Navigating tax: a comparative insight between the UK and Ireland
Is your workforce going global in 2025?
As we begin the new year and settle into 2025, many employers and employees are considering what the months ahead will bring. For employers this might be how and where their businesses operate and for employees where they will work.
The UK / Republic of Ireland (RoI) relationship has and always will be vital for both economies. The [Irish] Central Statistics Office shows that RoI multinationals employed up to 100,000 individuals in the UK with UK revenue at almost EUR40 billion. Trade between the two counties is approaching GBP85 billion.
With time zones that match, no language barrier, as well as the Common Travel Area creating ease at working across the border, there is a natural synergy between the UK and RoI. With so much cross border activity, employers should consider their tax compliance in relation to their employees.
EEA Director Requirement
Under Irish company law an Irish registered company must have at least one European Economic Area (EEA) resident Director on the board on an ongoing basis or a bond in place to cover filing liabilities.
This requirement is based on residency, not nationality. A company director of Irish nationality who lives in the UK is unlikely to satisfy the EEA requirement.
Income tax and payroll withholding
Often employers look at the Common Travel Area and assume there are special rules mitigating withholding requirements. Whilst there are some niche rules, on the whole, if an employer sends an employee to work in either Ireland or the UK or if there is a long-term remote worker or commuter, there is a high likelihood if there being a payroll requirement to collect income tax and/or social security.
Transborder workers relief
Irish transborder commuter relief is aimed at supporting individuals who commute weekly to work wholly outside the RoI. Employees may be able to claim relief from Irish tax in respect of their foreign employment income and if that employment income is their only income, Irish tax and USC may be fully relieved. The relief is typically claimed by employees working in the UK (incl. Northern Ireland).
Business travellers working across the border
The UK / RoI Double Tax Treaty may mitigate there being income tax due for business travellers, but there is reporting required:
- RoI: If an employee is present in Ireland (over the tax year) for less than 60 days, there would be no payroll obligation, however, if present for more than 60 days but not more than 183 days, a PAYE registration would be required. A PAYE dispensation may be granted to subsequently ensure no Irish payroll tax arises.
- UK: Employers may enter into an Appendix 4 Short Term Business Visitor agreement with HMRC to mitigate there being a payroll obligation and instead report annually business travellers to the UK.
Social Security
If an employee is working in both states or working across the border they are subject to only one state’s social security legislation at a time. This can create a disconnect between where the individual lives and where they pay social security e.g. if working in NI but living in RoI, UK income tax and NI may be due and no Irish income tax, USC or PRSI.
Corporation Tax Considerations
If an employer sends an employee to work between the UK and Ireland, as well as considering the employee implications above, they would also have to consider whether this employee creates a Permanent Establishment (PE).
A PE is defined as “fixed place of business through which the business of an enterprise is wholly or partly carried on ”. If it is determined that a PE arises based on the duties of the employee, the foreign company may have corporation tax exposure.
What next?
As more employers allow remote work, commuting or are considering expanding their business across the border, they should appreciate their tax position will become more complex. Involving professional advisors from the get-go not only helps with ensuring your business remains compliant, but adds to the employee experience and finally, will help mitigate unforeseen costs in the future - whether tax, interest, penalties or professional fees.
How we can help
Our UK and Ireland experts understand the challenges that businesses and individuals face and can help guide you in navigating your international workforce.
Please get in touch with MHA’s UK Head of Global Mobility, James Smith, or Baker Tilly Ireland’s Head of Tax, Brendan Murphy, co-authors of this article.
Alternatively, you can contact your usual MHA adviser or your local MHA office with any queries.
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