Mobile Employees UK Tax Relief on Overseas Workdays

The COVID-19 pandemic brought the world to a standstill. Economies ground to a near halt, travel was grounded and businesses faced much uncertainty to what the future held and the timeline for recovery.  

 One year later we are filled with hope as vaccines roll out and the world begins to open borders.  With the turn of the new fiscal year businesses may be setting their budgets for the year ahead to include some degree of travel and sending workers back overseas for employment purposes.  

 It’s important to know of a very relevant tax relief available to mobile employees who are coming to the UK for work especially where they intend to have business trips overseas after becoming UK tax resident.   

UK Residency 

For UK tax purposes an individual is taxed based on their residency as determined by the Statutory Residency Test.  There are several levels of this test that one must go through to determine if they are a resident or non-resident of the UK for tax purposes. 

 When a person becomes UK tax resident they are taxable on their worldwide income including their overseas income. However, there are some reliefs available under the UK tax regime to make sure a person is not double taxed.  

 One most notable relief available under the UK tax regime for mobile workers coming to the UK is called Overseas Workday Relief.   

What is Overseas Workday Relief?  

In short, qualifying individuals who are UK tax resident can exclude earnings related to their overseas workdays.  There are certain criteria that must be met for an individual to be considered eligible and HMRC is paying attention to those who make a claim for this important relief.   

Where all conditions are met an individual, who is tax resident and has overseas workdays, can exclude a portion of their employment earnings from UK taxation. This includes bonus and certain employment related share awards such as Restricted Stock Units.   

Depending on your employment and what is included in your compensation package the tax relief can be quite substantial.   

Who Can Claim Overseas Workday Relief? 

 HMRC are very specific about who can claim this tax relief and it is most beneficial to Globally Mobile Employees.  All of the below criteria must be met if the relief is to be claimed: 

  1. Taxpayers must have overseas workdays while UK resident. 
  2. Taxpayer must be non-domiciled and claim remittance basis of taxation. 
  3. Earnings related to overseas workdays must be paid offshore and remain unremitted to the UK.  
  4. Earnings must be paid into a qualifying bank account. 

Overseas workday relief cannot be claimed indefinitely and is time sensitive. Taxpayers can only make a claim for overseas workday relief for the first three years of UK tax residency including their first year whether a split year or not.  

This means that pre-move planning is extremely important to make sure all eligibility criteria is met to claim Overseas Workday Relief.   

Pre-Move Planning Advice 

Tax may not be on the forefront of your mind as part of your move to another country but I assure you it will be worth while to speak with an experienced adviser.   

The best advice I can share with you is this: 

  1. Keep proof of your UK residency. 
  2. Keep an up to date travel diary showing your UK and non-UK days especially workdays and non-workdays.  
  3. Consider your UK and non-UK bank account structuring prior to moving. 
  4. Speak with a tax adviser regarding the remittance basis and your overseas income.  

In conclusion, it pays to take some advice prior to your move to the UK. We work with clients who often travel for work, are not domiciled to the UK and can often have employee share awards in their compensation package. This pre-move planning is invaluable and we have seen with the right structure and planning in place, individuals can save substantial amounts in tax.

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