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  • Writer's pictureLuciano Peria

A TAX GUIDANCE FOR INDIVIDUALS COMING ON INTERNATIONAL ASSIGNMENT TO THE UK


Through this article we would like to share our experience with you, to assist you when you are considering making your international move to the United Kingdom.


It can be daunting moving to a new country on an international assignment. Understanding how tax and social security are affected by making such a move can add to the list of complexities you have to deal with.


Our Principal has been advising foreign nationals coming to the UK for over 20 years, helping several of international assignees understand what they need to do.


The guidance contained in this document reflects UK tax law and the reporting position for the 2022/23 tax year starting on 6 April 2022 (unless indicated otherwise).


We urge you to ask for advice before you act on any of the information contained in this article to make sure you have the most current data.


We hope you find this article useful and informative.


This article does not cover the tax and social security implications of Self-Employed individuals or Partnerships, for which there are different rules.


An overview of the UK tax system


The UK comprises England, Scotland, Wales and Northern Ireland and most, but not all, of the smaller islands around the British coast. The tax system extends to offshore oil platforms in British territorial waters. The Channel Islands, the Isle of Man and the Republic of Ireland are not part of the UK for tax purposes.


The income tax year in the UK runs from 6 April to the following 5 April. The main direct taxes for individuals are income tax and capital gains tax (CGT). You may also be required to pay UK National Insurance Contributions (NICs). Most goods and services are subject to Value Added Tax (VAT) which is a sales tax added to the purchase price. There is also a variety of other taxes on goods and services, such as, taxes on alcohol, car fuel, insurance and air travel.


Council tax is a local tax based on the value of the property in which you live. You will need to pay council tax even if you live in rented property unless the landlord has specifically accepted responsibility to pay council tax in the rental agreement. You are unlikely to be affected by estate and gift taxes (Inheritance Tax (IHT)) unless you die or make significant gifts while living in the UK.


The rate and amount of tax you pay may vary according to where you live. The Scottish Parliament and the Welsh Assembly have the power to set different rates of and thresholds for income tax for those living in Scotland and Wales respectively.


Like many other countries, the UK may require taxpayers to file an annual return of taxable income and gains, complete with a self-assessment of the remaining tax due. There are fixed filing and payment dates. Many employees working in the UK pay all their tax through payroll deductions and are not required to file a tax return. For the more complicated tax position of a foreign national on assignment means you will almost certainly have to file a return. This applies even if your taxes are being funded by your employer. If you are filing your own tax return but have not been sent a notice to complete one, you should request one from the UK tax authorities, HM Revenue and Customs (HMRC), by 5 October following the tax year in order to avoid incurring penalties. If Peria & Co is acting on your behalf for that tax year we can liaise with HMRC as required.


Determining your UK tax liability


Your liability to UK tax depends on several factors, particularly your residence and domicile status. When you arrive in the UK you will need to make a provisional assessment of your residence status, which you can confirm later by filing your tax return. Broadly speaking, your liability to pay tax in the UK will be determined by your residence status as follows:


1. Non-resident – You are taxable on personal income that arises in the UK. If you perform employment duties in the UK then part of that remuneration could also be taxable. You may also be liable to UK capital gains tax on disposals of UK residential property.

2. Resident – You are taxable on worldwide personal investment and employment income. Any capital gains you generate will also be taxable in the UK.

3. Non – Domiciled – If you are non-domiciled, tax relief may be available for any non-UK employment duties and other reliefs may apply for non-UK investment income and gains.


An individual can be resident in more than one country at the same time. The fact that an individual might prove to be resident elsewhere does not mean that they will not be resident in the United Kingdom. The decision whether an individual is resident in the United Kingdom is made by reference to the Statutory Residence Test (SRT) for the years 2013 to 2014 onwards. These rules are complex and we recommend you determine your residence position by taking advice from your Peria & Co tax adviser.


Domicile is a common law concept, which has a major impact on how you are taxed in the UK. Being non-UK domiciled has significant tax advantages. Provided you claim the remittance basis, certain personal income such as interest, dividends and capital gains which arise outside the UK on non-UK situs assets will only be liable to UK tax if remitted to the UK. You may also be able to claim an exemption from paying tax on income earned under a separate foreign employment contract.


An individual who is not domiciled in the UK may make a claim for certain types of offshore income and gains to be taxed only to the extent that they are remitted to the UK, rather than being taxed on them as they arise, the arising basis.


Claiming the remittance basis will, however, mean giving up any entitlement to the tax-free personal allowance and to the annual exemption for CGT. You may wish to take further advice before deciding whether it is beneficial for you to claim the remittance basis for any particular UK tax year, especially as you are able to choose year-by-year whether or not to claim.


