Moving From The UK – A Tax Guide To Working Abroad .
Moving from the UK – atax guide to workingabroadMaking Mobility EasyOctober 2019#pwcmobilitypurpose #makingmobilityeasy
ContentsWelcome to the UK tax guide for individuals going on international assignment abroad11. Determining your UK tax liability22. The taxation of non-residents43. Renting and selling your home84. Tax administration105. Social security contributions and benefits116. Work permits137. Miscellaneous148. Appendices15Appendix I: Double taxation agreement countries16Appendix II: Social security agreement countries17Appendix III: Residence18Appendix IV: Applying the split year rules209. ContactsContents A tax guide for UK individuals moving abroad PwC21
Welcome to the UK tax guide for individualsgoing on international assignment abroadIt can be daunting going to work in a foreign country on aninternational assignment. Understanding how tax and socialsecurity are affected by making such a move can add to thelist of complexities you have to deal with.Our Global Mobility Services team at PwC has been advisingUK nationals on overseas assignment for over 40 years,helping many thousands of international assigneesunderstand what they need to do.Victoria RobinsonUK markets leader, PwC GlobalMobility ServicesThe purpose of this guide is to share our experience with you,in the form of some frequently asked questions and answers,to help you when you make your international move.The advice contained in this document reflects UK tax lawand the reporting position for the 2019/20 tax year startingon 6 April 2019 (unless indicated otherwise). As you will beaware, in 2016 the UK voted to leave the EU, with the PrimeMinister triggering ‘Article 50’ in 2017. However, in light ofthe recent uncertainty regarding the UK’s departurearrangements, it is difficult at this stage to comment upon thechange this will have to current cross-border circumstances.The timing of the UK’s formal exit is therefore beingclosely monitored with appropriate guidance being offeredcloser to the time of departure.Please do ask for advice before you act on any of theinformation contained in this guide to make sure you havethe most current data. PwC is part of a network of firms,with offices in over 154 countries. Our advice spans alljurisdictions, so if you would like to find out more pleasecontact me or your usual PwC adviser. We also havea number of Technical Specialists who would be happyto assist, and you can find their contact details in section9 of document.You can also find further information on UK tax rates,allowances and Budget news at thesuite.pwc.comWe hope you find this guide useful and informative.This guide does not cover the tax and social securityimplications of self-employed individuals or partnerships,for which there are different rules.PwC A tax guide for UK individuals moving abroad 1
1. Determining your UK tax liability (1/2)Under UK law, spouses and civil partners aregenerally treated entirely separately for taxpurposes. This means that the tax residenceposition of your spouse or civil partner needs tobe considered based on his or her own facts andcircumstances. However, in some cases it can beinfluenced by your own tax residence position.1.1 What impact will my overseas assignment haveon my UK tax position?This depends upon the length and timing of your assignment,any return visits you make to the UK and what personal tiesyou maintain with the UK during your assignment. Thesefactors will determine whether you are considered resident ornon-resident for tax purposes in the UK during yourassignment. The taxation of residents and non-residents isvery different.1.2 How do I become non-resident for UKtax purposes?Your residence position is determined by a statutoryresidence test (please see Appendix III).Many people will be regarded as UK resident during the taxyear that they leave the UK. In certain situations it is possibleto split this resident tax year into a UK part and an overseaspart. If you are able to do this you will be taxed as if you werenon-resident for the overseas part of the tax year. (seeAppendix IV for greater detail on how to split a tax year).There are a number of ways to achieve non-resident status.You need to meet the following conditions to be considerednon resident under the full time working overseas test: You average at least a 35 hour working week overseasover the course of the tax year and; Visits to the UK during your overseas assignment do notexceed 90 residence days or 30 workdays back in the UKin a full tax year. There are no significant breaks in your employment.A break of more than 30 days is significant (subjectto exceptions for certain annual, parenting and sickleave) and;If you do not met all these conditions you may still be ableto achieve non-resident status but you will need to takespecialist advice to check if this is possible.1.3 How do I calculate whether I am averaging a35 hour working week overseas?The calculation is complex and needs to be undertaken usinga formula provided in legislation. However, you