Taxation Implications for Cross Border Employers & Workers

Taxation Implications for Cross Border Employers & Workers Rose Tierney June 2019

EURES • The EURES (which stands for European Employment Services – most people don’t know this!) Cross Border Partnership is there to support the cross border worker, jobseeker and employer. • EURES Advisers are based all along the border region, north and south, in the government employment services as well as through chambers of commerce and trade union bodies. • Please log on to our website for all the latest information on cross border working, job seeking or employing and the important issues of the day www.eurescrossborder.eu or follow us on twitter @crosseures • Any queries after the event please contact the EURES Cross Border Partnership and an adviser will follow up with presently.

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?

What’s the Issue? • The difficulty for Irish/UK frontier workers and employers is that there is no clear set of rules for them. There’s a mixture of different sources of guidance from each side of the border but no comprehensive agreed structure for these cross border businesses and individuals to follow.

This gives rise to a lot of questions!

Typical Question 1 • We have an Irish registered employer with a remote workforce all living in Ireland and working from home. One employee has now moved to NI so living and working from there on behalf of Irish employer so what way should their taxes be reported. Do they remain under the Irish reg or does the employer have to register for taxes in NI?

Typical Question 2 • I have worked full-time in the South for the last 7 years but prior to that I worked full-time in Northern Ireland for about 27 years, will I be entitled to a full state pension in either location and what are my best options? Also what documentation should I be completing in relation to tax requirements and can I claim for any tax relief as a cross border worker? I find it all very confusing!

Typical Question 3 • I used to work in the ‘South’, where my husband still does. My husband gets the ‘Married Man’s’ Tax Allowance, rather than us being taxed separately. Now I work in the North and I pay tax to the British Exchequer. Does my husband need to tell the Irish tax authorities that I am paying tax in the North and change to the individual tax basis, or is this taken care of automatically by the two separate tax jurisdictions?

Typical Question 4 • I live in the Republic of Ireland and work full time in Northern Ireland, so pay UK tax and national insurance under the PAYE system. The company for which I work does facilitate employees who wish to work from home from time to time. What are the implications for me and the company if I decide to work from home?

Typical Question 5 • Is there any clarity yet on whether Irish citizens resident in the Republic or Ireland who receive a UK state pension will have their pensions increased annually if there is a no-deal Brexit?

Typical Question 6 • Can a public sector employer, with employees permanently based (domiciled and frontier workers) in both the North and South of Ireland, dictate the introduction of one tax system for all staff i.e. pay Southern based staff via Northern Civil Service pay bands in sterling and deduct UK PAYE and NICS?

Mistaken assumptions ? • Employee or Employer can decide where payroll is operated- Wrong Always based on where the duties are carried out. • Employee or Employer can “elect to be taxed in home country” Wrong No ability for employee or employer to “elect” to be taxed in home country.

Mistaken assumptions ? • Employment tax based on domicile or residence of the employee. Wrong Residence of employee is only relevant for the treaty exemption for employer and personal tax obligations of employee • 183 days is all you need to know. Wrong 183 days is just one test there are lots of others.

What rules apply? • Basic rule: Employee is taxed under payroll where the duties of employment are carried out. • Basic Rule: Individual is taxed on a self assessment basis in country of residency on their “foreign” employment income with credit for taxes deducted under payroll.

ROI Requirements

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 • Treaty Conditions • > 30 days and ≤ 60 days • No Requirement to operate Irish PAYE where: > 30 days and ≤ 60 days • 1) Employee resident in Double Taxation Agreement (DTA) State and not resident in ROI; • 2) Genuine “foreign employment”; • 3) Individual not paid by an Irish Permanent Establishment (PE); • 4) Duties performed in Ireland ≤ 60 days.

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 • Treaty Conditions • > 60 days and ≤183 days • Where the employee is in Ireland ≤ 183 days and PAYE is operated in the “home” State from 1 January 2007 there is no requirement to operate PAYE in Ireland provided the conditions at 1) – 3) above are met AND provided the foreign employer: • Ø is registered in Ireland as an employer for PAYE; AND • Ø maintains a record of the full name, latest Irish and overseas address, date of commencement and cessation of individual, location where individual carries out duties of temporary assignment and amount of earnings in relation to temporary assignment; AND • Ø on request, supplies a copy of the contract relating to the employer’s engagement in Ireland; AND

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 • Treaty Conditions continued • Ø signs a written acknowledgement that in all cases where a liability is subsequently found to arise that they will pay any Irish PAYE that should have been paid; AND • Ø supplies evidence (e.g. payslip/ statement from HM Revenue & Customs) of PAYE being operated in the UK on the duties performed in Ireland; AND • Ø seeks clearance from Irish Revenue Commissioners by 21 days after the date the assignee takes up the duties in Ireland. • On receipt of written confirmation from the Revenue Commissioners, Irish PAYE need not be operated.

