Guidance

RDR4 Overseas Workday Relief

Updated 20 October 2020

This note gives you information about Overseas Workday Relief (OWR) and explains how it works. You should read this guidance together with the statutory residence test to gain a better understanding.

1.

General earnings from employment that you earn in a year for which you are resident in the UK are taxable in the UK when you receive those earnings.

2.

During the tax year, the earnings which relate to duties you perform overseas in that year are foreign earnings if:

• you’re not domiciled in the UK throughout the year
• you’re taxed on the remittance basis
• your duties of employment are carried out wholly or partly outside the UK, and that year is either:
  • the first tax year immediately after 3 consecutive tax years you were not resident in the UK
  • one of the next 2 tax years after such a year

These earnings are not taxable in the UK unless they’re remitted to the UK.

3.

If your foreign earnings (as described in section 2) are not remitted to the UK in the tax year that you receive them, they’re not taxable in the UK in that tax year. This is overseas workday relief.

4.

General earnings for a tax year other than one described in section 2 are taxable in the UK in the tax year that you receive them. Unless all of the following apply because they are earnings:

• for a tax year for which you are not domiciled in the UK
• for a tax year for which you are taxed on the remittance basis
• from an employment with a foreign employer (the duties of which are performed wholly outside the UK)

Subject to special rules where there’s an associated employment for which duties are performed in the UK, such earnings are taxable in the UK in the year they are remitted to the UK.

5.

Your foreign earnings are taxable in the tax year they’re remitted to the UK. This may be in the year they’re actually received or in a later year.

If your foreign earnings are not remitted to the UK at all, they’re not taxable in the UK.

6.

The number of tax years you can be eligible for overseas workday relief in your lifetime is not limited. As long as there’s a period of 3 consecutive tax years where you were not resident in the UK, you may be eligible for overseas workday relief even if you’ve previously benefited from the relief.

The statutory residence test determines your UK residence status. Where an individual is regarded as UK resident for a year under the statutory residence test but, under a tax treaty, regarded as treaty resident in another country, that does not override or change their UK residence status. The legislation at section 6(2) Taxation (International & Other Provisions) (TIOPA) 2010 explains the impact of double taxation agreements on income tax.

7.

Where the tax year for which overseas workday reliefapplies is a split year for you, overseas workday relief will only apply to foreign earnings which relate to the UK part of the year. For these purposes it does not matter whether the year is split into a UK part and then an overseas part of the year or the other way round.

8.

Where the tax year for which overseas workday relief applies is not a split year, overseas workday relief will apply to foreign earnings relating to duties in any part of that tax year.

9.

Overseas workday relief does not apply to earnings which relate to duties you perform overseas in the overseas part of a split year. Such earnings are not taxable in the UK, even if they’re remitted. Earnings which relate to duties you perform in the UK in the overseas part of a split year are taxable in full unless they’re exempt from UK tax under the terms of a double taxation arrangement.

10.

Overseas workday relief does not apply to earnings which relate to duties you perform overseas in a tax year for which you’re not resident in the UK. Such earnings are not taxable in the UK, even if they’re remitted. Earnings which relate to duties that you perform in the UK in a tax year for which you’re not resident in the UK are taxable in full unless they’re exempt from UK tax under the terms of a double taxation arrangement.

11.

When calculating your taxable earnings for a tax year in which you’re not resident in the UK, or for an overseas part of a tax year of UK residence, special rules apply to the general earnings from overseas Crown employment subject to UK tax.

12.

Earnings are usually received shortly after you earn them. However you may receive some earnings in a year, such as a bonus, which is for an earlier period because it relates to duties you performed in that period.

13.

You may perform duties in:

• one tax year but receive some of the earnings for those duties in a later tax year
• an overseas or UK part of a split year, but receive payment in the other part of the split year (UK or overseas), or in another tax year altogether

14.

It’s your circumstances in the period that the earnings are for that determine your eligibility to Overseas Workday Relief in relation to those earnings. It is not, if they’re different, your circumstances in the year you receive them.

15.

The following examples demonstrate how the rules apply in practice.

In each example, unless otherwise stated, the individual:

• is not domiciled in the UK throughout the period
• performs employment duties partly in the UK and partly overseas

See examples for headings 1 to 15.

16.

If you were ordinarily resident in the UK and so not eligible for Overseas Workday Relief for tax years before 2013 to 2014, you may still be eligible for relief for 2013 to 2014 and 2014 to 2015 under the new rules. Even if it was your intention when you came to the UK to settle here and you became ordinarily resident, this does not prevent you from being eligible for Overseas Workday Relief from 6 April 2013 under the new rules.

