UK Expat Tax Myths
For Expats, taxes can create some of the biggest problems as a part of the assignment abroad. As with anything, myths are passed from one person to another and sooner or later expats find themselves in trouble. Global Mobility specialists are essential for dispelling these myths and ensuring that expats are able to complete their assignments without a hitch. For those on assignment in the UK, there are some very important aspects of tax that expats need be aware of.
Myth 1: 183 Days
This is an exceedingly common myth amongst expats within the UK, that if an individual is on assignment within the UK for less than 183 days, they won’t be liable to tax. Tax however, does not just rely on an allotted amount of time spent in the UK. Typically if the employer resides in the host country, tax is still mandatory. It’s most important to be aware that revenue authorities can consider ‘economic employer’ within this bracket, not just legal employer – any recharges to UK entities will raise the attention of HM Revenue and Customs.
Myth 2: Salary is Paid Overseas
It doesn’t matter who pays the employee’s salary, unless exempt under terms of a tax treaty, an employee will still be taxed in the UK. In order to do this a ‘shadow’ UK payroll will be established in addition to overseas. Similarly, non-resident directors of UK companies may be required to pay tax on such things as accommodation expenses and any PAYE or P11d obligations. The penalties for those who avoid these payments are severe.
Myth 3: Salaries Paid Before or After Assignment
It’s quite a common belief for employers and employees that assignment salaries received before or after the assignment are irrelevant for tax related purposes. This is very much wrong. Whether received before or after the assignment, the host country will almost definitely want to tax the payment.
Myth 4: Tax Refunds
Tax refunds can be confusing even for citizens of the UK, never mind expats on assignment there. Common myths surrounding refunds is that they will remove eligibility for pensions, affects stays in the UK and even that everyone is due a refund when they leave the UK. As long as you have paid national insurance relating to a pension scheme, claiming pensions is unaffected by tax refunds. In the same way, applying for the refund will not affect your stay in the UK, and any global mobility specialist can help you ascertain whether you qualify. If you have worked in the UK at anytime during the previous four years you can apply for a tax refund whether you are in employment or in a new location.
Myth 5: UK National Insurance (NICs)
Unless an expat’s employer has a valid exemption certificate from the expat’s home country within a social security agreement, NICs are required to be paid by both employee and employer. It’s worth checking to see whether your country is exempt, since not all countries have a social security agreement with the UK.
Taxes are a minefield for expats around the world. With the help of a high quality global mobility team, legal and financial issues can be easily avoided. The most important thing, however, is to fully research the tax requirements of your host country and don’t believe everything you hear from other expats.