1. Taxation Implications for Cross Border Employers Rose Tierney

2. 1.Tax Implications for Employers employing Cross Border Workers or having staff working on either side of the border. 2. Redundancy, Pensions and Social Insurance in a cross border context.

3. 1. Employees - Working Across the Border (a)ROI Resident Employee Taking up Employment in NI UK Tax year runs from 6 April to 5 April. Personal Allowance 2015/16 £10,600 & 2016/17 £11,000 Rates on income – 20% first £31,785 2015/16 £32,000 2016/17 - lower rate – 40% £31,786 2015/16 £32,001 2016/17 up to £150,000 - higher rate – 45% over £150,000 - additional rate Rates on gross dividends – 10% in lower tax band in 2015/16. 7.5% in 2016/17. – 32.5% (on gross dividend) in higher tax band for 2015/16 & 2016/17 with 10% tax credit in 2015/16. – 37.5% in additional rate band in 2015/16 with 10% tax credit for 2015/16. 38.1% for 2016/17. – In 2016/17 the first £5,000 of dividends received by individual taxpayers will be taxed at 0% which ever tax band the dividends fall into.

4. 1. Employees - Working Across the Border (a)ROI Resident Employee Taking up Employment in NI NIC Rates Class 1Employees 12% - £155 - £815 per week 2% - over £815 per week Employers 13.8% - over £156 per week Employed person is generally subject to the legislation of the State in which he pursues his activity Employed person who is temporarily posted to work in NI for the same employer can continue to be subject to the social insurance legislation of the ROI provided the posting does not exceed 24 months and he is not sent to replace another person

5. 1. Employees - Working Across the Border (a) ROI Resident Employee Taking up Employment in NI Requirement to File a Tax Return – “Foreign” Income must be returned. The taxes deducted in the UK are available as a double tax credit against the ROI tax and USC on the same income. Cross Border Workers Relief (Transborder Relief) – ROI residents who commute to work in the UK. – Employment must be held for 13 weeks continuously – Tax must be paid in UK on employment income. – For every week the individual works abroad, he/she must be present in the ROI for at least one day in that week. – The relief can be claimed instead of the double taxation credit whichever is more favourable for the employee. – Separate assessment of spouses may be preferable.

6. 1. Employees - Working Across the Border (a)ROI Resident Employee Taking up Employment in NI Double Tax Treaty Relief for Certain Government Workers The ROI UK tax treaty Article 18 deals gives relief for certain government salaries and pensions The relief is that the income is only taxed in the state of employment and not in their home state. Eg ROI resident would not be taxed in the ROI on the employment income from government service in the UK. What is government service? Not all State funded employments are included. In order to qualify for relief the employee must be rendering services to the government or a local authority and must be discharging services of a governmental nature or employed in an educational institution. No relief – nurses, IDA etc Relief – Council workers

7. 1.Employees - Working Across the Border (b) NI Resident Employee Taking up Employment in ROI Tax year -1 January to 31 December. A tax credit system applies. Income is taxed at rates and bands then credits deducted. Joint assessment and married credit only applies to non residents where the entire income of the spouse is taxable in ROI. However aggregation can be used (TB 67) where the couple would be better off. This will however reduce the credit available against UK tax on the same income.

8. 1.Employees - Working Across the Border (b) NI Resident Employee Taking up Employment in ROI Tax Rates on income – 20% first €33,800 (Single) up to €67,600 (Married) - lower rate – Balance at 40% - marginal rate Personal Tax Credit 2016 €1,650 (Single) €3,300 (Married) Employee Tax Credit 2016 €1,650

9. 1.Employees - Working Across the Border (b) NI Resident Employee Taking up Employment in ROI Universal Social Charge ("USC") – 1% on the first €12,012 – 3% on next €6,656 – 5.5% on next €51,376 – 8% on the balance Capped at 3% for those aged 70 or over or those under 70 but holding a full ROI medical card with aggregate incomes of €60,000 or less

10. 1.Employees - Working Across the Border (b) NI Resident Employee Taking up Employment in ROI PRSI Rates Class A – Employees 4% on all earnings PRSI credit for those earning between €352 and €424 a week – max €12 a week Employers 10.75% - on total earnings where they exceed €376 per week 8.5% - on total earnings where they do not exceed €376 per week

11. 1.Employees - Working Across the Border (b) NI Resident Employee Taking up Employment in ROI NI/UK residents required to submit an annual Self Assessment return (Form SA100) to HMRC. Tax and USC deducted in ROI are available as a double tax credit against the UK tax on the same income. No equivalent in the UK of Cross Border Workers Relief. Top up must be paid to HMRC. Double Tax Treaty Relief for Certain Government Workers Traps include terminations payments & other reliefs claimed in ROI Common mistakes – inserting tax paid in ROI as tax deducted on employment in UK – producing a refund from HMRC !!

