Case Study One
UK national assigned overseas
Ben has been seconded to Italy for 12 months from 1 September 2015 to 31 August 2016.
He works 6 weeks on and 4 weeks off spending all his time off in the UK and travels all over Italy for work, so he has no home in Italy. His home in the UK remains available to him and he stays there when he visits the UK. This has resulted in him remaining resident in the UK throughout his assignment
His remuneration package is as follows:
|Home leave||£1,000 pa|
|Medical insurance||£800 pa|
UK Tax implications
He will be taxed on £60,000 pa i.e. his salary.
As a result of detached duty relief, he will not be taxed on his accommodation and no tax will due in respect of his home leave and private medical insurance benefits (important conditions apply).
Ben will be in a double tax situation paying tax in both Italy and the UK on the same income, he will, therefore, need to look at the Double Tax Treaty between the UK and Italy to see if any exemption or relief from tax can be claimed under the treaty and, if not, which country has to give him relief for the double tax (most likely the UK).
Case Study Two
Foreign national assigned to the UK
Kurt is on a 25 month secondment to the UK from Germany which started on 1 July 2015. He is not tax equalised and is, therefore, responsible for his own taxes.
He receives the following:
|Home leave travel||£2,000 pa|
|Medical insurance benefit||£650 pa|
|Company car benefit||£4,500 pa|
Kurt's employer pays directly for his accommodation while in the UK which amounts to £18,000 pa.
Kurt is a member of a private pension scheme in Germany and pays contributions into the scheme of £4,000.
Kurt performs 20% of his duties outside the UK while on secondment, with all his salary paid into a UK bank account.
It is established he is resident in the UK under the SRT throughout all of his secondment.
UK Tax implications
Kurt will be regarded as resident from 6 April 2015, therefore, he will need to see if split year treatment will apply to split the 2015/16 tax year between an overseas part, when he is treated as if a non-resident, and a UK part, when he is treated as a resident. This will also apply for the tax year of his departure from the UK..
He will be taxable in the UK on £80,150 i.e. on his salary and on the benefits he receives (the company car, medical insurance and provision of accommodation).
He will not be taxed on his home leave travel (providing certain conditions are met).
No tax relief will be available for the contributions Kurt makes into his pension scheme and, if beneficial, relief for earnings from overseas work days may have been available if he had been paid into an overseas bank account and not remitted the earnings to the UK.
If Kurt's secondment had been slightly less than the original 25 months, then detached duty tax relief may have been available and his accommodation would not have been taxable (assuming all relevant conditions had been met).
Regarding Kurt's pension contributions, if appropriate approval had been obtained from the Revenue, he would have been able to have had a tax deduction for the contributions he made.
All in all, if Kurt had taken advantage of all the tax reliefs available to him, by structuring his secondment more carefully, he would have saved over £20,000 in UK tax during his secondment.
Case Study Three
British National Emigrating
Julie has decided to start a new life in Australia. She has always spent her life in the UK and leaves the UK for good on 1st September 2015. She has no intentions of returning to the UK. She retains her home in the UK and has decided to rent it out. She also has 2 other properties in the UK, which she has always let out. She decides to keep one, but sell the other property to finance her move to Australia. She sells this property during June 2015 and makes a gain on this sale.
UK Tax Implications
Even though Julie spent less than 183 days in the UK during 2015/16, she satisfies the only home in the UK test under the SRT and so will be regarded as resident in the UK for all of the 2015/16 tax year i.e. until 5 April 2016, potentially being in a double tax situation from when she moves to Australia to 5 April 2016 i.e. taxed on her income in both the UK and Australia.
In this situation she will need to see if split year treatment applies, so that she can be treated as a non-resdient for part of the 2015/16 tax year. Failing that she can look at the double tax treaty between the UK and Australia to see if there is any exemption or relief from tax which she can claim under the treaty.
She will be subject to UK capital gains tax on the sale of her investment property regardless of whether or not she is resident for UK tax purposes. However, if she had waited to sell the property as a non-resident, then she would only be subject to UK capital gains tax on the gain from 6 April 2015, rather than from when she first acquired the property. Alternatively, if she kept this property and sold her home instead, as this had been her only main residence she would obtain relief for this and if she sold before 6 October 2016, no UK capital gains would be due.
Julie will be automatically covered by the non-resident landlord scheme and so have tax deducted from her rental income by her letting agent, if she has one, or tenant if not. She can apply to HM Revenue & Customs to receive this rental income gross with no deduction of tax, although she will still need to declare this income on her UK tax return and pay over any tax due under the self-assessment system.