If an eligible individual has less than £2,000 of offshore income and gains in any complete UK tax year, the remittance basis can apply automatically, without any loss of tax- free personal allowances or annual exemptions.


Any eligible individual who is 18 years of age or over and who has been resident in the UK in at least 7 out of 9 of the previous UK tax years, must pay an additional £30,000, known as the remittance basis charge (RBC), in order to claim the remittance basis. This charge increases to £60,000 if resident in at least 12 out of the 14 previous UK tax years. Once you have been resident in 15 of the previous 20 UK tax years, you acquire a ‘deemed domicile’ status in the UK – in this case, you will be taxed on the arising basis on your worldwide income and gains.


Whether paying the RBC is worthwhile will depend on comparing the amount of the charge with the additional UK tax which would be payable on the foreign income and gains brought into the UK tax system under the arising basis of taxation.


UK law deems an individual to be tax resident for an entire UK tax year. However it is possible to split the tax year into a UK part and an overseas part if you meet certain conditions.

Purchasing or renting a property in the UK may have an impact on your residence status, your split year status and also other factors such as relief under a Double Tax Agreement (DTA) and certain tax exemptions.


Therefore, please consult your peria & Co adviser about the possible tax implications, particularly if you buy a UK property.


The taxation of employment income


The factors that determine your UK tax residence status were explained above. The way your residence status will determine the taxation of your employment income is set out below.


Non-resident

Earnings related to UK duties will be taxable in the UK. Earnings related to duties performed outside the UK are not taxable in the UK.


Resident and UK Domiciled

If you are resident and UK domiciled your earnings will be taxable on a worldwide basis.


Resident and non-UK Domiciled

Earnings from UK duties will be taxable. If you have not been resident in the UK in the three years prior to your tax year of arrival then you will be eligible for ‘overseas workday relief’ in your first three years of UK tax residence. Overseas workday relief allows you to exclude from UK tax those earnings which relate to your non-UK workdays providing you file on the remittance basis a sufficient proportion of your employment income is paid and retained offshore.


Allowances, reimbursements and benefits which you receive relating to your assignment are taxable in the UK even if paid overseas. This includes all cost of living allowances, for example, the provision of housing and company cars. It may be possible to claim exemptions for certain specific items such as relocation expenses and home leave reimbursements. Reimbursed business expenses are not normally reported or taxed. In addition, overseas workday relief may be available on your taxable income.


If you have two or more separate employments, one of which is performed wholly outside the UK, the earnings from your non-UK employment may be liable to UK tax only if remitted to the UK if you make a claim for the remittance basis and if:


1. you are non-UK domiciled

2. your employer is not UK resident, and

3. none of the duties of that employment are performed in the UK in the tax year in question.


Any relocation costs paid on your behalf or reimbursed to you by your employer and related to your move to the UK are in principle taxable in the UK, but may be exempted subject to a limit of £8,000.


Your employer, or the UK organisation to which your services have been made available, is required to operate pay as you earn (PAYE) on cash payments and certain benefits-in-kind, including many types of employee share benefits. This deductions normally applies even if the payments or benefits are delivered to you outside the UK, or if payments are received before or after your assignment but which relate to your UK assignment. If your employer is responsible for funding your UK tax liability they should arrange to pay the PAYE directly on your behalf.


If you come to the UK, having not been resident here in the two previous UK tax years, your employer can reimburse the cost of your travel to the UK and your return trips home tax-free for up to five years.


As far as the UK is concerned, if you are not UK resident, you will only pay UK tax to the extent that you carry out your employment duties in the UK. Under double taxation treaty provisions you may be exempted from UK tax if your working visit is for less than six months and certain other conditions are met. Otherwise, you will pay UK tax and double tax relief may be available in the foreign country. In practice, claiming the remittance basis also helps to prevent double taxation.


Income relating to your UK assignment is taxable even if it is received before you arrive in, or after you leave, the UK. For example, a transfer bonus contingent on you commencing your UK assignment and which is paid before you arrive in the UK would be taxable in the UK. Other examples could include a bonus earned while resident in the UK but received after your assignment has ceased.


The Taxation of personal income and capital gains


You are liable to UK tax on investment income, for example bank deposit interest or dividends on UK shares, received from UK sources. Rental income from UK property is also regarded as UK source income.


If you are non-resident you will only be taxed on your UK sourced investment income. If you are resident then generally you will pay tax on your worldwide investment income. However, if you are resident but considered non-UK domiciled and claiming the remittance basis, you will only be taxed on most forms of non-UK source investment income if it is remitted to the UK. If the remittance basis is not claimed you will be liable to UK tax on this income. Claiming the remittance basis usually involves some cost in terms of loss of tax-free allowances, so you will need to decide on a year-by-year basis if it is worthwhile.


