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Mishcon Academy: Digital Sessions – Workplaces of the Future

Posted on 01 December 2020

Mishcon Academy: Digital Sessions are a series of online events, videos and podcasts looking at the biggest issues faced by businesses and individuals today.

This session was recorded on 23 November 2020. The information in the film was correct at the time of recording.

To review the key insights from the event, please view the film or read the write up below.

What are the key immigration changes and trends since March?
  • There has been a general shift towards flexibility from the Home Office. Like many public and private organisations, the Home Office has been forced to adopt systems that are more digital and are catered for agile working. Indeed, many caseworkers are now based from home and are processing applications there.
  • The Home Office have fast tracked their proposed use of technology to limit the need for human interaction, examples include the IDV app for reuse of biometric details, remote right to work checks and accepting scans in place or original documents.
  • The Home Office also showed flexibility in relation to many applicants' country of submission – this was something that practitioners had been raising with the Home Office for many years and has become an unseen benefit of the COVID-19 pandemic.
  • It has been clear that, for flexible working to work efficiently, the entire immigration ecosystem, involving advisers and the Home Office alike, must be able to handle the policies and rules in place. Some of the changes introduced by the Home Office will no doubt make life easier as an increased number of EU visa applications are expected shortly, following the end of the Free Movement rules at the end of the year.
How far will flexible working go? Will it extend to employees wanting to work even more remotely and overseas?
  • It is important to note that the UK's immigration environment remains a rigid one and it could be argued that if someone can work from home and abroad, their need for a visa might be questionable.
  • Other countries, particularly those in the Caribbean, have seen the COVID-19 pandemic as an economic opportunity to attract remote workers to their countries and are actively setting up visa categories to facilitate this.
  • At the same time, there is a clear possibility for individuals to be caught out where they have moved overseas but presently do not have the correct immigration permission to either work or study there.
  • It remains to be seen whether the UK's Immigration Rules, changing though they may be, will bend to adapt and accommodate these new working practices.
What have been the tax implications for employees who seem to be working in jurisdictions they would not normally be based in, including the UK?
  • Some clients have been caught in a country they are not normally based in and have been concerned that they may have inadvertently become tax resident there, or have an exposure to tax on their employment income for work they have been doing in that country.  In other cases clients embraced the opportunity to work remotely and have purposely based themselves in another jurisdiction (perhaps a holiday home) to work, and are now thinking about the tax implications of taking those steps.  
  • Many individuals are very careful about counting their days in the UK to avoid becoming tax resident.  They have now spent more days in the UK than they usually would due to cancelled flights, border closures and quarantines. HMRC have issued specific guidance on the application of the UK's statutory residence test in relation to COVID-19 and a possible discount of up to 60 days per tax year due to being in the UK for exceptional reasons.  This is of great relief to some clients, but not all.  HMRC have also been clear that it is not a blanket exception, and each case must be considered on its own merits.
  • Even those who do not become UK tax resident Individuals should also be mindful about being paid for work done in the UK, even where they are not or do not become tax resident in the UK. Double tax treaties may provide some relief in these scenarios but advice should be sought.
  • On the flipside, clients who are spending more time in countries outside of the UK need to be aware of local rules to ensure they do not become tax resident or that they do not incur a tax exposure, even if not technically tax resident there.  Again, local advice may be required and a careful analysis of any relevant double tax treaties.
What impact could this have on the companies they are involved with in the short and long term?
  • Employers and employees need to be aware of the operation of payroll and getting their tax obligations right – there has been an increase in individuals wanting to become non-resident.  Employees should seek advice as to their exposure to UK Tax as non-residents. Employers should ensure they have an open dialogue with employees and seek tax advice before amending payroll/tax deductions simply based on the word of an employee. 
  • Companies should also ensure that they take the correct steps so that they are not UK tax resident if that has been their aim historically.  There has been an increase in key company personnel being in the UK for a number of reasons directly related to COVID-19 and some are worried that this may bring their companies into the UK tax net. HMRC and the OECD have given guidance on this point to ensure that decisions made in this exceptional and temporary period of the pandemic do not have that effect. The key for these companies will be recording their steps diligently and being able to show that pre and post lockdown, key business and management decisions were being made outside of the UK. 
  • Companies should also be thinking about the future – what will employees be looking to do in the future and on a more permanent basis? If more long-term decisions are considered, companies should look to get advice sooner rather than later as reliefs that may have applied on a temporary basis due to exceptional circumstances could be lost if the place of management of the company changes in the longer term.
What should employers do to make sure their working from home arrangements are operating as they should be?
  • The key point for employers will be to distinguish temporary arrangements and those that might be carrying on in the longer term. Generally speaking, COVID-19 has forced employers to jump forward in terms of flexible working by about a decade.
  • Health and safety – employers should look to conduct a risk assessment for their employees at an appropriate time. As in-person assessments are not possible in the current environment, employers should consider sending surveys to their employees so that they can do all they can to ensure employees are working safely. Doing something and recording it is better than doing nothing at all in this respect.
  • IT and property – employees now have access to confidential information and even IP in their own homes. Employers should try to be diligent and retain control over these aspects as much as possible. For example, introducing provisions into employment contracts that allow employers to enter employees' dwellings might be considered appropriate in certain circumstances where highly sensitive material is likely to be held in an employee's home.
  • Monitoring –Employers should be open and transparent about their monitoring activities rather than trying to 'spy' on employees.  There are some limited cases where employees can monitor activities without employee awareness, but these tend to be confined to particularly serious issues relating to tax investigations or fraud.
  • Thinking ahead, employers should consider flexible working requests on an open basis – there is a formal statutory process for making requests and employers may want to encourage employees to use this process in order to ensure they keep a consistent approach to requests.
What has working online meant from a tech perspective?
  • There has been an enormous strain on existing IT systems with IT departments being the unsung heroes of the pandemic. For the first time, we have seen computing power available per dollar go down rather than up as demand for computing power and resource has skyrocketed. COVID-19 has brought to the forefront issues that have been on the radar for quite some time – being able to make agile communications and working decisions, being more data driven and optimising existing systems.
How might the tech we see continue to change the way we work?
  • The questions that we ask of our tech will and have become more mature. For example, the shift towards working from home will bring our focus and attention to maintaining standards of efficiency and our ability to reinforce core values. Objective justifications will need to fit within our regulatory frameworks (data protection, discrimination etc.) and the area of cyber security has never been of greater importance.
  • All changes that we have seen are here to stay and it is important to be able to anticipate and take steps to prepare for our increasingly digital future.
Is there anything that companies and employees should be keeping an eye out for in the future in respect of tax reporting?
  • Now is the time to take stock and think about the future – relevant jurisdictional planning will be key. Companies should be mindful of the employee/consultant distinction as individuals begin to work more flexibly and wish to be more independent in how they define their working roles.
Putting COVID-19 to one side, what are the key changes for employers and employees that both should be aware of?
  • The IR35 legislation, which was due to come into force in April 2020 was postponed until next year (i.e. April 2021). To summarise, this legislation will apply if you engage a consultant through a personal service company. The legislation will have an impact on the tax exposure and administration involved when individuals are hired in this way.  Companies who engage consultants in this way should start thinking about their current arrangements here to get ahead of the curve.
  • There is an increased move to the use of pay data to correct workplace imbalances.  We currently have gender pay reporting but in the future we expect there could be a move towards pay reporting to reflect differences in pay for those from different social backgrounds, ethnicities or those with disabilities. 

