Remote workers abroad: the permanent-establishment risk nobody flagged

It usually starts with a good problem. You've found the right person, or an existing employee wants to move, and remote work makes it easy to say yes. Nobody in the conversation is thinking about tax, you're thinking about talent.

But when someone works for your UK company from another country, you may have done something the business never intended: created a permanent establishment (PE) there. A PE is a taxable presence. If you have one, that country can tax the profit attributable to it, and you'll have registration, filing and sometimes payroll obligations you didn't budget for.

How one person creates a taxable presence

There are two common routes, and both catch UK businesses out.

• A fixed place of business. If the employee works from a location that's effectively at your disposal, a rented desk, a home office used as your base in that country, a small local site, that can be a PE in its own right.
• A dependent agent. This is the one people miss. If someone abroad habitually concludes contracts in your name, or plays the principal role in closing deals that you routinely rubber-stamp, they can create a PE even with no office at all. A salesperson is the classic example, but so is a senior hire with real commercial authority.

The test isn't the job title. It's what the person actually does, and how much authority they really have. A "remote engineer" who quietly negotiates renewals is a bigger risk than a "sales director" who only makes introductions.

What it costs to get wrong

A PE you didn't know about tends to surface at the worst time, during due diligence before a raise or a sale, or when the other country's authority comes asking. By then you're looking at back-taxes, penalties and interest, plus the cost of untangling it. And because the same profit can be taxed both here and there, relief under the double-tax treaty has to be claimed properly rather than assumed.

What to check before they start

You don't need to turn every hire into a project. You need to ask a few questions early:

1. Where will they physically work, and from what kind of space?
2. What authority will they have, can they commit the company to anything, or influence deals to the point of effectively closing them?
3. Is there a treaty between the UK and that country, and what does its PE article say? Treaties differ, and some are stricter than the OECD default.
4. What are the local rules on employing someone there, payroll, social security, employer registration? PE and employment obligations are separate questions, and you can trip either.
5. Is an Employer of Record the cleaner route for a single hire, or do you genuinely need your own presence?

The practical point

Most remote-hire PE problems are cheap to avoid and expensive to fix. The fix is almost always about structuring the role and the paperwork before day one, defining authority deliberately, choosing the right employment vehicle, and documenting the position so it holds up later.

If you're about to hire (or have already hired) someone overseas and you're not sure where you stand, that's exactly what the Overseas Expansion Diagnostic is built to surface, a clear read on where your people create risk, before it becomes a bill.