With the search for fresh tax talent becoming increasingly difficult in the UK, many clients are looking for innovative ways in which they can meet skills shortages. Could overseas-based remote workers be part of the solution?

At Harris Glubb, we have seen a noticeable increase in enquiries from tax specialists overseas who possess the necessary tax skills and are looking to work remotely for UK-based businesses. But are businesses adapting to remote working, meeting the challenges that come with it and are they in a position to welcome overseas-based employees?

Remote working – sink or swim

Much has been written about the risks of remote working within the tax industry despite the significant changes that have taken place in workplaces as a result of coronavirus. Whilst risks undoubtedly exist, none of them are insurmountable if the will to successfully adapt is there.

For those resisting change, staff issues might occur further down the line – with employees now less likely to work for a business that is not open to remote working.

With the right planning and processes in place, offering remote working opportunities gives employees greater satisfaction when it comes to achieving a work-life balance and provides employers with access to a wider pool of talent. This is especially important now that free movement no longer applies between the UK and the rest of the EU – making relocation more costly.

Consider labour laws

We have seen a recent example where a candidate has been hired with the intention of moving to the UK, but joined during 2020 and was therefore forced to work remotely from an EU country.

In this instance, the employer later embraced remote working for the entire workforce, which then made it possible to implement a tax reporting structure in the EU country – supporting the individual in remaining there as part of a virtual team. And once the need for immigration sponsorship came into effect for EU nationals working in the UK from 2021, the cost of running a remote payroll became no more expensive than the immigration sponsorship.  In this case, Permanent Establishment (PE) is easily avoided because the employee sits within an internal function and is therefore not generating revenue.

For employees in client-facing tax or legal roles, the most common objective is to sell billable hours. In this instance, a PE may be more likely but still depends on whether or not the employee has created the full ‘end product’ or just a part of it, and whether or not it is being delivered to a client in the same country or elsewhere. For example, an employee with French language skills living in France may be more likely to work on matters for French clients. For Partners, this scenario can come with even greater complexities.

Options such as a Professional Employing Organisation exist to make it easier to hire candidates in a foreign country without the need for a physical office space – but this approach does have costs associated with it that are not necessarily required, but may be considered worthwhile investments if the PE risk becomes too great. Smart use of non-resident payroll can achieve much of the same benefit for a lower cost, especially for existing employees.

It’s important to balance labour laws. For existing UK-based employees, it may be easier to work remotely – with the main link to the business being from a home office.  Whereas if someone is hired to live and work in another country from the outset of their employment, then arguing that the country’s labour laws are not relevant does come with greater difficulty.

Adapt, or risk losing tax talent

As the balance of power shifts back and forth between employers and employees in different ways, businesses refusing employees the right to choose their hours and their location run the risk of losing talent to those that do.

It’s easy to implement a policy that restricts overseas remote work to the UK, but it may be difficult to enforce such a policy. By having an arrangement that supports it and is clear on which costs are borne by who, employers will find fewer unauthorised trips coming back to create liabilities later on.

Employers using flexible benefits schemes might find that covering extra compliance costs does in fact help to share costs and make it clearer to those that don’t take up the option, that it’s a risk they’re running. And when hiring from scratch, the local cost differences can be priced into corresponding budgets.

A shortsighted view to eliminate ‘London weighting’ for remote workers should be costed against the businesses travel policy for reimbursing trips to a London office – which can rapidly eat up the difference.

Employees trading Underground season tickets for occasional intercity trips is something which employers have historically avoided involving themselves in. And if those intercity rail trips become short haul plane trips, then that in itself is even more important to avoid. It may therefore be simpler to leave pay scales unchanged for existing employees and instead focus on evolving a policy for future hires that is fair for all parties, and shares any potential savings equitably.

Is there a clear overseas tax worker solution?

Anyone who claims to know what the endgame is, is most probably speculating. What is clear though is that when it comes to tax recruitment, whether it’s domestically or internationally, having a well thought through approach will maximise your choice of candidates and as a result, provide better results for your business than those of your competitors.

From a candidate’s perspective, having a clear understanding of how a tax job can be performed remotely, as well as the costs of travel, and an assurance that they have the right to live and work in their current country of residence when the employer is based abroad, will make the process smoother.

As a recruitment business specialising in tax advisers and lawyers, we hope that this will become part of the solution to the skills shortage within tax and technology.

Peter Ferrigno is an ICAEW and CIOT qualified tax adviser and member of the Board of the ICAEW’s Tax Faculty.  He specialises in cross-border employment matters. He has worked in the Big 4, law firms, as well as in the relocation and immigration industry. We thank him for his contribution to this article.