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Assistance for Individuals

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Case Study One

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UK national assigned overseas

Background Information

Ben has been seconded to Italy for 18 months from 1 September 2009 to 28 February 2011.

His remuneration package is as follows:

Salary	£45,000 pa
Accommodation	£10,000 pa
Home leave allowance	£1,000 pa
Medical insurance	£800 pa

UK Tax implications

Ben will remain resident and ordinarily resident in the UK throughout the whole of his secondment.

He will be taxed on £45,000 pa i.e. his salary.

As a result of detached duty relief, he will not be taxed on his accommodation and home leave allowance (important conditions apply).

Ben will be in a double tax situation paying tax in both Italy and the UK on the same income.

If Ben's secondment had run from 1 September 2009 to 30 April 2011, split year treatment would have applied and he would have been not resident and not ordinarily resident during his secondment. This would have meant he would not have been taxed in the UK on his earnings during his assignment providing he did not carry out any UK duties.

Case Study Two

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Foreign national assigned to the UK

Background Information

Kurt is on a 25 month secondment to the UK from Germany which started on 1 July 2009. He is not tax equalised and is therefore responsible for his own taxes.

He receives the following:

Salary	£50,000 pa
Home leave travel	£2,000 pa
Medical insurance benefit	£650 pa
Company car benefit	£4,500 pa

Kurt's employer pays directly for his accommodation while in the UK which amounts to £18,000 pa.

Kurt is a member of a private pension scheme in Germany and both he and his employer contribute into the scheme £2,500 and £1,500 respectively.

Kurt performs 30% of his duties outside the UK while on secondment, with all his salary paid into a UK bank account.

His visits to the UK are:

2009/10	228 days
2010/11	316 days
2011/12	103 days

UK Tax implications

Kurt will be regarded as resident and not ordinarily resident from when he arrived in the UK to when he leaves.

He will be taxable in the UK on £74,650 i.e. on his salary and on the benefits he receives (the company car, medical insurance, provision of accommodation and employer pension contributions).

He will not be taxed on his home leave travel (providing certain conditions are met).

No tax relief will be available for the contributions Kurt makes into his pension scheme and, if beneficial, relief for earnings from overseas work days may have been available if he had been paid into an overseas bank account and not remitted the earnings to the UK.

If Kurt's secondment had been slightly less than the original 25 months, then detached duty tax relief may have been available and his accommodation would not have been taxable (assuming all relevant conditions had been met).

Regarding Kurt's pension contributions, if appropriate approval had been obtained, his employer's contributions into the scheme would not have been taxable and he would have been able to have a tax deduction for the contributions he made.

All in all, if Kurt had taken advantage of all the tax reliefs available to him, by structuring his secondment more carefully, he would have saved over £20,000 in UK tax during his secondment.

Case Study Three

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British National Emigrating

Background Information

Julie has decided to start a new life in Australia. She has always spent her life in the UK and leaves the UK for good on 1st September 2009. She has no intentions of returning to the UK. She retains her home in the UK and has decided to rent it out. She also has 2 other properties in the UK, which she has always let out. She decides to keep one, but sell the other property to finance her move to Australia. She sells this property during September 2009.

UK Tax Implications

HM Revenue & Customs may try to treat Julie as resident and ordinarily resident in the UK for the first 3 years she is out of the UK, unless she has convincing evidence to persuade the Revenue otherwise. This will mean she will remain taxable in the UK on her worldwide income. Australian tax will also be due on the same income i.e. a double tax situation may arise.

She will be subject to UK capital gains tax on the sale of her investment property, timing is the key here. Had she left the sale of this property a little later, she would have escaped UK Capital gains tax completely (assuming she didn't return to the UK). This can be a costly mistake.