If you were not eligible for Overseas Workday Relief at 5 April 2013, the new eligibility rules will apply to you from 6 April 2013.

See example for heading 16.

Changes from 6 April 2013

17.

Only eligibility to Overseas Workday Relief that commences on or after 6 April 2013 will be subject to the rules contained in this guidance note.

18.

If you were resident but not ordinarily resident in the UK at 5 April 2013, and so eligible for Overseas Workday Relief at that date under the old rules (see HMRC6, Chapter 3 ‘Ordinary Residence in the UK’), the new rules will not apply to you.

You may still have Overseas Workday Relief for 2013 to 2014, 2014 to 2015 and 2015 to 2016 as appropriate, if you would have been entitled to relief under the old rules. However, you must meet these old rules for each year concerned. If your circumstances are such that you would have been ordinarily resident for a year, you will not be eligible for relief for that year even if you are able to meet the new conditions. If you were in receipt of Overseas Workday Relief for:

• 2010 to 2011, 2011 to 2012 and 2012 to 2013 - you may continue to be eligible for Overseas Workday Relief under the old rules for 2013 to 2014 (so long as you were non-resident in the UK for 2009 to 2010)
• 2011 to 2012 and 2012 to 2013 - you may continue to be eligible under the old rules for 2013 to 2014 and 2014 to 2015 (so long as you were non-resident in the UK for 2010 to 2011)
• 2012 to 2013 - you may continue to be eligible under the old rules for 2013 to 2014, 2014 to 2015 and 2015 to 2016 (so long as you were non-resident in the UK for 2011 to 2012)

19.

The new rules will apply to you after you have been non-resident in the UK for three consecutive tax years.

See examples for headings 17, 18 and 19.

Changes from 6 April 2017

20.

Due to changes brought in by the new deemed domicile legislation, from 6 April 2017 individuals who claim Overseas Workday Relief may not be caught by Condition B. They will however be caught by Condition A.

See examples for heading 20.

Case examples

Example 1

Abdul arrives in the UK on 1 February 2014 to begin a work secondment. He has not previously been to the UK and so has not been resident here before. He leaves the UK on 5 April 2017.

Under the statutory residence test, Abdul is resident in the UK for the tax year 2013 to 2014 and is eligible for split year treatment. The UK part of his split year begins on 1 February 2014.

Abdul is also resident in the UK for the tax years 2014 to 2015, 2015 to 2016 and 2016 to 2017. He claims the remittance basis of taxation for the tax years 2013 to 2014, 2014 to 2015, 2015 to 2016 and 2016 to 2017. He is not resident in the UK for the tax year 2017 to 2018.

Abdul’s foreign earnings for 2013 to 2014 (from 1 February 2014), 2014 to 2015 and 2015 to 2016 are eligible for Overseas Workday Relief . They are only taxable in the UK if and when they’re remitted to the UK. In 2016 to 2017 Abdul is not eligible for Overseas Workday Relief as he’s received the relief in the three preceding tax years. As such his foreign earnings for 2016 to 2017 are fully taxable in the UK.

Provided Abdul remains not resident in the UK for 3 consecutive tax years following 2016 to 2017, he may be eligible for Overseas Workday Relief again from the 2020 to 2021 tax year.

Example 2

Burril arrives in the UK on 1 March 2014 to begin a work secondment. He has not been to the UK before and so has not been resident here. He leaves the UK on 5 April 2017.

He is not resident in the UK under the statutory residence test for the tax year 2013 to 2014. He’s resident in the UK for the tax years 2014 to 2015, 2015 to 2016 and 2016 to 2017. He claims the remittance basis of taxation for the tax years 2014 to 2015, 2015 to 16 and 2016 to 2017. He is not resident in the UK for the tax year 2017 to 2018.

Burril’s foreign earnings for 2014 to 2015, 2015 to 2016 and 2016 to 2017 are eligible for Overseas Workday Relief. They are only taxable in the UK if and when they are remitted to the UK.

Unlike Abdul, Burril is not resident in the UK in 2013 to 2014 (the tax year in which his UK secondment commenced). Burril is therefore eligible for Overseas Workday Relief for 2016 to 2017 because this is the third year for which he is UK resident.

Provided Burril remains not resident in the UK for 3 consecutive tax years following 2016 to 2017 he may be eligible for Overseas Workday Relief from the 2020 to 2021 tax year.

Example 3

Colar arrives in the UK on 1 February 2014 to begin a work secondment. He’s previously been resident in the UK. He ceased to be resident in the UK on 5 April 2011.

He was not resident in the UK for the tax years 2011 to 2012 and 2012 to 2013. He leaves the UK on 5 April 2017.