If you rent out your property in your home country you may have to pay UK tax on the rental income. Rental income is taxable unless you are non-resident or resident and the remittance basis has been claimed, in which case it is only taxed if and when it is remitted to the UK. Any UK tax will be based on the profit you make, determined according to UK rules.


UK residents are liable to UK Capital Gains Tax (CGT) on disposals of chargeable assets. You are entitled to an annual CGT exemption unless you claim the remittance basis and only gains in excess of this amount are taxable. The annual exemption for 2022/23 is £12,300. Capital gains will be taxed at 10% for basic rate taxpayers and 20% of higher and additional rate taxpayers. Where a gain is realised on the disposal of a residential property, the relevant capital gains tax rates are 18% for basic rate taxpayers and 28% for higher and additional rate taxpayers.


If you are not UK domiciled and make a claim to be taxed on the remittance basis, UK CGT is not payable on gains from the disposal of assets situated outside the UK, except to the extent that such gains are remitted to the UK. However, where the remittance basis is claimed you will give up the annual CGT exemption for the tax year concerned.

If you claim the remittance basis you will not normally be able to claim relief for any offshore capital losses.

Please note that capital losses in foreign currency terms are only losses for CGT purposes once denominated in sterling. It is possible for a capital loss to become a capital gain in sterling terms by the time that foreign currency movements have been converted to sterling.

Non-residents are liable to UK capital gains tax on disposals of UK residential property, subject to an exemption which may be available where the property is used as your Principal Place of Residence.


Deductions, allowances, credits and filing status


UK tax residents receive an annual tax-free personal allowance unless they choose to claim the remittance basis or have income in excess of a prescribed limit, currently £100,000 after which a phase out applies. Tax is not due until your taxable income exceeds the personal allowance, as applicable. Each individual has his or her own personal allowance. If you are treated as tax resident for only part of the UK tax year, you will nevertheless receive your full annual tax-free personal allowance subject to the restrictions above mentioned. If you are non-resident in the UK, you will generally only be entitled to a personal allowance if any of the following apply:


1. you hold a British passport

2. you are a citizen of a European Economic Area (EEA) country

3. you have worked for the UK government at any time during that tax year


You might also get it if it is included in the double-taxation agreement between the UK and the country you live in.


If a double taxation treaty applies you will rarely end up incurring a double tax burden. Double taxation treaties correct situations where double taxation has already occurred and also try to prevent it arising in the first place. If you are a UK tax resident, the UK will give treaty relief for overseas tax paid on overseas source income to the extent that the income has been doubly taxed.


Where no double taxation agreement is in existence you may still be entitled to relief under UK domestic law. In all cases, relief will be limited to the UK tax due on the doubly taxed income for the relevant UK tax year. If you are tax resident in another country that country may give relief for UK tax paid on UK source income if it is also taxed in that country.


The UK has a system of independent taxation, so each spouse or civil partner with taxable income is required to file a separate tax return each year. Each spouse or civil partner is entitled to separate personal allowances, and his or her own annual capital gains exemption, unless he or she claims the remittance basis, and to separate tax rate bands.


Social security contributions and benefits


You may have to pay UK National Insurance Contributions (NICs). This will depend on a number of factors including:


1. Who you are employed by.

2. The length of your assignment.

3. The country you were based in prior to your assignment to the UK, and

4. In some cases, your nationality.


If you are liable to pay UK National Insurance contributions as an employee, you normally have to pay Class 1 rates, as does your employer.


UK Child benefit is a non-contributory social security benefit which is generally payable for all children that you are responsible for. You may be able to claim benefit in the UK if:


1. You have indefinite leave to remain in the UK, and

2. You come from another EEA country, or

3. You come from certain other countries that the UK has agreements with covering the payment of child benefit, for example, New Zealand and Canada.


Where neither of the last two conditions above apply, you cannot usually get UK child benefit if your right to remain in the UK is subject to immigration control.

UK child benefit is not currently taxable in the UK unless you have an income of over £50,000, after which a phase out applies. If your or your spouse’s income exceeds £60,000, any child benefit claimed during the tax year will be ‘clawed back’ in full by HMRC.


Entitlement to state-provided free medical treatment in the UK. The National Health Service (NHS). Under current legislation, anyone who is considered resident in the UK is exempt from charges for hospital treatment. A resident for healthcare purposes is a person living in the UK lawfully and on a settled basis, or living a settled mode of life, for example, if you come to the UK for the purposes of employment. This exemption also applies to your spouse or children under the age of 16 (or 19 if in further education) if they have accompanied you to the UK.


