The rise of cross-border remote working isn’t just a workplace trend, it’s a tax time bomb. As clients increasingly work internationally or manage teams spread across jurisdictions, advisers need to understand the key employment tax, corporation tax, and permanent establishment (PE) risks that can arise.
- Employment Taxes: Withholding Risks Without Borders
When an employee works outside their home country, employment tax obligations can quickly proliferate:
- Payroll withholding: Presence in another jurisdiction, or presence in the UK of non-resident employees, may create obligations to register, withhold and remit PAYE/social security in the jurisdiction where the employee physically spends time.
- Double reporting: Employers might need to operate multiple payrolls or split reporting across jurisdictions.
- Totalisation agreements: Social security liabilities may be mitigated where bilateral treaties apply, but advisers must confirm coverage and certificates.
Action point: Clear policies on work locations and robust tracking of employee travel are now essential compliance tools.
- Statutory Tests & STBV (Short Term Business Visitors) requirements
Legislation like the UK’s STBV regime can mean that a UK payroll obligation arises in respect of a visitor to the UK from day 1 of their physical presence here:
- Day counts matter: Days worked in another country may trigger tax residence or withholding obligations.
- Nature of duties: Senior or decision-making roles can heighten risk, not just time spent abroad.
- Appendix 4 agreement: by proactively putting in place an Appendix 4 agreement with HMRC, UK PAYE exposures can be reduced or eliminated, and compliance burdens reduced
All clients with visitors to the UK should track and record their movements with an STBV lens.
- Non-Resident Directors: Taxable Presence by Meeting?
Remote attendance at board meetings across borders can inadvertently create tax exposure:
- Director presence = business presence? Some jurisdictions interpret attendance as proof of management and control.
- Withholding triggers: Fees paid to non-resident directors may attract withholding tax where the services are “performed”.
- PAYE obligations: UK legislation requires that even if a non-resident director spends little or no time in the UK, they must still be paid a fee via UK payroll, with PAYE / NIC obligations arising
Regularly review governance arrangements and meeting locations to avoid surprises, and ensure payments made via PAYE.
- Permanent Establishment: HMRC’s Updated Guidance
Perhaps the biggest shift in 2025/26 is HMRC’s revised stance on PEs in the era of remote working.
Traditionally, a PE requires a fixed place of business or dependent agent. However, extended remote presence can now be relevant if:
- A remote worker habitually concludes contracts, OR plays a key role in negotiating those contracts in another jurisdiction, even if contracts are formally concluded at head office.
- Key business decisions are made from that location.
- The activity exceeds preparatory or auxiliary functions.
HMRC’s updated guidance explicitly acknowledges that habitual remote working may give rise to a PE where the worker’s activities are core to the business. This aligns with international OECD thinking post-BEPS.
Implication: A company with no physical office abroad could nonetheless have a taxable presence because its people effectively are the “office”.
- Practical Steps for Advisers
To help clients stay ahead, encourage them to:
- Map where people work – and for how long.
- Track and document all international travel – including the purpose of visits overseas
- Document roles and responsibilities – tie duties to risk profiles.
- Review contracts and policies – especially director and senior executive travel.
- Assess local rules – zeroing in on employment tax and PE criteria in key jurisdictions.
Final Thoughts
Remote work isn’t going away, but neither are the international tax obligations it triggers. For accountants and lawyers advising internationally mobile clients, the blend of employment taxes, STBV tests, non-resident director exposure and updated PE guidance from HMRC demands proactive compliance planning.
The risks of clients getting this wrong include lengthy and expensive foreign tax audits, and challenges arising on tax due diligence in an exit scenario, which can lead to delays in a deal or price chip for your clients.
This is a complex area, where tax law & employment law meet, and getting the right advice early is key.