The tax regulations for overseas visitors working in the UK are based mainly around an individual’s residency status – which in itself depends largely on the amount of time a worker intends to stay in the UK, and why they are here, rather than the amount of time actually spent in the country.
The variations in residency status are quite complex, so if you are thinking of employing overseas staff, or you are a foreign national looking to come to the UK to work, it’s important to get expert advice as early as possible, to determine which category is a most relevant to your individual situation, and whether by slightly moderating the amount of time you intend to be in the country you could significantly change your tax position.
There are, however, a number of tax planning opportunities available for overseas staff employed or on secondment to the UK, and particularly for anyone intending to work in the UK on a temporary basis for a period of less than two years. In this situation, HMRC will allow relief from income tax for travel and subsistence payments if they are incurred in the performance of an individual’s duties of the employment – commonly known as ‘detached duty’ or ‘temporary workplace’ relief.
To qualify for the relief, as well as the maximum 24-month time period, an individual will also need to have an existing relationship with an employer in their home country, reinforcing the temporary nature of their employment in the UK – which is why detached duty relief typically applies to an employee who is seconded to the UK for a fixed-term assignment, rather than individuals who move to the country to take up a new UK employment.
Savings and claims under Detached Duty Relief
However, for those who do qualify, the potential savings are significant. Under detached duty relief, an individual can claim expenses for:
- the cost of travelling from home (or anywhere) to their temporary place of work
- the reasonable cost of accommodation – including all utilities – near to their temporary place of work
- daily subsistence costs, to cover the cost of meals.
It’s important to remember that these expenses relate to the individual employee only, and not their family. It should also be noted that these rules are quite complex, and the correct documentation and proof of payment will be needed to substantiate any claims. But by seeking early advice and applying the rules correctly, overseas staff can benefit from a significant tax planning opportunity.
There are tax-planning opportunities available for overseas staff whose residency status may vary from this. For example, workers who intend to remain in the UK for up to three years but who will have business trips outside of the UK may be entitled to claim tax exemption on the proportion of their employment income relating to days spent working abroad.
However, as with these and other reliefs and planning opportunities, the tax regulations may be quite complex, and could mean that an individual’s financial affairs need restructuring before they move to the UK – so again, expert advice at the earliest possible opportunity is key.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.
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