Summary of the International Forum discussions

As many of you would have read in our recent article, BUFDG held the inaugural International Forums in November, in various locations across the country. For those of you who were unable to attend, PwC hosted the forum and provided a scene setting, broad overview on the income tax, social security, corporate tax and immigration considerations for employees working overseas. Attendees were encouraged to participate and share their experiences (good and bad), best practices and the issues they are facing.

Whilst this summary can’t cover all the talking points raised, we hope it will give you a flavour of the topics covered and HEI issues discussed.

Your involvement

Over the coming months we will be looking to expand our international pages with content suggested from the forums and discussion pages. We would love to hear from you with your best practices, war stories, success stories, issues, helpful contacts, board papers, policies, advice on engaging senior management and any other useful information.  This will help us to create content which will be of value to all our members.

Income tax

Most members were happy with the principle that if you send someone to work overseas, there may be overseas income tax considerations as well as UK income tax compliance requirements, e.g. gaining an NT code. Overseas income tax obligations are dependent on the individual circumstances, including length of arrangement, host country location and the terms of the Double Taxation Treaty (DTT). Some DTT’s have a teaching exemption, but the use is very restrictive and care has to be taken, for example, some DTTs might allow teaching but not research.

The largest and most prevalent issue raised at every one of the forums was the lack of senior and/or academic engagement with the appropriate HR/finance/payroll teams.  Some HEIs shared that they often weren’t aware of international movement of staff until the individual came back to the UK.  Communication between the various streams of support staff is necessary as each department will have a part to play, but awareness at the executive and academics level is a pressing issue as they hold the knowledge. 

There were some success stories but the process of gaining senior support to highlight the importance of international tax matters appears to be a long one.  Without this support, finding the information from other sources is required and HEI’s shared how they went about this, including monitoring travel expenses and reviewing grant details to see whether overseas work is required.  However, it was acknowledged that this approach is both time consuming and reactive; getting buy-in from the very outset would be the best solution.

Social Security

In very basic terms, you pay social security where you work. If individuals are sent overseas, employers must check whether they should remain in their home country or apply for social security in their host country.  There are specific procedures to be followed depending on where the individual will be working.  The difficulty for HEIs, as with the tax situation above, is finding out about the arrangements. Broadly, two scenarios were discussed at the forums as being of particular issue to HEIs:

Lack of knowledge

The HEI had, in some cases, only discovering that an employee was working overseas when:

1. the HEI received a bill for benefits from that country’s authorities, or
2. an individual contacted their HR team as they couldn’t access healthcare in that country. 

Working from an overseas home

Many HEIs were concerned that academics did not inform the relevant central departments before allowing staff to work from an overseas home, for example, during the summer break.  Under social security rules, the individual only has to spend more than 25% of their time in their home country for a social security charge to arise.  Once the charge arises, there must be a decision as to who meets that cost and the HEIs were divided between charging back to the department and meeting the cost centrally.

Whilst PwC shared their practical advice; asking employees to sign a mandate agreeing not to spend more than 25% of their time in their home country, it still relies on knowing the arrangements exist in the first place and also relying on your staff to monitor/audit their time.

The consequences of these scenarios is an increased footprint in the individuals’ home country for all taxes and potentially sparking expensive social security contributions for the HEI (e.g. France charges 45%).  From the individual’s perspective, they risk not having access to key rights within their home country.

CERN

Not a topic presented by PwC but many HEIs discussed the issues they encountered when sending employees to CERN and the uncertainty of the tax position (whether or not they were exempt from taxes).  It is understood that HEIs may work collectively on this matter to seek clarification from PwC.  If any HEI wants to learn more about or be involved in this collective advice, or has experience of working with CERN that they can share, or any concerns over how tax arrangements for CERN operate, please contact Julia.

Corporate Tax issues

PwC identified how a Permanent Establishment (PE) can be created overseas, often unwittingly and unknowingly. Whilst there are different rules for each country, it is important to consider what individuals are doing in a country as  there is a risk that they could create a PE. If a PE is triggered, the HEI may have corporation tax implications and is likely to trigger PAYE charge on individuals working in that country.

There can also be a risk for HEIs who engage with student recruitment or other agencies where those agents only work for the HEI. That agency could create a PE for the HEI and trigger taxes in that country.

PwC advised HEI’s to consider the following questions when looking at potential PEs:

1. Is the individual acting as a dependent agent on the HEI’s behalf
2. Is the work being undertaken in an office or a fixed place of business (this will include homeworkers)
3. How long are the individuals spending time working in that country

Again, HEI’s agreed that the best solution for PE issues would be to find out about the arrangements early to mitigate those risks, however, in practice this was not always the case for ad hoc arrangements.

The forums discussed the difficulty with overseas authorities’ inability to understand charitable status in the UK. BUFDG have agreed to raise this issue with HMRC to see if there is any assistance they can provide.

Consultants

PwC drew attention to the care needed when using consultants overseas to ensure that they were genuinely self-employed or run the risk of creating all the tax implications set out above. Whilst overseas rules will all differ, PwC advised that using the UK rules for employment status was a good rule of thumb when assessing individuals overseas.    

Immigration

Before taxes and social security implications, if your employee will be working overseas, HEIs must ensure that they have the correct visas and work permits in place.  PWC shared a war story of an individual travelling to South Africa for a holiday but also booked to speak at a couple of lectures whilst there.  As the individual was travelling under a holiday visa, he was denied entry into the country as the border force discovered he would be carrying out work in South Africa. He received a 10-year travel ban which had to be disclosed on other visa applications during that period. 

Posted workers directive

The Posted Workers Directive essentially ensures that a worker posted overseas is protected by the minimum standards, which includes working time, health & safety and pregnancy & maternity protection. The rules are complex and PwC stated that a UK worker posted overseas could essentially have rights under UK and host country rules. Whilst the rules have been in place a number of years, it is understood that they will be rigorously applied in the future as stronger rules are coming in to force in July 2020.