 

Steven Bostock

I just want to thank everyone for joining us today.  I’m Steven Bostock and I’ll be your host.  This is a Mishcon Academy Digital Session, a series of online events, videos and podcasts looking at the biggest issues faced by businesses and individuals today. 

The concept of working at a fixed desk within an office has been in decline for some time now.  Even before the pandemic Forbes reported more than 70% of people around the world used to work remotely at least once a week. 

Today I’ll be joined by my colleagues, Natalie Loader who’s an Associate in our Immigration Group; Neil Shanghavi, a Managing Associate in our Immigration Group; Charlie Sosna, a Partner in the Tax and Wealth Planning Group; Dominic Boon, a Managing Associate in Employment and Tom Grogan who is the Head of MDRx. 

Covid-19 has dramatically changed the workplace since March this year but what are the key changes the immigration group have observed since then?

Natalie Loader

What we’ve seen in the immigration group is a shift in Home Office procedure and the Home Office’s reliance on in-person appointments and the sight of original documentation.  During the first lockdown we saw a significant slow down or even a halt in some areas in the Home Office processing.  As with every other office-based business the Home Office had to adapt quickly to remote working and this included finding ways for caseworkers to access secure Home Office systems remotely from home and also to implement flexible new processes and policies for visa submissions and the good news is that many of these processes look as though they could be here to stay.  While the Home Office have for some time been working towards a more agile, more digital system in this way, the process was set to take years to implement across the globe.  However, as with many other organisations Covid-19 has forced the Home Office to accelerate the implementation of digital technologies which were already in the pipeline and also to create new policies to fit the sudden restrictions in movement and in-person human interaction. 