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 • If the above conditions are not met, the employer should apply Irish PAYE by reference to the duties performed in Ireland, but should review the position after the end of the tax year to see if a refund is available under the relevant DTA • > 183 days • Apply Irish PAYE by reference to duties performed in Ireland.

Updates on Revenue Interpretation • Notwithstanding that an overseas employee may be in Ireland for 60 days or less in a tax year, a specific application for a PAYE dispensation is required in the following circumstances; • Where an individual comes to Ireland on assignment or on business trips for an aggregate period greater than 60 workdays, whether in one year or straddling two tax years.  • For any business traveller to Ireland where there is an expectation that there will be recurring visits over more than two years, irrespective of the duration or frequency of visits.  • Where different individuals come to Ireland to perform the same role, and the total period exceeds 60 work days in a year. • In addition, a specific application will need to be made in all cases where an overseas employee has between 60 and 183 workdays in Ireland in a tax year. The guidance notes state that the dispensation must be applied for within 30 days of the employee’s arrival in Ireland.

Updates on Revenue Interpretation • The Irish Revenue have adopted an ‘economic employer’ approach to the interpretation of the employment article in Ireland’s DTAs. • This may result in business visitors being subjected to Irish tax in a far wider range of circumstances than was previously the case. • The view stated in the guidance is that the Irish entity will be regarded as the employer of the individual where the individual; • a)Performs duties that are an integral part of the business activities of theIrish entity, or, • b)Replaces a member of staff of the Irish entity, • c)Is supplied by an agency to work for the Irish entity, or • d)Where the remuneration is paid by the foreign employer but the cost is then recharged to the Irish entity. • Where the Irish entity is considered to be the employer, relief under a DTA will not be available. The individual will be subject to Irish tax on earnings derived from duties performed in Ireland, and the employer will be required to account for such tax through the PAYE system.

Updates on Revenue Interpretation • To the extent that an Irish liability does arise, a foreign tax credit should be available, in whole or in part, in the individual’s home country, provided the home country is a country with which Ireland has a DTA. • Revenue’s interpretation of what constitutes an ‘integral part of the business’ of the Irish entity is broad and includes matters such as; • who bears the responsibility or risks for the results produced by the employee; • who authorises, instructs or controls, where how and or when the work is performed; • who does the individual report to or who is responsible for assessing performance etc.

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). • UK also have a 30 days, 60 days, 90 days and 150 days rules. • 30 day rule – no requirement to register employment unless part of a longer period. • 60 day rule - no requirement to register employment provided no formal Uk employment contract unless part of a longer period.

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) • 90 day rule - PAYE can be disregarded provided that the employer supplies the information below by 31 May following the end of the tax year • Full name of employee • Last known UK and overseas addresses of employee • Nature of duties undertaken • Date commenced • Date ceased • To which country a tax return covering worldwide income is submitted • And confirms that the Uk company does not • ultimately bear the cost of the employees remuneration or • Function as the employees employer during the Uk assignment.

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) • 150 day rule- PAYE can be disregarded provided that the employer supplies the information required above for the 90 days rule and additional information for non- US citizens and Green Card Holders • 183 day rule – applications to be made on a named individual basis once days exceed the 150 which must include all the information required above for the 90 days rule and a statement from each employee stating why they consider they are treaty resident elsewhere and entitled to the treaty exemption. • 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.

Remote Workers • Eg Employer in Newry Employee resident in Dundalk and works from home. • No treaty exemption because of residence • Must set up ROI payroll • Eg Employer in Dundalk, Employee resident in Newry and works from home • No treaty exemption because of residence • Must set up UK payroll

Pension Contributions • 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. • Sometime better to “park” one pension and start a new one in country of employment

Termination Payment Resident In ROI ROI Employments • Tax free ex gratia limited to lower of SCSB or €200,000 – lifetime limit S201 • Payments for injury, disability or death not subject to 200k cap Payment from UK Employments -Where termination payment would not otherwise be subject to tax it is taxed under S123 and then the same reliefs are available under S201

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

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.

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

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

State Pension • Take control of your State pension. • Know what your contribution record says • Request UK and or ROI record • For Help and Assistance on Benefits Claims and State Pensions use the resources available at your local Citizens Information and Social Welfare Offices

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?

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

3. Taxes after Brexit • The saving grace is the existence of the tax treaty between ROI and UK. This eliminates double taxation or allocates taxing rights to types of income. • The treaty will apply irrespective of Brexit.

Social Welfare after Brexit • DEASP statement: • Recipients will experience no change to the reciprocal social welfare arrangements between Ireland and the UK. The rights and entitlements of both EU and British citizens to social welfare payments will remain as they were before Brexit. • Irish and British citizens living in either country will maintain the right to benefit from social insurance contributions made when working in either country and to access social insurance payments in either country. EU citizens living in Ireland will maintain the right to benefit from social insurance contributions made when working in the UK. • Payments such as child benefit, which can be exported to the UK (or vice versa), will continue to be exported. • Existing payments will not change and there will be no change in the way we assess new applications for EU and UK citizens.

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

Taxation Implications for Cross Border Employers & Workers