Cross-border workers and tax reporting obligations

For those individuals, it is important to be aware of the tax reporting requirements for both the individuals and their employers.  

As a general rule of thumb, you must pay your tax wherever you earn your income. For those with an Irish employer, Irish tax will be deducted directly from their salary through payroll withholding.

However, the ultimate responsibility is to pay tax to the country where you reside. Generally, if you are physically present at midnight in Northern Ireland for 183 days or more in a tax year, then you will be UK resident for tax purposes.  Effectively this means there is an obligation to report your cross-border income to HMRC via an annual UK tax return.

As you are paying tax in both jurisdictions and are effectively being ‘double taxed’, relief will be given to you via the double taxation agreement between the UK and Ireland. This means Irish tax paid on your salary can be claimed as a foreign tax credit on the foreign pages of your UK tax return. If the Irish tax liability is higher than the UK tax liability then no further tax is payable, but HMRC will not issue a repayment of the difference. If the reverse is true (i.e. the UK tax liability is higher than the Irish tax paid), then the difference will be payable to HMRC.

When it comes to social security (referred to as National Insurance (NIC) in the UK and Pay Related Social Insurance (PRSI) in Ireland), the rules are slightly different. The general rule for social security is that you pay it in the country where you work. However, unlike tax, social security should only be paid in a single jurisdiction (even if you work in two or more jurisdictions). If you work entirely in Ireland then this is where you should pay social security contributions. It is important to be aware that social security contributions build up entitlement to certain state benefits, including the State Pension. 

It would be worthwhile seeking further specialist advice if you wanted to make voluntary contributions of NIC to ensure you still obtain your full UK long-term State benefits.  If you work partly in Ireland and partly in the UK, specific rules must be considered to determine the jurisdiction in which social security contributions should be made.

Working across the border from where the employer is located can also mean additional payroll registrations are required for the employer. For example, working for an Irish employer but working from home in Northern Ireland could mean the Irish employer needs to register with HMRC as a UK-employer, and start to operate a UK payroll.

For many individuals, their working pattern now is different to what it was pre-Covid, and therefore if they haven’t already done so, it is important that the individual, and their employer, review the position and ensure tax compliance in both jurisdictions.