Taxation Implications for Cross Border Employers & Workers

Taxation Implications for Cross Border Employers & Workers Rose TierneyJune 2018

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?

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 2018/19 £11,850 ( 2017/18 £11,500) Personal Allowance restricted where income >£100,000 £1 restriction for every £2 of income   Rates on income 20% first £34,500 2018/19 (2017/18 £33,500) - basic rate 40% £34,501 up to £150,000 - higher rate 45% over £150,000 - additional rate  Rates on gross dividends First £2,000 in basic rate bands 0% Remainder of basic rate band 7.5% 32.5% in higher tax band 38.1% in additional rate band.

1 . Employees - Working Across the Border ROI Resident Employee Taking up Employment in NI NIC Rates  Class 1 Employees 12% - £162 - £892 per week 2% - over £892 per week Employers 13.8% - over £162 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

1 . Employees - Working Across the Border (a) ROI Resident Employee Taking up Employment in NIRequirement 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.

1. Employees - Working Across the Border ROI Resident Employee Taking up Employment in NIDouble 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

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.

1.Employees - Working Across the Border (b) NI Resident Employee Taking up Employment in ROI Tax Rates on income 20% first €34,550 (Single) up to €69,100 (Married) - lower rate Balance at 40% - marginal rate Personal Tax Credit 2018 €1,650 (Single) €3,300 (Married) Employee Tax Credit 2018 €1,650 Earned Income Tax Credit (self employed & proprietary directors & their spouses) €1,150

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% on next €7,360 4.75% on next €50,672 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 

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 10.85% - on total earnings where they exceed €376 per week 8.6% - on total earnings where they do not exceed €376 per week   

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

1.Employees - Working Across the Border (b) NI Resident Employee Taking up Employment in ROITraps 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 !!

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.

2. Employers Employing Cross Border Workers (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.

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  Mistaken assumption often made that they can work in ROI for 183 days before employer has to register. WRONG! They have 30 day, 60 days and 183 day rules 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

ROI Requirements No PAYE/No Reporting No PAYE/No Reporting Clearance from PAYE obligations Under 30 Irish workdays p.a. Up to 60 Irish workdays p.a. Between 60 Irish workdays - 183 Irish days p.a. [3] Not Irish resident Not Irish resident Tax treaty resident outside Ireland Not Irish resident Tax treaty resident outside Ireland No application to Revenue No application to Revenue Application required to Revenue Subject to PAYE in home location Relief under domestic tax Meets tax treaty exemption rules Meets tax treaty exemption rules

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 daysNo Requirement to operate Irish PAYE where: > 30 days and ≤ 60 days 1)       Employee resident in Double Taxation Agreement (DTA) State  and not resident in Ireland; 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 daysWhere 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 continuedØ       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; ANDØ       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 ROIIf 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 daysApply Irish PAYE by reference to duties performed in Ireland. The balance of employment income may be taxable in Ireland (Schedule D, Case III) if the individual is Irish tax resident.

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 and 60 days rule. 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.

Mistaken assumptions? Employee or Employer can decide where payroll is operated- WrongAlways based on where the duties are carried out.Employee or Employer can “elect to be taxed in home country” WrongNo ability for employee or employer to “elect” to be taxed in home country.Based on domicile or residence of the employee. Wrong – residence of employee is only relevant for the treaty exemption

Remote Workers Eg Employer in Derry/L’Derry Employee resident in Donegal works from home.No treaty exemption because of residence Must set up ROI payroll

Other Issues Real Time ReportingUK 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.

Other Issues Real Time ReportingIrish Revenue introducing SMART PAYE from 1 Jan 2019Real Time ReportingApply to Revenue for RPN 2 days before each paydate.

Other Issues Real Time ReportingWork is ongoing and software providers will have to update software in compliance with the new system

Workplace Pension UK Workplace PensionAutomatic enrolment’Every employer must automatically enrol workers into a workplace pension scheme if they:are aged between 22 and State Pension ageearn more than £10,000 a yearwork in the UK

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 yearyour entire salary or wages before tax

Workplace PensionYour employer chooses how to work out your qualifying earnings. You pay Your employer pays Govt pays1% 1% 0.2% (tax relief)rising to 5% rising to 3% rising to 1%of your ‘qualifying earnings’ by 2019

Workplace Pension in ROI? There has been an announcement by Leo Varadkar that he intends this to be in place by 2021.

Pensions Cross BorderEnsure payment made to scheme in country where income isRelief 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.

Termination Payment ROITax free ex gratia limited to lower of SCSB or €200,000 – lifetime limitRelief for foreign service Payments for injury, disability or death not subject to 200k capPension 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.

Termination Payment UKFirst £30,000 is exemptStatutory redundancy is included in £30,000Relief for foreign service in some cases

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

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 EntitlementsJobseekers For those on intermittent parttime hours benefits should always be claimed in the jurisdiction you last workedFor those fully unemployed benefits should be claimed in State of residenceAggregation rules apply so NIC and PRSI can be combined to arrive at entitlements

Claiming EntitlementsIllnessBenefits should normally be claimed in jurisdiction where you last worked MaternityBenefits should normally be claimed in jurisdiction where you last worked

Claiming EntitlementsHealthcare While employed in NI the ROI resident individual (but not spouse or children) are entitled to routine NHS careRetired 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 saysRequest UK recordOnline through GOVT Gateway or By postNational Insurance Contributions and Employer Office HM Revenue and Customs BX9 1AN United Kingdom orBy Phone :0300 200 3500

State PensionRequest ROI record https://www.welfare.ie/en/Pages/secure/RequestSIContributionRecord.aspxBy postPRSI RecordsDepartment of Social ProtectionMcCarter's RoadArdaravanBuncranaDonegal Ireland Tel:(01) 471 5898

3. Brexit What Happens Next?The 4 Freedoms free movement of goods, capital, services, and labourGoods – 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’sNo visa or passport requirements although ID requiredExpected that this will continue but no guaranteesOther practicalities of cross border workersCurrency movements on wagesDifficulty getting mortgages when earning in foreign currencyReciprocal access to social welfare & state pensions

3. Brexit What Happens Next? 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.

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