Creation of a permanent establishment
In light of the current circumstances, employers are concerned that employees forced to work from home due to COVID-19 will create a permanent establishment if their home country is not the country where they regularly work.
These are exceptional and temporary circumstances which should not (and it is unlikely that it will) create any changes to the determination of a Permanent Establishment. However, countries where a tax treaty isn’t applicable may have a lower threshold for required presence than those that do have a tax treaty in place and therefore this could trigger filing requirements. Tax Administrations are encouraged to provide guidance in this respect.
Worldwide travel - Scale rate payments
If you provide your employees with a round sum amount to pay for some common business expenses like travel and meals, these are known as ‘scale rate payments’. HMRC publishes those scale rates that can be used for employees travelling overseas and these have been reviewed and updated. Do ensure that you are aware of the tax and social security rules around scale rate payments and round sum allowances.
For more infomration: https://www.gov.uk/guidance/expenses-rates-for-employees-travelling-outside-the-uk
HMRC extends certain filing deadlines
Due to the unprecedented position the World is currently in due to the Covid-19 pandemic, global tax authorities are looking at ways to assist business (and individuals) with their filing and payment obligations. HMRC has announced extended filing deadlines for the following:
National Insurance Contributions settlement return (NSR Appendix 7A)
If you operate PAYE under Employment Procedures appendix 6 tax equalisation and your employee is from abroad and working in the UK the deadline has been extended to 31 May 2020, due to temporary measures put in place to stop the spread of coronavirus (COVID-19).
Short term business visitor arrangements
Where you have a formal agreement in place with HMRC for the tracking and reporting of business visitors to the UK, the deadline for submitting the 2019/20 submission has been moved from 31 May 2020 to 31 July 2020. Note that this still only applied to individuals who are ultimately exempt from UK tax and care needs to be taken that visitors are being reviewed and treated correctly for tax purposes.
HMRC: Changes to the statutory residence test due to Covid-19
On 14 April 2020, the Chancellor relaxed the tax residence test for skilled workers coming to the UK to help tackle the coronavirus pandemic.
In a letter to the head of the Treasury Select Committee on 9th April, Rishi Sunak confirmed that the statutory residence test (SRT) will be temporarily amended to ensure that any time spent in the UK by individuals working on COVID-19 related activities between 1st March and 1st June 2020 will not count towards the residence tests – this period may be extended if required.
The Chancellor said the measure will allow ‘highly skilled’ individuals from across the world to come to the UK and help the response to the current health emergency. Under normal circumstances, working in the UK could affect these individuals’ tax residence status and result in their earnings being taxable in the UK.
The Chancellor acknowledged the risk of potential tax avoidance from the change, confirming: “The qualifying criteria will therefore be designed so that the relaxation of the rules is tightly targeted to minimise the risk of abuse.”
The government has promised further details on the eligibility and scope of the change to the SRT, to be legislated in Finance Bill 2020.