Update: COVID-19 – Global mobility tax and social security considerations

Tue 24 Mar 2020

The world we live in today is more mobile and connected than ever before. We are the first ones in the 21^st century to have experienced a whole new digital world, growth in the movement of people and services, which drive innovation and the unification of populations around the world.

Even with evolving immigration controls and visa restrictions, the current pandemic does not result in  the ‘end-all’ of global mobility, but rather it  starts  ‘responsible global employer mobility’ tracking, monitoring and compliance. The time has come for employers to ensure their procedures are holistic and robust when such outbreaks, and other global events occur, which impact businesses and their people.

We are actively supporting our clients and their employees through the COVID-19 pandemic, please see the ‘How we can help employers’ section for further details.

UK – COVID-19 considerations:

As COVID-19 spreads in the UK, there are regulations in place for the Health Secretary to quarantine any individual who is considered by health professionals to be at risk of spreading the virus.

This raises questions as to how these regulations can impact  tax and social security positions for internationally mobile employees who are either working in the UK on assignment, on a short-term business visit, or on a commuter arrangement.

Can an individual quarantined in the UK, or who self isolates here:

• be at risk of becoming a UK tax resident?;
• create a PAYE withholding obligation for their employer?; and/or
• still be covered under their home social security system if they exceed their certificate of coverage/A1 certificate coverage periods?

Days spent in the UK – Impact on tax residence position under the Statutory Residency Test

Under the UK’s Statutory Residency Test (SRT), the number of days an individual spends in the UK during the tax year (6 April to the following 5 April) is a key factor in determining whether they have become UK resident for UK tax purposes.

If an individual is quarantined in the UK, they may inadvertently become tax resident in the UK and be liable to UK tax on their worldwide income and gains (subject to the remittance basis and claims under a double taxation agreement), by virtue of exceeding a day count test under the SRT.

However, the “exceptional circumstances” provision contained in the SRT allows an individual to exclude days spent in the UK from their UK day count for some of the “UK”, “overseas” and “ties tests”, where these days are attributable to “exceptional circumstances” that prevent them from leaving the UK. This includes “national emergencies”, and “serious or life-threatening illness”.

HMRC guidance states that where an individual:-

• is quarantined or advised by a health professional or public health guidance to self-isolate in the UK as a result of the virus; or
• they find themselves advised by official Government advice not to travel from the UK as a result of the virus; or
• are unable to leave the UK as a result of the closure of international borders; or
• are asked by their employer to return to the UK temporarily as a result of the virus; then

the circumstances are considered as exceptional.

Appendix 4: STBV – Days spent in the UK and impact on PAYE compliance obligations

Where an employer has an Appendix 4 agreement in place, it can disregard PAYE withholding requirements on the earnings of non-resident employees (resident in a country that the UK holds a double taxation agreement with), that it hosts in the UK provided that certain conditions are met.

One of these conditions is that the employee stays in the UK for less than 183 days in the UK in any 12-month period (reduced to 60 days where the employee’s remuneration is ultimately borne in the UK and that period does not form part of a longer period in the UK).

Based on the OECD interpretation of the model double taxation agreement, days of sickness that prevent the individual from leaving the UK would not be counted for the 183 and 60 day tests. This would cover those who are quarantined in the UK, but whether this covers someone who self isolates, or who stays in the UK to care for someone impacted by the virus, is, again, subject to HMRC’s discretion.

Consequently, UK employers should determine whether the STBVs it hosts are impacted by the virus, and how this impacts upon their PAYE withholding requirements under their Appendix 4 agreement.

A1/COC – Impact on coverage period

No explicit provision is made in the UK’s social security agreements with other countries or the EU social security regulations in regards to periods that an employee spends in the UK as a result of illness.

Consequently, employers should seek guidance from the employee’s home state social security authorities for guidance on how the social security coverage period for those employees who stay in the UK as a result of COVID19.

How we can help employers

We can assist employers by:

• helping it identify employees impacted by COVID19
• providing guidance on its PAYE compliance obligations for these employees and any additional PAYE liabilities that may arise
• obtaining guidance from HMRC on specific cases in order to assist with assurance that employers are compliant with PAYE regulations

For more information, please contact either:-

• Joe Pilley – Head of Global Mobility at joe.pilley@mazars.co.uk;
• Robin Bailey – Global Mobility Senior Manager, at robin.bailey@mazars.co.uk; or
• Sukh Kandola – Global Mobility Senior Manager, at Sukhraj.kandola@mazars.co.uk

Visit our website for more information on Global Mobility.