When does mobile working in the UK constitute a permanent establishment?

HMRC has published a user-friendly guide to assessing the tax consequences of mobile working in the UK

By:
Mechthild Pietrek,
Christina Busch
05 Jul 20231 min read
The subject of mobile working is becoming ever more relevant. The UK tax authorities (HMRC) have published a guide to the consequences of this for tax. The question is: when does a permanent establishment come about?
Contents

The most important point in brief:

  • The UK tax authorities have presented a practical guide
  • It concerns the assessment whether mobile working in the UK establishes a permanent establishment

 

Guide with clear examples

On 20 June 2023, HMRC published an update of their guide on permanent establishments. It includes examples of the tax treatment of various situations of temporary mobile working in the United Kingdom and focuses on the question of when a fixed place of business exists and the time element of duration that is to be taken into account.

No permanent establishment if mobile working is short-term

The conclusion: short-term mobile working in the UK does not lead to the founding of a permanent establishment in principle. Regular repeated work and coordinated work on projects may be exceptions to this.

The examples in the HMRC guide and the assessment of them reflect overall the various kinds of cases that are also being discussed in other countries. 

Mobile working from home

In comparison, working from home in Germany often does not constitute a permanent establishment since Germany tends to base the assessment of whether a permanent establishment exists or not on more formal criteria, such as the question of powers of disposition.  

The question will thus remain relevant in UK-German relations since there is no conclusively agreed definition or interpretation of the term ‘permanent establishment’ in the context of mobile working. 

TAGS
Authors
  • Mechthild Pietrek
    Mechthild Pietrek Mechthild Pietrek is Senior Manager in the Tax Advisory department in Dusseldorf. She has been advising national and international medium-sized clients in tax matters for more than 18 years and spent 2 years in Dublin to gain additional experience in this field. View Profile
  • Christina Busch
    Christina Busch Christina Busch is a Tax Advisor and a Partner in the Tax department. She has more than 17 years of experience in advising clients with national and international operations on tax. Christina Busch is head of the International Tax Law Service at Grant Thornton AG. She is also a member of the US Desk of our company. View Profile