Looming End to Relaxed Tax Laws in Northern Ireland May End Remote Work for Cross-Border Staff

People living in Ireland but employed across the border will need to pay both UK and Irish income taxes if pandemic-era remote works rules sunset.

Regulations that are due to be imposed in 2022 could end remote work for workers who live in the Republic of Ireland and are employed by companies in Northern Ireland. The border between the EU state and the UK is barely perceptible, except for a change in road markings that display miles in the north rather than kilometers in the south, but thousands of workers will be affected when quarter-century-old tax rules are reimposed next year. 

At the beginning of the pandemic, the rules were relaxed as people were ordered to work from home. For 12,500 workers living in Ireland but employed by companies across the border, the return of the tax rules will prevent them from continuing to work hybrid or fully remote work schedules.

The tax rule was established in 1997, and it exempts workers living in the Republic of Ireland but who travel to Northern Ireland for work from paying Irish taxes on top of UK income tax. During the height of Covid-19 stay-at-home orders, the tax rules were eased, which allowed people to work from home until the end of 2021 without being taxed twice. 

Officials in both the Republic of Ireland and Northern Ireland want hybrid working to continue as Covid-19 infections rise across the island and the delta and omicron variants temper optimism about a return to normalcy. Cross-border workers are also reluctant to give up the flexible work arrangements that co-workers in the UK's Northern Ireland will continue to enjoy.

The re-established rules risk reducing the talent pool available to tech companies. This threatens to hurt one of the poorest corners of Northern Ireland, just as post-Brexit immigration rules have made it harder to attract European workers.

For companies in Northern Ireland, remote working will soon become impossible for workers who have come to rely on the arrangement. Unless the rules change, doing even small work tasks at home— such as work-related calls or professional emails — could be counted as work in Ireland, where personal income tax on salaries is higher than in the UK. 

Before the pandemic, cross-border workers were required to file a tax return in the UK and Ireland, and different rules controlled stock options and capital gains tax. Now, tax liabilities could cost cross-border workers thousands of pounds without a rule change. New carbon taxes on fuel will also increase costs for workers forced to travel for work. 

The rule changes can also affect companies. At the pandemic's start, a requirement that foreign employers deduct payroll taxes from staff working in Ireland was relaxed through the end of 2020. This would add up to hundreds of thousands of pounds for companies, and they are not guaranteed a rebate from UK tax authorities.

A coalition lobbying on behalf of cross-border workers has found that the Irish government is unwilling to reconsider the rules. The government recently announced that Paschal Donohoe, Ireland's finance minister, had listened to official advice and decided that there would be no extension to the waiver.

Both cross-border workers and their managers agree that the regulation no longer serves a purpose. Executives now see workers quit over the rules because workers prioritize flexibility in the work schedule. 

Businesses in Northern Ireland are also worried about their shrinking talent pool and the risk of increased tax liability. Already, job advertisements are being published stipulating "Northern Ireland residents only," which some say is discriminatory. 

Both workers and executives are pushing the government to consider a year's extension.