Overseas Workday Relief (“OWR”) Print

OWR is only available to individuals who are not domiciled in the UK.

OWR is available to those non-domiciled individuals for the tax year in which the individual becomes UK resident, and for the following two tax years. This is irrespective of how long the individual intends to remain in the UK.

Income relieved under these provisions is taxable on the remittance basis, which must be claimed. Accordingly, the claimant is unlikely to be entitled to the personal allowance. The tax liability is only mitigated if the earnings remain outside the UK.

Example:

Tariq first arrived in the UK on 1 June 2020, and is not domiciled here. He has a 2-year contract with a UK employer and during the year 2020/21 his salary is £120,000. PAYE tax of £40,500 is deducted. He spends 60 workdays outside the UK out of a total of 222 workdays in the year. His pay is paid into his overseas bank account, and he claims both the remittance basis, and OWR. His tax liability is calculated as follows:

£
Salary 120,000
Relief due £120,000 x 60/222 32,432
Taxable income 87,568
First 37,500 @ 20% 7,500
Balance 50,068 @ 40% 20,027
27,527
Less tax deducted under PAYE 40,500
Tax repayment due 12,973

The full OWR will only be available if Tariq has limited his remittances to the UK to the net salary after both tax and NIC relating to his UK duties. Otherwise, part of the earnings relating to the overseas workdays will be remitted to the UK and become taxable on the remittance basis. In addition, as the amount of Tariq’s unremitted overseas income is in excess of £2,000 he loses his personal allowance, and CGT annual allowance on claiming the remittance basis.

Tariq’s employer may apply to HMRC for authority under the provisions of Section 690 ITEPA 2003 to operate PAYE on the estimated proportion of Tariq’s salary attributable to UK workdays. By reducing the income tax deducted from the salary, Tariq will automatically benefit from reduced remittances to the UK.

Start a Conversation

How can we help you? Please complete all fields