One of the most valuable tax reliefs available to expats working in the UK is Overseas Workdays Relief (“OWR”).
Foreign national expats that have come to the UK for purposes of employment, and are a tax resident of the UK, are typically fully taxable on their employment earnings in the UK. However, if their employment requires them to work overseas, it may be possible to make a claim for OWR provided they meet certain criteria. The most prominent of these are that they are non-UK domiciled, and the earnings which relate to non-UK duties are paid into a non-UK account and not then remitted to the UK.
What is the Point of OWR?
If a successful claim for OWR is made you are able to relieve the part of your employment earnings which relates to overseas duties from UK tax.
How it Works: OWR Claims
In order to be eligible to make a claim for OWR you must meet the following criteria:
• be considered non-UK domiciled for the whole of a UK tax year (broadly a foreign national);
• elect to be taxed on the remittance basis (in essence this means that your non-UK source income and/or gains are not subject to UK tax unless or until they are remitted the UK – again further details are provided below);
• ensure that earnings relating to your overseas workdays are paid into a qualifying non-UK bank account and not then remitted to the UK; and
• have been considered non-UK tax resident in each of the three UK tax years preceding a tax year in which you become tax resident in the UK.
Practical Considerations
For a successful claim to be made it is important that the rules for claiming OWR are implemented correctly.
• You must keep a detailed record of your overseas working pattern and days must be identified with reference to HMRC’s guidance on international business travel;
• We would recommend that you overseas bank account is operated in such a way that allows you to take advantage of the ‘special mixed rules’;
• Your bank account needs to be managed carefully and you must keep sufficient funds outside of the UK to validate your claim;
• Complete and full disclosure should be made to HMRC of the relief claimed and how it has been calculated.
How Can We Help?
We specialise in advising Expats and non-domiciled taxpayers and can help you structure your affairs to make an OWR claim and can complete your tax return for you ensuring things are done correctly. If you would like our assistance, please contact us.
