Overseas Workday Relief

Overseas Workday Relief

If you are a remittance basis user and split your workdays between the UK and elsewhere, you may be entitled to claim overseas workday relief (OWR). 

OWR allows individuals to exclude part of their employment income from the scope of UK tax based on the split of their UK and overseas workdays. 

You will be eligible to claim OWR if you have had a consecutive period of three tax years out of the previous five, during which you were non-resident in the UK. 

This means that non-domiciled individuals coming to work in the UK during the 2022/23 UK tax year will be eligible to claim OWR for 2022/23, 2023/24 & 2024/25 UK tax years if they met the three-year non-residence requirement before 2022/23.

OWR works by apportioning an individual’s earnings between their UK and overseas duties based on where the duties were physically performed. 

For example, suppose an individual spends 50% of his work duties overseas and meets the rest of the criteria associated with claiming the relief. In that case, they should be able to exclude half of their general earnings from the scope of UK tax. 

It is important to note that the earnings paid concerning the OWR must be paid and retained overseas (into an offshore bank account). If these earnings are later remitted to the UK, they will be taxable on a remittance basis. 

There are various other criteria to be met to claim the relief, such as (but not limited to):

• The bank account must have a balance of less than £10 when the first payment is made into it,
• The account must contain employment income only.

In addition, when claiming overseas workday relief, the ‘special mixed fund’ rules will replace the standard ‘mixed fund’ rules. Where an overseas bank account contains money from different sources, it will be classed as a mixed fund. 

The special mixed fund rules will allow users of overseas workday relief who meet specific criteria to use a more straightforward method when identifying remittances. 

When a remittance is made from an overseas mixed fund, the legislation sets out the order in which income and gains within the account are remitted to the UK. 

Where the special mixed fund rules apply, instead of applying the mixed fund rules on a transaction-by-transaction basis, all the remittances made in the year can be totalled up and treated as a single remittance for the purpose of the analysis.

Next Steps

Overseas workday relief can be complex and time-consuming, but it is a great way to save UK tax for those it applies to. 

Please get in touch with us if you require any support about the remittance basis or overseas workday relief.