Many employers have been very flexible about where employees are located when working from 'home' during the pandemic, particularly in the first few months. For some, it may have been a holiday home far from England, for others it has meant returning to their home country for an extended stay.  Now that most offices are returning to some office based working, many employers have required employees to return to the UK. Those that have been away for some time, or who continue to stay away, may find themselves facing unexpected immigration, tax and employment issues, with additional potential issues for those in regulated sectors. 

Employment

Employees that are permitted to work for extended periods outside the UK may accrue employment protections in the territory in which they are working and residing. This may be the case even if the arrangement began as a temporary arrangement but has inadvertently become a longer assignment. Each case will be different depending on local law application but it would be prudent to take legal advice in the relevant jurisdiction to establish what these rights might be and to assess legal risks and possible exposure.  

Tax

An employer may trigger additional tax liabilities by allowing an employee to work abroad for any extended period of time. The tax consequences will depend on the individual circumstances in each case and the jurisdictions in question. In broad terms, the main risks are: (i) triggering a local corporation tax liability through the inadvertent creation of a "permanent establishment" in the local jurisdiction and (ii) becoming obliged to account for local payroll tax and social security in respect of amounts paid to the employee whilst they are abroad. This is a complex area, and employers are advised to seek specialist tax advice, ideally well in advance of the employee's departure.

Regulatory issues

In the financial services sector the Financial Conduct Authority and the Prudential Regulation Authority expect UK authorised firms to have "mind and management" in the UK. FCA and PRA regulated firms therefore always need to ensure that they continue to maintain sufficient numbers of senior management who are physically present in the UK.

Additionally, the FCA expects firms to maintain the same standard of monitoring of staff working from home as they would in an office environment. In a speech on 12 October Julia Hoggart the FCA's director of market oversight said that "We expect firms to have updated their policies, refreshed their training and put in place rigorous oversight reflecting the new environment - particularly regarding the risk of use of privately owned devices."

Outside financial services in other areas where business is regulated it would be prudent to think about the consequences of allowing employees to work remotely for extended periods from an oversight and supervision perspective. Where appropriate advice should be sought from a regulator.  

Immigration

Prior to employees' working remotely, outside of the UK, consideration should have been given to the visa requirements of that particular jurisdiction. Currently UK nationals can live and work freely across all EEA countries, however this position changes from 1 January 2021. EEA nationals arriving in the UK to work from 1 January 2021 will require a visa and we expect similar rules to be put in place for UK nationals seeking to work in EEA countries from this date onwards.

Each jurisdiction has different rules and business visitor visas are not always required in advance for business trips, usually depending on the individual's nationality. It is common, however, throughout most jurisdictions - the UK included - that any type of 'productive' work is strictly prohibited under a business visitor visa.  Penalties for illegal working can be severe, both for the individual and their employer.

If a work visa is required, consideration should be given to the current status of the immigration system in the relevant country, for example, there may be significant delays to visa processing times due to COVID-19. The employee may also be required to self-quarantine for a period in their country of destination and again upon their return to the UK. Depending on the employee's nationality, travel bans might also be in place at a later date preventing them from returning to their home office. Finally, for employees in the UK who are not UK nationals, consideration should be given to their current immigration status in the UK and how this, or any future UK immigration application, might be impacted by a prolonged trip overseas, for example by way of an issue with excessive absences.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.