Although most healthcare services provided to UK residents under the NHS are free at the point of treatment, there are certain specific exceptions. For example, dental care, eye care and prescription medication are generally not provided free at the point of treatment. This means that, in most cases, some of the costs of these treatments will have to be paid by the patient directly. You may therefore wish to consider whether you should seek additional private medical insurance cover for yourself and your family members, if they have accompanied you to the UK.


Other matters to consider


Where you have been granted and or exercise stock options during your UK assignment, due to the complexity of the regime governing the taxation of stock options, you should seek and obtain professional advice before any actions are taken.


Generally speaking, a liability to UK tax will arise on the exercise of an option, even if the option was granted to you prior to the commencement of your UK assignment and or if you exercise an option even after your assignment has ceased and you are non-UK resident.


You may be able to continue to participate in your employer’s home country pension plan. You will need to determine whether your particular pension plan allows you to continue to participate during your assignment to the UK.


Since Brexit, you will almost certainly require entry clearance (a visa) before you can begin your assignment in the UK. If you are being sponsored by your company in the UK, before you can apply for entry clearance, the company must first issue you with a Certificate of Sponsorship under Tier 2 of the Points Based System. You can submit an entry clearance application to a British Diplomatic Post in your country of nationality or country of legal residence.


If you are non-UK domiciled your exposure to inheritance tax (payable on death and by the donor in respect of certain lifetime gifts) is limited to your UK-based assets. You will be deemed to be domiciled for all tax purposes (i.e. for income tax and capital gains tax as well as inheritance tax) after you have been UK tax resident for 15 out of the last 20 tax years. You can also be deemed domicile in the UK for income tax purposes if you were born in the UK, have a UK domicile of origin and are UK resident for the year.


For inheritance tax purposes, you can also be a deemed domicile of the UK if you were born in the UK with a UK domicile of origin, have acquired another non-UK domicile of choice, are resident in the UK and were resident in the UK in at least one of the two previous tax years. In these circumstances, your exposure to UK inheritance tax extends to your worldwide assets, subject to the provisions of any applicable estate tax treaty. Inheritance tax planning should be considered if you are planning to settle long-term in the UK or acquire significant assets here. The impact of these new rules is particularly complex in the context of offshore trusts. In addition, inheritance tax is payable on all UK residential property owned by non-domiciles, regardless of their residence status for tax purposes.


You should consider whether you may be triggering a UK tax liability by remitting foreign income or capital gains. The taxation of remittances is a complex area; for instance, remittances are not limited to straight cash transfers, and there are special rules regarding remittances from a non-UK account which contains a mixture of earned income, investment income and capital gains.


You may need professional advice before transferring funds to the UK, especially if the amounts are substantial and or if they involve converting any other currency into sterling.


If you are employed by a non-UK employer and assigned to the UK, you will normally need to complete a HMRC Starter Checklist with your employer on arrival in the UK. This will enable HMRC to establish a Self-Assessment tax record for you and will facilitate payroll deductions. There is no separate arrival form to advise HMRC of your arrival in the UK.


If you are employed on a local UK contract you may need to help your employer to complete a HMRC Starter Checklist for payroll purposes but you will also may need to complete a form SA1 and file this with HMRC to allow them to create a Self-Assessment record for you.


HMRC should, on receipt of the relevant information, write to you and provide you with a Unique Taxpayer Reference Number (UTR). The UTR number is required to file a tax return online and you will need to provide this number to your tax adviser that you may engage to file your tax return.


To get a National Insurance number you need to apply online. You will need to prove your identity when you apply. You will need any of the following documents:


1. a passport from any country

2. a biometric residence permit (BRP)

3. a national identity card from an EU country or from Norway, Liechtenstein or Switzerland


You can still apply if you do not have any of these documents, but you may need to attend an appointment in person to prove your identity.


If you already have a National Insurance number, you do not need to apply for a new one, even if your personal details change. Your National Insurance number remains the same for life.


There is no requirement to obtain an exit permit from the UK tax authorities before you leave the UK, but HMRC’s Expatriate Tax Group asks expatriates to complete a declaration on leaving the UK, so that they can decide whether or not a tax return will be needed for any income received post departure. If your tax affairs are handled by any other part of HMRC, completing a form P85 will enable them to confirm your tax residence status following your departure. This may speed up tax refunds.


This guidance is for general information only and does not substitute specific advice. You should not rely on it as specific advice and Peria & Co cannot accept any liability for its contents. If you need advice please contact us at info@peria.co.ukor call us on +44 (0)1932 849023.

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