury, disability or death not subject to 200k cap • Pension lump sums paid in the UK to ROI residents – excess over tax free lump sum – taxed as Sch D Case IV and doesn’t qualify for remittance basis of taxation for non domiciled persons.

22. Termination Payment UK • First £30,000 is exempt • Statutory redundancy is included in £30,000 • Relief for foreign service in some cases

23. Termination Payment • A period of service counts as “foreign service” where the earnings from the employment are not “relevant earnings”. • Relevant earnings include foreign earnings taxed in UK on a UK resident. • Some or all of the period of service in the ROI will not count as foreign service – termination payment taxable in the UK. • Residency planning well in advance of the termination could help

24. Claiming Entitlements • EU and Bilateral agreements allow the Social Contributions made in EU and other bilateral countries to be taken into account when assessing eligibility to Social Welfare and State Pension.

25. Claiming Entitlements • Jobseekers • For those on intermittent parttime hours benefits should always be claimed in the jurisdiction you last worked • For those fully unemployed benefits should be claimed in State of residence • Aggregation rules apply so NIC and PRSI can be combined to arrive at entitlements

26. Claiming Entitlements • Illness • Benefits should normally be claimed in jurisdiction where you last worked • Maternity • Benefits should normally be claimed in jurisdiction where you last worked

27. Claiming Entitlements • Healthcare • While employed in NI the ROI resident individual (but not spouse or children) are entitled to routine NHS care • Retired individuals who were already receiving treatment for a condition can continue to do so but not for routine services

28. State Pension • Take control of your State pension. • Know what your contribution record says • Request UK record • Online through GOVT Gateway or • By post • National Insurance Contributions and Employer Office HM Revenue and Customs BX9 1AN United Kingdom or • By Phone:0300 200 3500

29. State Pension • Request ROI record • https://www.welfare.ie/en/Pages/secure/RequestSIContributionRecord.aspx • By post • PRSI Records • Department of Social ProtectionMcCarter's RoadArdaravanBuncranaDonegalIreland Tel:(01) 471 5898

30. 3. Brexit What Happens Next? • The 4 Freedoms • free movement of goods, capital, services, and labour • Goods – customs tariff barriers – WTO or some agreed arrangement? • Capital – Foreign Exchange Controls?? • Services – Increased in country regulation? • Labour – freedom of movement?

31. 3. Brexit What Happens Next? • Free movement of labour • Common Travel Area since 1920’s • No visa or passport requirements although ID required • Expected that this will continue but no guarantees • Other practicalities of cross border workers • Currency movements on wages • Difficulty getting mortgages when earning in foreign currency • Reciprocal access to social welfare & state pensions

32. All the other taxes that allow relief for EU citizens which we would want to apply to NI and rest of UK will require amendments to legislation • Eg CAT Agricultural Property Relief

33. Questions? • Contact Details: • Rose Tierney • Tel: +353 47 57843 • Email: rose@tierneytax.ie