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Assistance for Individuals

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Tax Planning

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By recognising UK tax planning opportunities, you become better informed to take the best course of action and potentially save money by paying less tax.

Tax planning opportunities should be considered prior to the start of an assignment or before you leave your home country. So often these are addressed after an individual has moved, meaning generous tax savings are missed.

The most common UK tax planning opportunities are:

Travel and Subsistence Expenses

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If you are assigned to the UK by your overseas employer for a limited time, then it is possible to obtain tax relief for your travel and subsistence costs under a relief known as detached duty. Subsistence includes your accommodation costs.

Certain important conditions apply which must be satisfied, and providing your assignment is correctly structured, it may be possible to obtain this tax relief. In practice, so many expats structure their assignment incorrectly, that they lose out on this very generous tax relief.

Overseas Workdays

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If you are a non-UK domicile working in the UK, and depending on your tax residence status, it may be possible, with careful planning, to legally avoid UK tax for any days which you work overseas, however the remittance basis rules will have an effect on whether it is beneficial or not to claim this overseas work days relief.

Structure of Assignment Contract

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The structure of your assignment contract or letter, can have a big impact on how you will be taxed in the UK and what tax reliefs you may be entitled to. Any tax planning should take place when the contract is being drafted, however, commercial aspects should also be taken into account at this stage as well as tax considerations.

With whom you have an employment contract can also have a big impact on how you are taxed in the UK

Timing of Assignment

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The timing of your assignment can often be crucial from a UK tax perspective, especially if you normally live in the UK and you are leaving for an assignment of less than 2 years. Again, this consideration should take place at the planning stage of your assignment.

Get it wrong and you could find yourself in a double taxation situation

Transfer of Funds into the UK

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If you are a non-UK domicile coming to work and live in the UK and need to transfer funds into the UK, there are tax efficient ways of transferring these funds into the UK to avoid UK tax arising, however, you need to consider the impact of the remittance basis of taxing overseas income & gains, to establish the most beneficial way of taxing your overseas income & gains in the UK.

Short Assignments (less than 6 months)

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Double taxation may be avoided by structuring the secondment such that the conditions of any relevant double tax agreement are satisfied. Many short assignments do not satisfy these conditions and therefore, double taxation can arise on the same income.

Overseas Pensions

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If you or your employer are paying contributions into an overseas pension scheme, your UK tax liability will increase. Appropriate approval for tax relief on these contributions may be available, providing certain conditions are satisfied.

UK Assets

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If you have assets in the UK which are potentially subject to capital gains tax, there are planning techniques which may minimise or eliminate UK capital gains tax when you leave the UK, if you are leaving for a number of years.  One of the most important assets you should consider is your home and whether you need to elect for it to remain your main residence while you are living overseas, thereby maintaining its exemption from UK capital gains tax. 

Estate

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Your domicile status is important in establishing the inheritance tax liability on your estate and not your tax residence status. If you have a UK domicile your estate will be subject to UK inheritance tax, even if you are not a UK tax resident. Adopting a foreign domicile is possible, but is difficult to achieve, therefore, professional help is necessary.

Leaving the UK

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If you leave the UK permanently, you may still be treated as a resident for UK tax purposes for a few years, resulting in a possible double tax situation arising where you are taxed twice on the same income. Certain actions may help in avoiding this situation from arising.

The above information is intended to give you ideas of what planning is possible. Professional advice should be sought if you wish to proceed with any of these ideas.

Contact UK Expat now to discuss these opportunities further.