Global Mobility – Coming to Work in the UK

Introduction

If you are working somewhere other than your home country, even for a short period of time, you could be exposed to additional tax implications. Tax can seem daunting and can quickly fall to the bottom of the agenda, which comes with a huge risk.

With the world of travel opening back up, we are seeing lots of individuals decide to travel once again, especially for work purposes. When working in more than one jurisdiction, tax can seem complex and we are here to help.

Coming to work in the UK

UK tax residence

To determine an individual’s UK tax residence status, we are required to review the Statutory Residence Test (SRT), which was set out by HMRC in 2013. Prior to this, whether an individual is considered a UK tax resident or not was largely determined on piecemeal case law. The SRT can be thought of as a road map, and there are a series of tests to look at in turn. There are various automatic overseas tests to consider first, followed by automatic UK tests, and if none of these are met, we are required to move on and review the sufficient ties test. Once one of the tests are met, no further steps need to be taken.

An individual’s residence status can change year on year, which is why reviewing the SRT each year is important. Various factors such as the days present in the UK (whether these are workdays or not) and whether a UK home is available are a few examples of what the SRT entails.

Where a person either arrives or departs the UK during a certain tax year, it may be possible to claim split year treatment. This treatment (if applicable) would mean that the individual can split the tax year into a period of residence and non-residence, which can be tax advantageous. There are further tests to review when it comes to claiming split year and these are equally as detailed as the SRT.

Domicile

Unlike residence, an individual’s domicile status can be difficult to change and has an ‘adhesive’ nature. If an individual is considered non-UK domiciled, they may be eligible for favourable tax treatment, by claiming the remittance basis.

Domicile is a concept of common law and is only really of interest where an individual has foreign income or gains. Recent changes to the deemed domicile rules have meant that more people are now being considered domiciled in the UK for tax purposes.

HMRC would be unlikely to argue with an individual who claims that they have a UK domicile.

Double tax agreements

Where an individual performs duties in more than one country, the tax position between the jurisdiction can become complex, especially where multiple sources of income are involved. Double tax agreements exist between the UK and a large number of other countries to help minimise or, in some cases, eliminate any double taxation.

Double tax agreements are also used to review an individual’s treaty residence status where they are considered domestically resident in two countries. This can help determine where the primary taxing rights lie.

Remittance basis

The remittance basis is a favourable tax treatment available to millions of non-UK domiciled individuals living in the UK. The treatment allows for overseas income and gains to be exempt from the scope of UK tax on the basis that they are paid and retained overseas.

If the income is remitted to the UK (e.g. spent on a card linked to an overseas bank account or taken out at a cash machine) then a tax charge will arise.

The remittance basis will apply automatically where a person’s unremitted foreign income is less than £2,000 in the tax year, otherwise, an election will need to be made via their Self-Assessment. Making a claim for the remittance basis would result in an individual’s personal allowance being lost, however where this applies automatically, the personal allowance remains available.

Where an individual is not entitled to claim the remittance basis, the arising basis will apply. The arising basis will subject an individual’s worldwide income and gains to UK tax.

A comparative calculation is often helpful to determine whether making a claim for the remittance basis (against arising basis) is beneficial, based on the facts given.

Where an individual has been resident for seven out of the previous nine tax years, and makes a claim for the remittance basis, a remittance basis charge of £30,000 will apply. After twelve out of fourteen years, this will increase to £60,000. Claiming the remittance basis is optional and alternating between the remittance and arising basis is possible.  

Overseas workday relief

If the remittance basis applies and duties are split between the UK and overseas, a claim for overseas workday relief can be made. This will enable an individual to exclude any overseas workdays from the scope of UK tax, on the basis the income relating to these duties is paid and retained overseas.

The criteria for claiming this relief can be complex, however, if implemented correctly, can carry huge tax savings.

Other tax reliefs

There are various other reliefs available to individuals coming to work in the UK, either on a temporary or permanent basis.

If an individual is temporarily working in the UK for a period of 24 months or less, or for under 40% of their total working time, relief can be available on their travel and subsistence expenses.

It is worth noting that where an individual’s intention changes and they expect to be in the UK for a period of longer than 24 months, the relief will cease to be available from the date of their intention change.

In addition to the above, the reimbursement of removal expenses can be exempt, up to a maximum of £8,000. This is applicable where an individual is changing their main residence and can cover a wide range of expenses, such as removal costs, legal fees associated with disposal and acquisition, survey costs and estate agent fees to name a few.

Where a non-domiciled individual is working in the UK, relief may be available on their travel expenses and also for their spouse and family to visit twice a tax year. There are many favourable reliefs worth exploring and taking advantage of, if an individual is working in the UK on a temporary basis.

Social security

Reciprocal agreements are in place between the UK and a number of other countries to ensure that social security contributions are not paid twice on the same income. If an individual is coming to work in the UK from a country with which the UK has a reciprocal agreement, it might be that UK National Insurance is not due and the individual can remain within their home country social security system. This would need reviewing on a case by case basis and there are various conditions to be met.

This can be a complex area, and one HMRC are very interested in, so if ETC Tax can be of any assistance, please do not hesitate to get in touch with us.