may not needto do this calculation if it is clear that you are workingsufficient overtime during the year such that a 35 houraverage will be easily achieved. If you believe you will notwork much overtime, or have a considerable amount ofnational/bank holidays then please seek professional advicein order to complete this calculation.2 A tax guide for UK individuals moving abroad PwC1.4 What is the difference between a residenceday spent in the UK and a UK workday forSRT purposes?A residence day is spent in the UK if you are here at midnight.A day of work for these purposes includes any type of work,including travel for work purposes, that lasts for more than 3hours in the UK.For split year purposes, you must pro-rate the 90 day and 30day limits based on when you leave the UK.1.5 How do I treat days of absence and holidays?These days can affect the calculation which determineswhether you are working full time overseas so you will needto keep a detailed calendar which records where you areeach day and what you are doing (see below).1.6 What records do I need to prove I am workingfull time overseas?We recommend that records are kept that evidence the timeyou spend working overseas. Online calendars (Outlook,Gmail etc.), timesheets and detailed work diaries will allprove useful when supporting the claim that you wereworking full time overseas. You should also keep contractsof employment and other documentation/communicationswhich relate to your time overseas. HMRC has been known toask for information on the nature and duration of workactivities and therefore you may wish to take a conservativeapproach and ensure your records of working time aresufficiently detailed, should HMRC ever enquire into yourresidence position.1.7 What if I do not meet these conditions?If there is any doubt about whether you will meet theseconditions, and you also continue to maintain links to the UK(for example, your family is remaining in the UK while you areon assignment) your residence position will be more complexand you should take professional advice on it as necessary.1.8 What happens if I do not become non-resident?If your overseas assignment does not result in you beingtreated as non -resident, you will normally continue to besubject to UK tax on worldwide income. A UK tax liability willarise on many of your assignment-related payments, even ifthese are paid in the assignment location, such as housingand cost of living allowances. In some cases special taxreliefs are available for assignment-related payments. Theseare covered in question 1.9 below. Your UK employer will berequired to continue operating Pay As You Earn (PAYE).Since there may also be tax to pay in your assignmentlocation, this may lead to double taxation and potential cashflow implications. If you pay tax in your assignment locationyou should be able to claim a credit for the overseas taxespaid when calculating your UK tax liability (subject tolimitations). The UK has an extensive network of double taxtreaties with other countries.
1. Determining your UK tax liability (2/2)1.8 What happens if I do not become non-resident?(cont’d)One of the functions of these treaties is to prevent doubletaxation by allowing only one country to tax your earnings –usually this would be the UK. However, this provision doesnot always apply. For instance, it may not apply if you areworking in another country for more than six months. In thiscase, you may be taxed in both the UK and in yourassignment location and eligibility for tax credits anddetermination of taxation rights between the countries willneed to be considered on a case-by-case basis.1.9 Are any tax reliefs available for a tax residenton a short-term assignment?If your assignment is not expected to last more than twoyears and is part of a continuing employment you may not besubject to UK tax on employer-provided accommodation,travel and subsistence relating to your assignment. If you arepersonally incurring these costs you may also be able toclaim a deduction for such costs. Strictly, in all cases, this willonly apply to your personal costs and does not apply to costswhich are deemed to relate to your spouse or civil partner andchildren. Other tax reliefs which do not depend on continuingemployment and the length of your assignment may beavailable, including: Employer reimbursement of your personal additionaltravel and subsistence costs of working overseas.This includes the cost of travel between the UK andthe assignment location where the duties arebeing performed. For all but very short assignments (under 60 days) thereimbursed cost of your family visiting you. Overseas board and lodging costs but only where youtake up a separate overseas employment.1.10 How is the tax position of my spouse or civilpartner affected by my overseas assignment?Under UK law, spouses and civil partners are generallytreated entirely separately for tax purposes. This means thatthe tax residence position of your spouse or civil partnerneeds to be considered based on his or her own facts andcircumstances. In some