We’ve also seen the Home Office offer more flexibility in terms of the country of submission of an application.  So, previously it was not always possible for applicants to switch from one visa category to another in the UK but during the Covid-19 pandemic the Home Office adopted a flexible policy in relation to this and this allowed people to submit in the UK where ordinarily they wouldn’t be able to and this saves unnecessary and time-consuming international travel.  Some of these flexibilities are now permanent, we’re really happy to say and they’ve been written into law in the new immigration laws which are going to be in place from the 1 December 2020.  With the end of free movement from the EU, there’s likely to be an increased number of visa applications from the 1 January 2021 as EU nationals who wish to come to live and work in the UK will need a visa to do so.  So, in a very strange way, Covid-19 has helped us shape the immigration environment to cope with the increased number of visa applications which are forecasted due to Brexit. 

Steven Bostock

Neil, a question for you.  It appears the Home Office in some circumstances recognise the growing change of agile and flexible working.  Do you think that might extend to employees wanting to work even more remotely and possibly overseas?

Neil Shanghavi

From an immigration control perspective, I think the Home Office would argue that where somebody can effectively work from home 100% of the time, on what basis do they require a visa and moreover would it be just more pragmatic that they actually say stay in their home country and just work remotely from overseas?  Whilst the UK is clearly sort of dealing with that as a concept, there are other countries that are a little bit ahead of the curve here and so looking at a global position there are some countries, taking some Caribbean countries for example, they are actively looking to attract workers to move to their countries to remote work from there.  And they have introduced visa categories to facilitate this.  So, I think for some countries they’ve already identified this trend as an economic opportunity, a potential boon for them and perhaps unsurprisingly they’ve reacted to that and they’ve introduced these categories, as I said, designed specifically to promote agile working practices and remote working practices. 

Steven Bostock

Charlie, if I can pass over to you on the tax side.  Obviously, tax is a huge part of this possible future of more flexible and remote working and while it’s possible and I wonder what, what impact it’s had – remote working – on individuals you’ve been working with since March. 

Charlie Sosna

We’ve seen a lot of issues since March and the beginning of the tax year in April where individuals have been stuck in a country where they normally wouldn’t be based and they’re working and they are panicking about what their tax might be because they’re now working somewhere they wouldn’t normally be, their normal plans have gone out the window and they’re a bit worried about that.  And the other side of it is individuals who have just completely embraced it and taken advantage of the flexible working. 

What we’ve seen a lot on our side is individuals that would normally be very carefully counting their days in the UK to avoid becoming UK tax resident and they know that we have a statutory residence test that they need to tick the right boxes and a lot of our clients will be very carefully managing their day count in the UK to avoid triggering a tax resident status here.  And what we’ve found with them is a lot of them are spending a lot more time here because their flights got cancelled, they were told to quarantine here and the borders were shut.  And the situation for those individuals are that basically our statutory test allows for an individual in each year to discount up to 60 days that they spend in the UK for exceptional reasons and the Government and HMRC gave specific guidance in relation to Covid and how it would relate for these 60 exceptional days and effectively, if you are someone that’s found yourself stuck here and you couldn’t get out again because you were told to quarantine, the Government guidance was not to travel, the international borders were closed, or you were asked by your employer to come back here on a temporary basis because of the virus.  Now when we’ve been working with clients they fall into various categories.  We will have some clients that yes, they normally would have become tax resident but they fall squarely within the exceptional days because of the flights being cancelled, their home border closed and them not being able to leave.  And we have clients who have gone way over the 60 exceptional days and as a result are definitely going to be caught and you know everyone likes to play the game as much as they can and we’ve got clients who are saying, “Oh there was no commercial flights.  I couldn’t go home.”  I’m like, “Yeah but you’ve never taken a commercial flight in your life.  You’ve only flown a private jet.  Who are you kidding?”  HMRC are going to be looking at people carefully where they think they are taking advantage of these exceptional rules.  If you were let’s say normally paid by a UK employer and you’ve gone and based yourself abroad and they’ve continued to pay you but your spending as little as 90 days somewhere, then I would hope that the double tax treaty would basically say, “Well, you would just be taxed in the UK.”  You wouldn’t have a local exposure in France or wherever you’ve gone to.  But that is something you should certainly be looking into just to double check there’s not a problem. 

Steven Bostock

That’s really helpful, thank you very much.  And I think that segues quite nicely to Dom in employment. 

