Remote hiring into the United Kingdom is now normal — but it can create an unexpected tax issue for overseas companies: Permanent Establishment (PE) risk.
A PE is, broadly, a taxable presence in a country. If your business is treated as having a UK PE, you could become exposed to UK corporation tax on profits attributable to that PE, plus compliance/admin obligations.
This article explains:
- what PE means in practice,
- the most common UK PE “triggers” when hiring remotely,
- how an Employer of Record (EOR) helps,
- and the important things an EOR does not protect you from.
Quick note: PE is fact-specific. This is general guidance, not tax advice. Always take professional tax advice for your circumstances.
What is a Permanent Establishment (PE)?
Under treaty-based principles, a PE commonly arises in two broad ways:
- Fixed place of business PE
This is where the enterprise has a fixed place of business through which its business is carried on. - Dependent agent PE (DAPE)
Even if you don’t have an office, you can still create a PE if a person in the UK acts for you in a way that meets the dependent agent conditions (for example, habitually concluding contracts on your behalf).
HMRC’s manuals highlight that PE is often a question of facts and degree, and that “permanence” matters for a fixed place PE.
Why remote hiring can trigger PE risk
Remote work can blur the lines between:
- “We just hired a person who works from home”, and
- “We now have a real business presence in the UK.”
The risk tends to increase when the UK-based person:
- is revenue-generating (sales, deal-making, commercial negotiations),
- has authority to bind the company,
- uses their home as a stable base for the business,
- or is effectively running part of your business from the UK.
UK PE issues connected to mobile/remote workers have been discussed in professional guidance and commentary, including scenarios where employees of overseas entities work in the UK.
Common UK PE triggers when hiring remotely
1) A “home office” becomes a fixed place of business
A home office can become relevant if it’s effectively used as a place through which the business is carried on, and has a sufficient degree of stability/permanence.
Practical risk factors:
- The home address is used on your website / contracts / invoices.
- The person hosts client meetings there.
- The company requires the person to work from that location (not just “employee choice”).
- The home is used to store stock or equipment central to operations.
2) The person “habitually” concludes contracts
Dependent agent PE risk can arise if the UK person is effectively closing deals for you — even if final signatures happen abroad. HMRC describes dependent agent principles in its international guidance.
High-risk roles:
- sales leads who negotiate and agree key terms,
- country managers who sign customers or suppliers,
- senior executives building the market.
3) UK-based senior leadership or “C-level” activity
If you place real decision-making and commercial direction in the UK, PE risk often increases (even if you’re using an EOR). Some EOR providers themselves flag that EOR isn’t a “PE shield” in higher-risk scenarios.
What an EOR does cover
An Employer of Record typically helps on the employment compliance side, such as:
- Local employment contract issuance (compliant terms, policies)
- Payroll processing and statutory deductions
- Employer registrations needed for payroll and reporting
- Benefits administration
- HR processes (onboarding/offboarding)
- Employment law compliance (working time, leave, etc.)
In other words: an EOR is excellent for hiring and paying someone compliantly in the UK without you setting up a UK employing entity.
What an EOR doesn’t cover
Here’s the key point:
An EOR does not automatically eliminate UK PE risk
PE is a corporate tax concept focused on your business activity and presence, not only who issues the payslip.
Even if the EOR is the legal employer, your overseas company may still create PE depending on:
- what the individual actually does day-to-day,
- how contracts are negotiated and agreed,
- and whether the UK location functions as a “place of business” or creates a dependent agent situation.
A good way to think about it:
- EOR reduces employment law/payroll risk
- PE risk is mostly driven by commercial activity, authority, and operational footprint
Real-world examples
Example A: Low PE risk
A software engineer in the UK:
- builds product,
- has no customer-facing responsibility,
- does not sign contracts,
- works from home by personal choice,
- and the home address is not presented as a business location.
EOR is often a strong fit here: employment compliance is handled, and PE risk is typically lower (subject to facts).
Example B: Higher PE risk
A UK “Head of Sales” who:
- negotiates and agrees key commercial terms,
- effectively closes deals (even if HQ signs),
- represents the business publicly as “UK office”,
- and is building the UK market.
This is the kind of scenario where PE analysis becomes critical — and where you may need to redesign the role, tighten contracting controls, or consider a different market-entry structure.
How to reduce PE risk when using an EOR: a practical checklist
These are common controls companies use (with tax advisors) to reduce exposure:
Contracting & authority
- Ensure UK-based staff do not have authority to sign/execute contracts.
- Avoid “rubber-stamping”: if HQ always signs, HQ must also genuinely control approval.
- Use clear internal approvals and documented negotiation boundaries.
Role design
- Keep UK roles non-core to contracting and revenue where possible.
- Limit “principal role” involvement in concluding contracts (especially in sales leadership roles).
How the UK presence is presented
- Don’t list the employee’s home as a “UK office” address.
- Avoid using the home address on marketing materials, business cards, invoices, or letterheads.
Operational footprint
- Avoid storing inventory/stock in the UK (where relevant).
- Be cautious about using the UK location for routine client meetings.
Documentation
- Maintain a short memo or file note explaining:
- why the role doesn’t create PE,
- what controls exist,
- and how decisions/contract approvals are handled.
When you should get specialist advice
Get tax advice early if:
- the hire is sales, business development, country manager, or executive
- the person will negotiate contracts
- you plan multiple hires and a “UK team”
- you want the UK as a strategic growth market
HMRC and treaty concepts are nuanced and depend heavily on facts.
