by Sarah Robert
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11 May 2018Ex-Pat Tax
by Sarah Robert
If an employee is seconded to the UK for no more than 24 months, a deduction from earnings is allowed under detached Duty Relief for travel expenses (including subsistence) incurred, such as:
Provision of furniture
Meals at the temporary workplace
Home to office travel (usually considered as private commuting and taxable.)
Only housing and food costs for the employee fall within the relief. As a general rule, 10% for a spouse and 5% per child can be deducted from housing costs to calculate the allowable amount. Claiming a deduction for food, however, is more difficult as detailed records would need to be kept and it may be hard to calculate what portion of these expenses were incurred by the employee and not by family members. For this reason it often considered too problematic to claim any deduction for food.
As an employer, if you pay your assignee a round sum allowance, the payment is taxable, however a deduction can be claimed by the individual via a UK tax return for actual expenses incurred.
The employee should therefore keep records to support the claim, such as invoices, bank statements, receipts, rental contracts confirming rental amount etc.
What if an assignment is extended beyond 2 years?
If an assignment that was initially planned to be less than 24 months is extended, travel costs up to the point of 'change' are deductible, but costs after that date are not, so the relief would stop at the date the extension is agreed.
A temporary workplace can also exist where an employee attends a place of work for less than 40% of their working time and it is not a place they would normally attend in the course of their duties. This arrangement can be for an unlimited time.
What assignment planning is required?
All documentation should be consistent with an anticipated assignment of not more than 24 months, including work permit applications. A visa length of more than 24 months would not be problematic as long as the assignment contract states a maximum of 24 months and all emails and other correspondence show the same. Rental agreements should also not be signed for a longer period.
To be eligible for temporary workplace relief a relationship should still exist between the employee and their home country location, therefore they should remain on their home country employment contract (although this can be suspended). It is possible in very limited circumstances for the relief to be available where an employee is on a local UK contract, but the continuing relationship with their home country would need to be clearly demonstrated as would the temporary nature of the UK work, should HMRC enquire into the eligibility of the claim.
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