Dominic Boon

Before the Covid crisis there was a trend towards home working anyway and I just think that we’ve jumped forward 10 or 15, 20 years in one go and it was likely faster than both employers and employees were ready for.  And I think there has been some flexibility both sides.  I think employees have been okay paying for their own internet to be using for sort of company purposes because they’re saving on their commutes.  And I think employers are okay showing a little bit more flexibility about how employees spend their time in, in return for the extra sacrifices employees are making.   On the health and safety side, an employer is responsible for an employee’s welfare, health and safety, so far as is reasonably practicable.  So, you should really as an employer be conducting a risk assessment.  And I know at Mishcon when I joined I had the pleasure of a form and I think maybe even an inspection from someone checking my monitor height and my sort of arm rest on my chair but that’s obviously much harder to do if you’ve got a workforce at home, particularly in the current circumstances.  We now have a situation where if you’re working from home you have access to your, your employer’s software, its confidential information and up to a point, potentially some of its intellectual property.  It used to be the case that on termination of employment, if you left work you would be allowed to go to your desk, fill up a sort of cardboard box of belongings and sort of walk out of the door.  Whereas now you’re in a situation where you could fill in that cardboard box but you’d still be at home and so there’s almost a slight reverse situation and from an employer perspective you want to make sure that you have as much control as possible over that information and over those systems.  It is possible to check what your employees are doing on a day-to-day basis and that they’re using systems appropriately but despite, I find the sort of, there’s a misconception that an employer can spy.  That is not the case.  It’s always best I find as an employer to be open and transparent about your activities and if you are going to be monitoring or looking at things and conducting an appropriate assessment but also making sure that employees are aware of what’s going on. 

Steven Bostock

Lots of employees have demonstrated that they can work from home.  How do employers really think about starting with the return to the office when the time comes?

Dominic Boon

There are some employers who are particularly focused on getting employees back into the workplace as soon as possible.  And they were doing so just prior to the sort of current lockdown.  And I think an obstacle is going to be flexible working requests from members of the workforce seeking to maintain the status quo.  It used to be the case that you could tell employees that their jobs could not be done from home and now there is a large portion of the workforce that is able to demonstrate that they in fact can work from home.  And my advice to an employer in that situation is to genuinely consider flexible working requests on an open basis, trying not to pre-judge.  But also, try and make any application made on a formal basis.  There is a statutory process for making a flexible working request.  And the advantage of that is you have a formal system which you can then point to if you ever needed to justify an approach and also a flexible working request in that format can only be made once a year. 

Steven Bostock

The pandemic has seen us all move a lot more online.  What has this meant from a technology perspective?

Tom Grogan

What we have seen in the last, what is it now, 10 months in the pandemic, enormous strain on legacy systems I think is the big thing to mention.  I think the unsung heroes in this pandemic have probably been the IT guys and girls and they’ve been working extremely hard over the last 10 months just to keep us afloat and keep us swimming against unprecedented demand.  I know we use the word ‘unprecedented’ a lot at the moment but it really, really has been.  We’ve actually seen for a very brief period at the start of the pandemic, the cost of compute i.e.  computing power, the amount of computing power available per dollar go down for the first time in well, ever.  To give it some context, computing power available per dollar has probably increased by a factor of about 10 every four years for the last 25 years.  At one point at the start of the pandemic, that flatlined.  That’s never happened.  That wasn’t because nobody was inventing new technology it’s just that the demand went through the roof.  So yeah I think the IT heroes are, are you know, they’re well due a mention and a thanks for keeping us online.  When we hired our data science team five years ago, it was because we were quirky and when someone asked us why we had them a year ago it was because we were cool.  Now it’s just because actually any business worth its salt runs itself on a data-driven manner moving forwards and I know and can state definitively that we in Mishcon as a business will be more and more data-driven as we lawyer and hire professional services moving forward.  And I think organisations everywhere, public sector, private sector, are really seeing the benefit of data-driven decision making in everything that they do and that’s gonna be a future… The shift to digital and actually we’re doing meetings by Teams and Zoom or whatever platform we’re using, that’s been quite a stark transition.  I think I certainly expect that to remain the case post-Covid, whatever post-Covid might be and whenever that might be.  I certainly hope it will be especially as we start to have a bit more of a discerning look at our carbon footprint and things like that.  That’s a change that’s here to stay. 

Steven Bostock

Thanks to everyone for joining us today.  That brings our session to a close.  And we hope to see as many of you as possible at our future events or digital sessions.  If you’ve got any follow-up questions please drop any of us a call or an email or whatever’s best for you and we’ll get back to you.  So, thank you all for your time. 

The Mishcon Academy Digital Sessions.  To access advice for businesses that is regularly updated, please visit Mishcon.com. 

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