Like many French people in the UK, Mélissa*, an employee of a communication agency, decided to work from France since the first confinement in March 2020. But when the question of returning was raised by her employer a year later, she was faced with a difficult choice: stay in Paris or return to England. “My manager asked me for a date to return to the office on each call, while my assignments are, by nature, very compatible with remote work”She explains.
The more the days passed, the more Melissa became uncertain. “Depends on the week, the management team told me I could extend my stay for several months, then the tone went back to urgent the following week”, she says. Indecision was pregnant in the arguments put forward by the French employer. “I was told vaguely about the tax system, 183 days or even the corporate culture. It got very blurry! 🇧🇷she ends up finishing.
183 days from golden number to smokescreen
Cloaked in artificial complexity, the tax argument is enough to deter unwanted questions. The determination of tax residency is often the first reason given to justify the requirement that employees return to British soil. For UK employers, registration of employees in the withholding system (Pay as you earn Where PAID OUT) is mandatory, unlike the French annual tax collection system.
Abroad for several months, should Mélissa pay her taxes in the UK or France? Jessica Fazzone, British tax attorney at Irwin Mitchell, sheds light on this thorny issue. “If an individual spends a minimum of 183 days during the tax year in the UK, they will automatically be considered a tax resident in the country”, she clarifies. To do this, UK residents must verify their status with the UK tax authorities (Her Majesty’s Revenue and Customs Where HMRC) by completing a legal residency test (Legal residency test🇧🇷 Thus, the tax authorities define the status of natural persons having as their first criterion the number of days spent on British soil.
However, 183 days are not the only data to determine UK tax residency. If an individual resides in the UK for less than six months, the “sufficient link test” looks at other criteria such as family ties, employment contract with a British employer or renting property. Not knowing the ins and outs of the British tax system, Mélissa chose to leave her post to stay in Paris.
Plural legislations and bilateral agreements
The issue of tax residency between the UK and France is regulated by the double taxation agreement signed in 2008 between France and the UK. 🇧🇷 In a Franco-British context, it will be necessary to study the conditions for determining tax residence in terms of the national legislation of each country.explains Cédric Rivière, tax lawyer and specialist in taxation of the French-British detachment.
In addition, the expert specifies that an individual can be a tax resident of two countries if they positively meet the tax criteria of each of them. It will then be necessary to refer to the stipulations of the bilateral agreement to define the place of tax residence, based on factual findings. As tax law expert Jessica Fazzone points out, in this specific context of “bi” tax residency, employers can contact the foreign authority where the employee is based to ensure that all tax obligations are met, both in the UK and abroad. in the host country. 🇧🇷
Brexit and social contributions
And social contributions? Although the Treaty on the Functioning of the European Union does not provide for harmonization in terms of tax collection, the European Commission presents rules for the coordination of social security between European countries. Cédric Rivière warns of the consequences of Brexit, which has not spared the tax law in this regard.
When they were part of the European Union, Britons established in France, as well as British residents with income of French origin, evaded social contributions in whole or in part in accordance with European Union coordination regulations. “With the launch of EU coordinating legislation, French residents with UK source income, as well as UK residents receiving French income, may be subject to additional social security contributions, and this can be quite unpleasant”points to Cédric Rivière.
*The interviewee did not want to communicate his surname.