cases it can be influenced by yourown tax residence position. For instance, it is probable thatyour spouse or civil partner will remain tax resident, even ifyou are considered non-resident, if he or she does notaccompany you on your overseas assignment. However ifyou are considered non-resident and your non-workingspouse or civil partner accompanies you on your assignmentthen he or she will generally (although not in all cases) betreated as having broken tax residence at the date ofdeparture, even though he or she is not in full-timeemployment outside the UK.1.11 Does it matter if I am domiciled outsidethe UK?The position for someone who is not domiciled in the UK islikely to be more complex as there are additional rules thatcan apply to foreign domiciliaries. For example, offshoreinvestment income, if remitted to the UK while you areregarded as temporarily non-resident, will potentially betaxable upon your return to the UK. We recommend you takefurther UK tax advice if you are domiciled outside the UK.Key considerationsReview the split of assets with your spouse or civil partnerand consider changes to ensure that both your personaltax allowances are being fully utilised.PwC A tax guide for UK individuals moving abroad 3
2. The taxation of non-residents(1/4)Each source of personal income needs to beconsidered to establish your UK tax position.Some sources of investment income caneffectively be received free of UK tax or at areduced tax rate when you are non-resident.2.1 What are the main implications of becomingnon-resident in the UK for tax purposes?Becoming non-resident will generally mean that you onlyremain liable to UK tax on UK source income. This appliesfrom the day you meet the conditions to be taxed as nonresident to the day you cease to meet those conditions.Normally, provided that any employment duties youperform in the UK are only incidental to your main duties,you will not have to pay UK tax on employment income andbenefits earned after you have broken UK tax residence. Thisapplies even if you are still paid from the UK. (Examples ofincidental duties include training, liaison with UK colleaguesto report on projects or receive instructions).Your UK tax liability on income arising when you areconsidered non-resident is normally restricted to: Earnings from an employment previously carried on whileresident in the UK, even if they are received after youhave left the UK. A typical example is a bonus paid afteryou leave the UK which was earned before you left.Please note that depending upon the PAYE coding that isin place for you, any tax deductions applied at source atthe time of payment may not represent your final liability. Some payments received on the cessation of youremployment where termination occurs during youroverseas assignment. Stock options exercised during your assignment that mayhave been earned by reference to UK service – this iscovered in more detail in section 2.7. Other awards of shares that may have been earned byreference to UK service. Tax on UK source personal income, such as intereston UK bank accounts, UK dividends and rental incomefrom UK properties. Capital gains tax (CGT) which arises on the sale of someassets. In particular, if you are temporarily non-residentfor CGT purposes (broadly, if you are non-UK resident forfive years or less) any gains realised during the absenceon assets held before you left the UK are likely to becharged to tax in the year of your return (see section 2.6below). Whether you are liable is entirely dependent onyour personal circumstances and we recommend youtake further advice if you are in this position.Disposals of UK residential property (reliefs areavailable but again, depend upon each person’s factsand circumstances).4 A tax guide for UK individuals moving abroad PwC2.2 Am I still entitled to personal tax allowances?Yes, if you are a UK, or European Economic Area (EEA)national (Appendix II) or a resident of certain countries withwhich the UK has a double tax treaty (Appendix I). This isprovided that your taxable income does not exceed aprescribed level, currently set at 100,000, after which aphase out applies (reduced by 1 for every 2 that anindividual’s income exceeds 100,000). Where personal taxallowances are granted under a tax treaty, they may not beavailable if the only UK income you are receiving is interest ordividends. Please see section 2.4 below for further details.In the year of departure from the UK, your personal taxallowances will normally be fully utilised against earningsarising in the pre-departure period which remain fully taxable.However, because of the way in which relief for thesepersonal tax allowances is given, if all of your tax is collectedthrough the PAYE system and you have no benefits-in-kind orother taxable income, you would normally find that a smallrefund may be due for the year of your departure because ofunutilised personal tax allowances.2.3 Can I continue to participate in an IndividualSavings Account (ISA)?ISAs are available to individuals who are resident in the UKfor tax