The UK Government has announced that overseas workdays relief will be available to all non-UK domiciled new arrivals in the UK.
Background
Historically, certain non-UK domiciled employees coming to the UK could remove from the scope of UK taxation the income relating to work performed outside the UK on business trips by having that income paid outside the UK and not brought into the UK.
This applied to employees coming to the UK with the initial expectation of remaining for less than three years. It did not include employees coming to the UK with the initial intention of remaining on a more long term basis. Therefore, an individual’s intention on arrival could adversely or beneficially affect the amount of UK tax payable.
The issue
Given that intentions may quite easily change, it was perfectly possible for an individual arriving with the intention of remaining in the UK for less than three years to remain for longer, and for an individual arriving with the intention of remaining for more than three years to leave before that three year period had elapsed.
The result in these cases would be that the individual who was in the UK for more than three years would receive a tax break designed for short to medium term visitors while the person who was in the UK for less than three years would not.
New rule
With effect from 6 April 2013, this anomaly will be removed. Overseas workdays relief will be available to all non-UK domiciled employees who arrive in the UK for the first time after that date regardless of how long they intend to remain in the UK. Employees who have previously been in the UK will also qualify provided they have not been resident in the UK in all of the previous three UK tax years.
Relief will be available for the year of arrival and the two subsequent UK tax years.
Commentary
This is a welcome development which demonstrates good sense. It reflects the UK Government’s stated aim of determining an individual’s UK residence status (and by extension the extent of their UK tax liability) by reference to facts and not their intention (as previously).
For further information or to discuss the issues raised, please contact John Mooney or Bina Gayadien on +44 (0)20 3051 5711.
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