Overseas Workday Relief (OWR) is a valuable exemption only available to foreign domiciled UK tax residents which treats part of the earnings from a UK employment wholly or partly performed abroad as if it were a foreign source of income. If that part which is performed abroad is not remitted to the UK then it is not subject to UK tax. Accordingly, any PAYE tax deducted at source from your salary can be refunded.
In order to claim this relief you have to:
- Be tax resident in the UK in the tax year following three consecutive tax years of non-UK tax residence
- Have a foreign domicile
- Elect to be taxed on the remittance basis
- Be employed in the UK
- Perform duties wholly or partly abroad
- Keep that proportion of income relating to foreign duties abroad in an offshore bank account
- Keep accurate records to support your claim
The relief is only available following three consecutive years of non-UK tax residence.
Then it is available for the first three tax years of UK tax residency.
It is preferable that the earnings are paid into a qualifying account. This is a bank account in your name, located overseas, with a balance of £10 or less before the first deposit of earnings into the account.
Special mixed fund rules apply to a qualifying account which treats all the remittances over the year as a single remittance. This simplifies the calculation of what proportion of the earnings were not remitted to the UK. If a qualifying account is not used then each remittance has to be analysed transaction by transaction under the normal mixed fund rules. Please see Remittance Planning for further information.
The relief may apply in the year of arrival or departure where split year rules apply. However, it applies only to that part of the tax year where you are UK tax resident. Any foreign earnings relating to the non-UK resident part of the tax year may be treated as clean capital and are not taxable in the UK even if remitted to the UK.
This relief does not apply to foreign employments. The income from a foreign employment, where the duties are performed wholly abroad, may not be taxable in the UK providing the earnings are not remitted to the UK. Special rules apply where there is an associated employment abroad where duties are performed partly in the UK.
As well as helping you open an overseas bank account, Mark Davies & Associates can advise on how to maximise this relief and what documentation is needed to support your claim. The relief has to be claimed on your self assessment tax return which we can prepare for you.
Contact us for a quote.
HMRC frequently audits or investigates self assessment tax returns where overseas workday relief is claimed. We can manage HMRC investigations on your behalf, maximising the available relief and reducing the stress and time spent. Contact us for an appointment, terms and conditions apply, to discuss how we can help you with an HMRC investigation.
By choosing us to complete your tax return, our expertise in the reliefs available to non- doms will reduce the risk of investigation by HMRC.