purposes and over 18 years old. If you become nonresident you may retain existing ISA investments, with the UKtax advantages, but you may not invest in ISAs when you areconsidered non-resident. Income from an ISA may be subjectto tax in your assignment location.2.4 How is my other personal income affected duringmy assignment?Each source of personal income needs to be considered toestablish your UK tax position. Some sources of investmentincome can effectively be received tax free or at a reducedtax rate when you are non-resident. However, you need toconsider your overall tax position as the interaction of therules can be complex Therefore, this is an area where adviceon your own personal circumstances is needed. This willdepend on the level of investment income you receive fromeach source. The main sources of personal income arebroadly taxed as follows:UK interest: There is no taxation of UK bank interest atsource. In addition, a ‘personal savings allowance’ isapplicable, which means that some or all of your bank andbuilding society interest may be tax free, depending on theamount of interest payable and the level of your other sourcesof income. Please contact us for further details.UK dividends: A tax free ‘dividend allowance’ applies whichfrom April 2018 is set at 2,000 per year. Dividends are alsotaxed at different rates from other income. Please contact usfor further details.Rental income: Any profit which arises from renting UKproperty will continue to be taxable in the UK. We cover thisin more detail in section 3.
2. The taxation of non-residents(2/4)In a complete UK tax year of non- residence, a restrictionoperates to limit your liability to UK income tax. Your taxliability is the lesser of: UK tax (if any) deducted at source from certaininvestment income, plus your UK tax liability on anyother UK source income calculated without any claim totax-free personal allowances. Your UK tax liability on all UK source income afterclaiming tax-free personal allowances.It follows that if you have significant UK sourceinvestment income and little other UK source income (e.g.rental income) the first alternative will usually result in alower UK tax liability.Key considerationsCarefully review your personal finances to establish theUK and foreign tax implications of your assignment.If UK residence is broken, consider the net impact ofmoving funds offshore to eliminate UK tax.Bear in mind that while abroad you may have to payforeign tax on UK and offshore investments, including onUK investments that are tax-exempt in the UK.2.5 Are there significant advantages in moving mypersonal investments outside the UK?Investment income received from assets based outside theUK is not taxable when you are considered non-resident.Special rules apply in the tax year that you return to the UKand advice should be sought before returning to the UK toeffectively manage your overall tax position.There may be UK tax advantages of moving your investmentsoutside the UK, but you need to consider your personalinvestment strategy, the tax treatment overseas and any antiavoidance legislation before taking this action. For example, ifa tax liability arises in your assignment location on personalincome then reducing your UK tax liability may have noincremental tax impact.You also need to consider any tax (e.g. capital gains tax) andtransaction costs of moving your investments outside the UKand any exchange rate risk. In addition, there may bedisclosure obligations for offshore organisations paying outinvestment income/gains, for example under initiatives suchas Tax Information Exchange Agreements and the OECDCommon Reporting Standard.Although there may be significant UK taxadvantages of moving your investments outsidethe UK, you need to consider your personalinvestment strategy and the tax treatmentoverseas before taking this action.2.6 What are the implications if I make capitalgains while non-resident?Normally, UK capital gains tax is only applicable to individualswho are tax resident in the UK. However, you may be liable toUK capital gains tax on disposals of residential property whileyou are non-resident. Please see paragraph 3.2 below forfurther details. More generally, the application of the capitalgains tax regime is a complex area. If you are subjectcapital gains tax regime is a complex area. If you are subjectto temporary non-residence rules (typically if you return to theUK five or fewer years after your departure) gains madeduring your period of non-residence may be taxable in the taxyear of your return to the UK. These rules are explained ingreater detail in section 2.11.2.7 Are there any tax implications for my otherpersonal income?If you leave the UK and become non-resident then certaintypes of personal incom
treated as non -resident, you will normally continue to be subject to UK tax on worldwide income. A UK tax liability will arise on many of your assignment -related payments, even if these are paid in the assignment location, such as housing . Making
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