As the pandemic has transformed attitudes to remote working, country borders rather than office walls have become the de facto boundaries for many employee roles. In this new reality, a civil servant wishing to permanently trade Dublin for Doolin may find their luck is in, but a tech worker hoping to combine work with world travel may find their HR department less supportive.
The issue, of course, is to do with employment laws and taxation. An overseas jurisdiction may require visas, work permits, registration of the employer’s business entity, or any combination of all three, for an individual to legally work there. A worst-case scenario could see not just the employee but the employer breaking the law by allowing remote working without having the necessary paperwork in place.
‘Restrictive Irish personal tax rules mean that if crossborder workers work from home at all, a “double tax” can be imposed on their income’
Border relief
One group that might have expected an exemption from such complexity are Ireland’s 25,000 to 30,000 crossborder workers – people who live in one jurisdiction on the island and work in the other. Since 1998, Revenue has operated transborder workers’ relief (TBWR), designed, it says, ‘for people who are resident in Ireland, but work and pay tax in another country’. While the timing of the introduction may suggest a link to the peace process, Breda Mullaney, director for tax at Deloitte Ireland, says the relief ‘is a general measure and is not limited to Irish individuals who work in Northern Ireland and Great Britain’.
Key requirements for successfully claiming TBWR are tax residency in Ireland, being in Ireland at least one day in every week of absence abroad for work purposes, and only doing work ‘incidental to the role’ while in Ireland. That meant, until recently, the perk of home-working, even on an occasional basis, was definitively off the table for TBWR claimants. This, it could be argued, wasn’t necessarily a punitive or discriminatory measure but reflected the era when the rules were framed. Revenue says that crossborder remote working arrangements ‘were uncommon at the time the relief was introduced’.
In March 2020, Revenue responded to a suddenly changed world by introducing a TBWR concession allowing crossborder workers required to work at home because of the pandemic to do so knowing their tax affairs would not be complicated by the new reality so long as ‘all other conditions of the relief are met’. Here, though, it becomes complicated and Mullaney points out that this caveat to the concession in relation to Covid needs to be considered to determine whether all the ‘other conditions of the relief’ are met.
Competitive disadvantage
The concession is also set to expire at the end of this year and the Irish government has made clear that there are no plans to extend it. As a result, many crossborder workers who have become attuned to the benefits of remote working will be feeling frustrated and some crossborder employers concerned about their future competitiveness.
Conor Dowds, co-chair of the Cross-Border Workers Coalition, lives in Donegal and works in Derry. He writes that while the Irish government and the Northern Ireland Executive recognise the importance of remote working in the future, ‘restrictive Irish personal tax rules mean that if we work from home at all, a “double tax” can be imposed on our income. The re-introduction of these rules in January 2022 will cause significant disruption to crossborder workers’ lives.’ He also says that in Northern Ireland ‘job advertisements now include statements like “remote working optional (for UK residents only)”’.
While technically feasible, applying a double tax agreement comes with considerable complexity
Dowds isn’t alone in voicing concern. Paul Clancy, CEO of the Londonderry Chamber of Commerce, has called for a one-year extension to the current concession to ‘provide some breathing space to figure things out’. He told The Financial Times that businesses in Derry ‘have a limited pool of talent. We are totally dependent on Donegal as a hinterland.’ With competition for talent growing, the inability to offer remote working to this pool could be a serious handicap to recruitment.
Future path
While taxation is key to the complexity of crossborder remote working, there are some ways out. According to Revenue: ‘If TBWR does not apply, then the foreign employment income is taxable in Ireland. However, importantly, an employee in this position should be able to avoid double taxation on this income by claiming the appropriate double taxation relief due to him/her as outlined in the relevant double taxation agreement in operation between the state and his/her country of employment.’
While technically feasible, applying a double tax agreement comes with considerable complexity, not least the potential for remote and office work to be taxed at different national rates. Making such an arrangement work could also come with both administrative and tax costs for the company.
Given the intense political focus on the border over the past few years, is it conceivable some further reciprocal arrangement could be made to facilitate remote working on an all-island basis? ‘It certainly could be achieved,’ Mullaney says, pointing to bilateral agreements on continental Europe that have achieved similar outcomes, albeit in the context of the pandemic. ‘However, engagement and motivation will be needed by both parties and it may be difficult for this particular issue to get the necessary traction for meaningful agreed change in the near future.’
Next steps
Her advice to crossborder employees who wish to continue to work remotely in the New Year is to ‘start a discussion with your employer now’ while recognising there are complexities for both parties. ‘As an individual, it is also important for you to understand how remote working may impact some of the wider package of benefits you receive as an employee.’
While the issues are certainly challenging, she sees the growing focus on them as presenting some grounds for optimism. ‘Many employers are seeking our advice on both sides of the border to allow them to come up with a solution that is operable and compliant in both the UK and Ireland. The good news for employees is they are actively looking to understand how they can best continue to offer this flexibility to them when the current restrictions end.’
