Temporarily overseas

By Tolley in association with Annette Morley
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The following Employment Tax guidance note by Tolley in association with Annette Morley provides comprehensive and up to date tax information covering:

  • Temporarily overseas
  • Introduction
  • Income tax
  • Deductions for travel and subsistence
  • What is ‘temporarily’ overseas?
  • Defining the international work area
  • The importance of the 24-month rule
  • Other potential tax reliefs
  • Effect of residency on expense claims for temporary overseas employment
  • National Insurance (NI)
  • NIC summary
  • Temporarily overseas ― related topics

Introduction

There are some differences in the tax and NIC treatment for employees who only work overseas for a short period, compared with those who go overseas on a substantial assignment or permanently.

Income tax

An individual on a temporary work assignment overseas might be UK resident or not. This will depend on the facts as determined by the statutory residence test (SRT) (see the Statutory residence test guidance note for details of the SRT). In this context, the determinant is likely to be the length of the period overseas. An employee moving away from the UK to take up permanent full-time employment overseas is likely to become non-resident. See the Foreign employment guidance note.

Even though the overseas placement might be temporary, it is feasible that there would be a tax liability imposed by the foreign jurisdiction. The position should be checked against the relevant double tax treaty. Mostly, these have a 183-day rule before residency is imposed. There could be a clause that exempts tax liability in the host country, particularly where the employee remains resident in the UK. It is also worth checking that the identity of the employer(s) for tax and other legal purposes is made clear in the contracts and, if it is intended that the employment should continue to be with the UK employer, that recharging of employment costs to a host employer does not change the position.

A key difference in income tax treatment between a temporary placement and a permanent move concerns travel and subsistence. Where an employee travels overseas to a temporary workplace, a tax deduction can potentially be claimed against his UK earnings for travel and associated subsistence costs related to that employment. This means that travel and associated benefits provided by the employer can effectively be tax-free.

Deductions for travel and subsistence

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