Tax laws

how Irish tax laws collide with the new reality


Eamon Lafferty’s journey to work from his home in Donegal to his office in Northern Ireland would normally take him across a barely noticeable border between an EU state and the UK.

Aside from a subtle change in road markings and signs displayed in miles to the north rather than kilometers to the south, there isn’t much to distinguish between the two jurisdictions.

But the likely re-imposition of quarter-century-old tax rules that were relaxed when governments ordered people to work from home because of Covid-19 threatens to erect a barrier for around 12,500 people living in Ireland but employed by companies based across the border – preventing them from working flexibly.

Under tax rules, dating from 1997, workers living in the Republic but traveling across the border to work were exempt from Irish tax in addition to UK income tax.

While that sounds great on paper, it does mean the job – even emails and phone calls – can’t be done in the Republic. During Covid-19, the rules were relaxed, allowing people to work from home until the end of 2021 without being taxed twice.

But now, after more than a year of working remotely during the pandemic, many cross-border employees do not want to give up the flexible working arrangements that their colleagues in the UK will always be able to enjoy – especially as civil servants in the north and south of the border want hybrid work to continue as Covid-19 infections increase across the island.

The rules, which are expected to be reinstated early next year, have nothing to do with Brexit. But they risk reducing the talent pool available to high-tech companies in one of Northern Ireland’s poorest corners, just as post-Brexit immigration rules have made it harder to attract workers. Europeans.

‘Big difference’

“It’s ironic, Ireland funds remote work centers in Donegal if you work at an Irish company,” said Mr Lafferty, head of engineering at the facilities at US firm Seagate Technology. across the border in Derry. “But for businesses in Northern Ireland, remote working is [going to be] possible for UK [resident] workers only.

“Everyone now expects remote working to be something that will stay,” said Aidan O’Kane, IT director of Allstate Northern Ireland, an American insurance company based in Derry, and co-chair of the Cross Border Workers’ Coalition. An estimated 25,000 people work on one side of the border but live on the other and the coalition represents those who live in Ireland and who may fall under the legislation.

“It has made such a big difference in our family life,” said Catherine, who is quitting her job as a recruiter at a large international company in Derry in large part because of the issue.

Teleworking made it possible to have dinner with the family, a logistical impossibility when she had to commute because her two children ate with the nanny before she came home.

Inability to work from home beyond the end of this year, unless tax rules are changed, was an “important factor” in her decision to leave when offered a remote position based in Donegal, said Catherine, who declined to use her real name.

Unless the rules change, take even a brief call from home work, catch up on office chores from the dining room table on weekends or when the kids are in bed, or send an e- work mail in pajamas, could be counted as a working day in Ireland, where personal income tax on higher wages is higher than in the UK.

Considering the seismic shift in working patterns due to the pandemic, “it’s almost a career delay,” Mr. O’Kane said.

The tax obligations of cross-border workers – already complicated enough, with the obligation to file an income tax return in the Republic as well and different rules governing stock options and capital gains tax – could reach thousands of pounds unless the rules are changed, Mr Lafferty said.

Cross-border workers will also bear the brunt of any new carbon tax on fuel by being forced to travel, he added.

To further complicate matters, the obligation for foreign employers to deduct payroll taxes from staff performing duties in Ireland was relaxed during Covid-19 – but only until the end of 2020, even though cross-border workers were allowed to continue working remotely until the end of this year. It could amount to “hundreds of thousands of pounds” for businesses, without any money-back guarantee from the UK tax authorities, Mr O’Kane said.

“No flexibility”

Despite a series of positive meetings with Finance Minister Paschal Donohoe, “there has been no flexibility on the part of the Irish government,” he added.

A spokesperson for the department said Mr Donohoe had listened to official advice and decided that there would be no extension of the waiver and that it would flow as planned, like other Covid supporters. 19. “No change is envisaged,” the spokesperson said.

But for Mr O’Kane, Covid-19 has highlighted a regulation he considers unsuitable. He has seen employees quit because they had to come to the office at 3 a.m. for an issue they couldn’t resolve over the phone or by calling a coworker to resolve it. “It’s crazy and not the way a modern business can operate,” he said.

If the law is not overhauled, “businesses north of the border will decide who they hire based on their address,” O’Kane said.

Indeed, the uncertainty worries the workers. Catherine said around 20 people in her office were at risk of being affected and “many are thinking about their situation”.

Businesses are also affected. “I have businesses that come to us all the time because they want clarification,” said Paul Clancy, managing director of the Londonderry Chamber of Commerce. “We have a limited talent pool. We are totally dependent on Donegal as a hinterland, ”he said.

Likewise, workers in Donegal regularly seek prospects across the border. “There are very few jobs in this part of Donegal,” Mr Lafferty said. “There’s nothing in high tech, for my experience – it’s only in Derry. “

Mr. Lafferty believes that there should “be at least another year of exemption to give a little breathing space to understand things”.

Business leaders in the region have seen job advertisements saying “Northern Ireland residents only”, which they believe is discriminatory.

“If you have an equal person with similar qualifications, by default the Donegal person may not be chosen because companies don’t know what the tax liability would be,” Mr. Clancy said. “We need [the Irish Government] grab the nettle now.

– Copyright The Financial Times Limited 2021

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