Sending employees to the UK – six top tax tips
For those considering sending employees to the UK, there are several ways to reduce the employment costs with careful planning. Our multi-disciplinary team can help arrange UK assignments to allow employers to take maximum advantage of the key planning points below.
- Overseas workdays relief
Employers can reduce the UK tax bill of their assignees for up to three years if they make business trips outside the UK during the assignment. The income for those business trips will not be subject to UK tax if it is paid outside the UK and retained outside the UK. While the arrangements required are relatively straightforward and easy to put in place, care needs to be taken.
- Living costs in the UK
It is possible to treat an assignment in the UK as merely an extended business trip if it is intended to be for no more than 24 months. This means that assignees’ actual UK living costs can be paid (accommodation, meals travel etc) without there being any UK tax or reporting obligations. However, there are a number of key steps that employers should take to achieve this tax efficiency. These include ensuring that expenses are reimbursed rather than paying a round sum allowance which does not qualify for this tax advantage.
- Continuing in the home country pension plan
Most employees will want to continue participating in their home country pension plan. A UK assignment may not have any adverse tax effect in relation to contributions make to a foreign pension plan. It may be possible for individual contributions to be deducted from UK taxable income and for employer contributions to be treated as not taxable in the UK. Agreement can be made with the UK tax authorities in appropriate cases if supervening legislation does not apply to grant the exemption.
- Home leave
Where certain conditions are met, employers can pay for their employees’ and their families’ home leave trips without any UK tax payable.
- Relocation expenses
Rather than pay employees a relocation allowance or a relocation bonus, employers should pay or reimburse their assignees ’relocation expenses’. Provided these are regarded as “qualifying” expenses, an amount of up to £8,000 carries no tax or social security. Employers can also arrange the travel costs to the UK to fall within the home leave provision so that those travel costs do not count towards the £8,000.
- Social Security
The UK has entered into many social security agreements with other countries including the US, Japan, Korea and other EU and EEA states (via EU derived legislation). Employers can use these agreements to retain their assignees in their home country social security scheme rather than becoming subject to UK social security charges.
Even where there is no agreement in place with the home country, employers can still avoid having to pay employee and employer social security in the UK for the first 52 weeks of the assignment if certain conditions are met.
To learn more about how to take advantage of these potentially valuable assignment planning tips or to discuss any of the issues raised, please contact Bina Gayadien at Bina.Gayadien@abbisscadres.com, or email firstname.lastname@example.org.
To learn more about how Abbiss Cadres help international companies with global mobility please see our brochure for more details.