Autumn Budget – The highlights series by Sopher + Co (Article 2 : Simplification of Overseas Workday Relief)

Welcome to the second article in our Autumn Budget – The highlights series, if you missed yesterday’s article discussing Foreign Income and Gains (FIG) regime can view it here.  

In this article, Sue Doran, Tax Director, discusses the Overseas Workday Relief and shares the following insights:

• Overseas Workday Relief (OWD): Under the new FIG regime employees will be able to claim OWD for duties performed overseas for a longer period of up to four years of tax residence.  The real benefit of these new rules is that anyone who qualifies will be eligible for the relief regardless of their domicile status and the income does not have to be kept offshore.  This will be a welcome break from the need to track remittances and structure bank accounts, so funds are not mixed.

• Transitional rules will be introduced to allow employees who are claiming OWR already but are ineligible for the new FIG regime to claim until the end of their third tax year of residence. Those employees that are eligible under both regimes will be able to claim OWR for four tax years.

• Applying for OWD: There will be a simplified process for applying OWD relief at source in the employee’s payroll by just requiring a notification and automatic acknowledgement. This replaces the current system of submitting an application and waiting for approval from HMRC before adjusting the PAYE withholding.

• Restrictions: Some high earning employees and those with extensive overseas duties may be restricted due to a cap at the lower of 30% or £300,000 (per tax year) of the qualifying employment income.

Our overall view is that more taxpayers will enjoy the relief as a result of the extension to four years and the eligibility criteria. Employers will benefit from the simplified payroll process and employees will welcome the freedom to bring their offshore employment income into the UK.  We should see some increased interest in the UK as a destination for employees on short to medium term assignments. Although, reiterating James’ comment mentioned in our previous article on Foreign Income and Gains (FIG) regime as to whether the four-year regime is long enough to encourage long-term relocation to the UK will remain to be seen.

Please note, this information is intended as a general overview. It is important that professional advice is sought on specific issues relevant to your circumstances. To understand how these changes will affect you or employees, please contact us for tailored advice.