A remote-first hire in the wrong location can turn into a tax footprint you did not plan for. The moment someone negotiates deals, signs contracts, or routinely works from a home office abroad, you may create a permanent establishment (PE) and owe corporate income tax, returns, and penalties in that country. This guide explains where PE risk comes from in US–UK setups and how to reduce it without slowing the business.
Permanent establishment (PE). A taxable presence in a country, usually triggered by a fixed place of business or a dependent agent acting on your behalf.
Fixed place PE. A place with a degree of permanence and disposal to the company (office, branch, workshop, sometimes a home office).
Dependent agent PE (DAPE). A person who habitually concludes contracts or plays the principal role leading to their conclusion for the enterprise.
Preparatory or auxiliary activity. Support work that typically does not create PE if it is genuinely ancillary to core revenue activities.
Construction/installation threshold. Building and installation projects can create PE if they continue beyond a treaty threshold (often 12 months). Always confirm the current treaty text.
Note: The US–UK income tax treaty follows these general concepts. Details matter. Check scope, exceptions, and any protocol changes before relying on them.
Risk mechanics. A home office can be a fixed place PE if it is at your disposal and used on a sustained basis for core revenue functions. Red flags include publishing the address, storing inventory, or requiring the employee to work from that location.
Mitigation.
Risk mechanics. A salesperson or founder in the other country who negotiates and finalizes deals can trigger a dependent agent PE even without formal signing rights. Making commitments that customers routinely accept is enough.
Mitigation.
Risk mechanics. If strategic decisions are made and recorded abroad, tax authorities may argue the company has a place of management there.
Mitigation.
Risk mechanics. Storage or servers can be PE if they are at your disposal and part of core delivery rather than auxiliary support.
Mitigation.
Risk mechanics. On-site projects may create PE if they cross treaty time thresholds.
Mitigation.
Employees and directors create higher PE risk because their actions are imputed to your company.
Third-party vendors reduce risk but do not eliminate it. If a vendor acts exclusively and under your control to conclude contracts, authorities may treat them as a dependent agent.
Mitigation with vendors.
PE analysis is separate from payroll withholding and social security coverage. You may still need local payroll and employer registrations even if you avoid PE. For US–UK moves, review the totalization agreement to prevent double social charges. On indirect taxes (VAT/sales tax), nexus rules differ; plan registrations independently of PE conclusions.
PE risk is about patterns, not titles. If core revenue work and deal closure live in the other country, you invite a tax presence there. Keep contract authority, approvals, and place of management anchored at home, document the workflow, and check project timelines against treaty thresholds. Do that, and remote hiring stays flexible without creating surprise corporate tax bills.
.png)
October 22, 2025
A practical MOFU checklist to integrate accounting after an acquisition—align policies, consolidate charts, migrate systems, and maintain compliance.
.png)
October 21, 2025
Learn to reconcile multi-channel sales and payouts, capture marketplace fees, manage inventory across platforms, and stay compliant with sales tax.