A period of working overseas can engage the tax systems of two countries at once. The right preparation makes it straightforward for you and for your company.

The ability to work from almost anywhere has reshaped expectations of where, and how, professional life is conducted. For an employee seeking a period overseas, or a director with the freedom to divide their time between the UK and abroad, the appeal is obvious. The tax and regulatory consequences, however, are considerably less so. A spell of working abroad can engage the tax systems of two countries at once, and for those who control a company, the stakes are higher still. The points below set out the matters that, in our experience, most warrant attention before any departure.

The right to work in the chosen jurisdiction

The threshold question, and the one most often overlooked, is whether you are permitted to work in the country at all. The right to enter a country as a visitor is not the same as the right to perform work there, and a tourist visa will rarely authorise it, even where the duties are carried out remotely for a UK employer. Confirming your immigration position, together with any conditions imposed by a professional regulator, should therefore precede every other consideration.

Your personal tax residence

Residence is the foundation on which an individual's tax position rests. A sufficiently long period abroad may render you tax resident in the host country, giving rise to a liability and a filing obligation there even though your remuneration originates in the UK, and some jurisdictions assert taxing rights after a notably short presence. An extended absence may equally affect your standing under the UK's Statutory Residence Test. The UK's network of double taxation agreements is designed to prevent the same income being taxed twice, but relief is not automatic and seldom removes the need to file in both countries. Establishing your position in advance is far preferable to reconstructing it afterwards.

Social security and your contribution record

National Insurance follows rules distinct from those governing income tax, and a period of work abroad may bring an obligation to contribute to the host country's social security system. Where the relevant agreement applies, it is often possible to obtain a certificate of coverage, such as an A1, which preserves your liability in the UK alone. Securing this protects the continuity of your UK State Pension record and avoids contributing in two countries at once, and it is best arranged before you travel.

Directors: a higher order of risk

A director must approach the question with greater caution than an employee, because their presence abroad can have consequences for the company as well as for themselves. Two exposures are paramount. The first is the risk of creating a permanent establishment: where contracts are concluded, business is won, or the enterprise is in substance directed from another country, the local authority may treat the company as having a taxable presence and seek to tax the profits attributable to it. The second concerns corporate residence itself, since the place where a company's central management and control is exercised can determine where it is regarded as resident for tax purposes. A director working abroad is, in consequence, a materially different proposition from an employee doing likewise, and merits considered advice before any extended arrangement is agreed.

Employee or director: the key distinctions

| Consideration | As an employee | As a director | |---|---|---| | Personal tax residence | A prolonged stay may create a liability in the host country; monitor day counts | As for an employee, and the location of decision-making may also affect the company | | Local tax and reporting | A host-country return may be required | As above, with potential reporting obligations for the company | | Social security | Apply for an A1 or equivalent to remain within UK National Insurance | As for an employee | | Corporate tax footprint | Generally limited where duties are purely employment | Significant: a risk of creating a permanent establishment abroad |

Matters to address before departure

Confirm your legal right to work in the host country for the full intended period.
Establish your residence position in both jurisdictions and whether a local return will arise.
Review your social security position, and your eligibility to make voluntary contributions for National Insurance while overseas.
As an employee, record the arrangement with your employer in writing, including responsibility for any additional costs.
As a director, take advice on the company's exposure before a short visit becomes a longer engagement.

How we can assist

Properly planned, a period of working abroad is entirely manageable. We advise on residence in both the UK and the host country, on the application of the relevant double taxation agreement, and on securing the appropriate social security certificate. For directors, we assess what time spent overseas may mean for the company's tax position, including the risks of permanent establishment and corporate residence. A considered conversation before you travel is, almost invariably, all that is required to proceed with confidence.

At Expat UK Tax we specialise in UK tax for individuals and business owners who live, work and invest across borders. If any of the points above affect you or your business, please get in touch and we will be glad to help you plan ahead with confidence.

This article is provided as general information and does not constitute personal tax advice. The position depends on the jurisdictions involved, the duration of any stay and the particular facts. We would be pleased to advise on your specific circumstances before you work abroad.

Working Remotely Abroad: The Essential Considerations for Employees and Directors