12. 2. Employers Employing Cross Border Workers (a) ROI Employer Taking on NI Employee to work in ROI Employee needs PPS number - Proof of Identity and address will be needed. Employee must apply for tax credit certificate using Form 12A. Employer will receive notice of tax credit - P2C - in the ROS Inbox. Until tax credits certificate is received emergency basis of taxation applies. (b) NI employer taking on ROI Employee to work in NI Employee needs an NI number - arrange an evidence of identity interview. Proof of identity and address and the reason for the application will be required by the interviewer. Form P46 will need to be filed online to apply for the correct tax code for the employee.

13. 3. The Tax Implications of Having Staff Working on Either Side of the Border (a) NI Employer taking on employees to carry out duties in ROI Requirement to register as an ROI employer if employees duties exceed 183 days in calendar year to 31 December. Register online on ROS or on paper Forms Prem Reg or TR1/TR2. The 60 day and 183 day Rules Not required to register if employee spends less than 60 days on duties in ROI in a calendar year Where days spent >60 <183 not required to register provided conditions satisfied

14. 3. The Tax Implications of Having Staff Working on Either Side of the Border (b) ROI Employer taking on employees to carry out duties in NI (or rest of UK) 183 day rule - requirement to register as a UK employer if the employee performs duties of employment in NI /UK exceeding 183 days in a tax year (ended 5 April). If from the outset it is known that the employee will exceed 183 days on duties then employer registration must commence from the outset. Register as an employer online at www.hmrc.gov.uk. UK operating PAYE Real Time Information (RTI) system. Employers are required to provide online reports which will include details of the employees, the payments made to them and the deductions. This information has to be provided on or before each payday. Penalties can apply.

15. Other Issues UK Workplace Pension Automatic enrolment’ Every employer must automatically enrol workers into a workplace pension scheme if they: – are aged between 22 and State Pension age – earn more than £10,000 a year – work in the UK

16. Workplace Pension The law says a minimum percentage of your ‘qualifying earnings’ must be paid into your workplace pension scheme. ‘Qualifying earnings’ are either: the amount you earn before tax between £5,824 and £42,385 a year your entire salary or wages before tax

17. Workplace Pension Your employer chooses how to work out your qualifying earnings. You payYour employer paysGovt pays 0.8% 1% 0.2% rising to 4% rising to 3% rising to 1% of your ‘qualifying earnings’ by 2018

18. Pensions Cross Border – Ensure payment made to scheme in country where income is – Relief available in UK in some cases under Migrant Member, Transitional Corresponding or DTA – These reliefs are very restrictive and generally only apply where you transfer cross border with the same or an associated employer.

19. Termination Payment ROI – Tax free ex gratia limited to lower of SCSB or €200,000 – lifetime limit – Relief for foreign service – Payments for injury, disability or death not subject to 200k cap UK – First £30,000 is exempt – Statutory redundancy is included in £30,000 – Relief for foreign service in some cases

20. Termination Payment A period of service counts as “foreign service” where the earnings from the employment are not “relevant earnings”. Relevant earnings include foreign earnings taxed in UK on a UK resident. Some or all of the period of service in the ROI will not count as foreign service – termination payment taxable in the UK. Residency planning well in advance of the termination could help

21. Cross Border Social Insurance Activities in One Member State Employed person subject to the legislation of the State in which he pursues his activity eg John is Resident in ROI working in NI subject to UK NIC on employment earnings. Temporary Transfer Employed person who is temporarily posted to work in another Member State for the same employer can continue to be subject to the legislation of the first State provided the posting does not exceed 24 months and he is not sent to replace another person eg John employed in ROI is posted to work in the UK for 18 months – continues to pay ROI PRSI

22. Cross Border Social Insurance Activities in More than One Member State Employed person is : – subject to the legislation of the State of residence if some of his employment activity is in that State or if he pursues activities for a number of different employers in different Member States – Eg Joe lives in NI works as a salesman for an employer in ROI but covers the Border Counties of NI as well as Leinster in ROI – subject to NIC on earnings. Activities in More than One Member State Employed Person is : Subject to the legislation of the State in which the registered office of the employer is situate if he doesn’t pursue any of the employment activity in his State of residence Eg Joe gets a new role with the company and his job takes him to Germany, Poland and Holland – subject to PRSI in ROI where registered office of his employer is situated

23. Cross Border Social Insurance Both Employed and Self Employed in Different Member States Subject to the legislation of the State of employment If employed in more than one State – subject to the legislation of the State of residence if some of his employment activity is in that State or if he pursues activities for a number of different employers in different Member States or – Subject to the legislation of the State in which the registered office of the employer is situate if he doesn’t pursue any of the employment activity in his State of residence Eg. Sean is self employed computer consultant and is based in ROI but also has parttime employment with a company in ROI and another in UK He must pay PRSI on his earnings

24. EU and Bilateral agreements allow the Social Contributions made in EU and other bilateral countries to be taken into account when assessing eligibility to Social Welfare and State Pension.

25. Useful Contact on Pension Entitlements Brendan Casey- PRSI Consultant – Email: brendan.was.casey@gmail.com

26. Questions? Contact Details: Rose Tierney Tel: 047 57843 Email: rose@tierneytax.ie