He’s resident in the UK for the tax year 2013 to 2014 under the statutory residence test and is eligible for split year treatment. The UK part of his split year begins on 1 February 2014.

He’s resident in the UK for the tax years 2014 to 2015, 2015 to 2016 and 2016 to 2017. He claims the remittance basis of taxation for the tax years 2013 to 2014, 2014 to 2015, 2015 to 2016 and 2016 to 2017. He is not resident in the UK for the tax year 2017 to 2018.

Colar has not been non-resident in the UK for three consecutive tax years immediately prior to his secondment to the UK. He’s not eligible for Overseas Workday Relief for 2013 to 2014, 2014 to 2015, 2015 to 2016 or 2016 to 2017. If he remains not resident in the UK for 3 consecutive tax years following 2016 to 2017 he may be eligible for Overseas Workday Relief from the 2020 to 2021 tax year.

Example 4

A US company employs Drey. Drey has visited the company’s group office in the UK on short business projects on a number of occasions in each of several tax years prior to 2013 to 2014. He has not been UK resident prior to 2013 to 2014.

In 2013 to 2014 Drey works on a short business project in the UK and is resident for the year under the statutory residence test. He has further business visits to the UK during 2014 to 2015 but is not resident in the UK for that year. He’s seconded to work at the company’s group office in the UK for 3 years from 1 May 2015. Drey leaves the UK on 5 April 2018.

Drey is resident in the UK for the tax year 2015 to 2016 and is eligible for split year treatment. The UK part of his split year begins on 1 May 2015.

He is resident in the UK for the tax years 2016 to 2017 and 2017 to 2018. He does not claim the remittance basis of taxation for 2013 to 2014. He claims the remittance basis of taxation for 2015 to 2016, 2016 to 2017 and 2017 to 2018.

In 2013 to 2014 Drey was not eligible for Overseas Workday Relief because, even though he was not resident in the UK for the 3 previous consecutive tax years, he had not claimed the remittance basis of taxation for that year.

Drey’s foreign earnings for (the UK part of) 2015 to 2016 are eligible for Overseas Workday Relief because 2015 to 2016 is 1 of 3 tax years immediately following 3 consecutive tax years for which he was not resident.

His earnings for 2016 to 2017 and 2017 to 2018 are not eligible for Overseas Workday Relief because neither year is 1 of 3 tax years immediately following 3 consecutive tax years for which he was not resident.

Example 5

In January 2017 Drey receives his 2016 performance bonus which is in respect of his duties throughout the calendar year 2016.

He is not eligible for Overseas Workday Relief for 2016 to 2017 when he receives his bonus but as he earned part of it in respect of duties performed in 2015 to 2016, that part is eligible for Overseas Workday Relief .

Example 6

Estelle arrives in the UK on 6 April 2012 to begin a work secondment which will last for four years. She has not previously been to the UK and so has not been resident here before.

For 2012 to 2013 she is resident and ordinarily resident in the UK and claims the remittance basis of taxation. Her earnings for 2012 to 2013 are not eligible for Overseas Workday Relief because she is ordinarily resident for that year.

She is resident in the UK for 2013 to 2014, 2014 to 2015 and 2015 to 2016 and claims the remittance basis of taxation for each of these tax years.

Her foreign earnings for 2013 to 2014 and 2014 to 2015 are eligible for Overseas Workday Relief and are only taxable if and when they are remitted to the UK. Her earnings for 2015 to 2016 do not qualify for Overseas Workday Relief because this is not 1 of the 3 tax years immediately following 3 consecutive tax years for which she was not resident.

Example 7

Francis arrives in the UK on 1 December 2011 to begin a work secondment which is expected to last for 35 months. He has not previously been in the UK and so has not been resident here before.

For the tax years 2011 to 2012 and 2012 to 2013 he is resident but not ordinarily resident in the UK and claims the remittance basis of taxation. His foreign earnings for these years are eligible for Overseas Workday Relief and are only taxable if remitted. However, as Francis was eligible for Overseas Workday Relief for 2012 to 2013, the new rules do not apply to him.

He leaves the UK permanently in 1 November 2014. Under the statutory residence test, Francis is resident for 2013 to 2014 and 2014 to 2015 and claims the remittance basis of taxation. He would have been not ordinarily resident for 2013 to 2014 and 2014 to 2015 under the old rules.

He may have Overseas Workday Relief for 2013 to 2014 and 2014 to 2015 on the same basis as for 2012 to 2013 because he would have been eligible if the rules had not changed.

Example 8

Greta arrives in the UK on 1 December 2012 to begin a work secondment which is expected to last for 35 months. She has not previously been in the UK and so has not been resident here before.

For 2012 to 2013 she’s resident but not ordinarily resident in the UK and claims the remittance basis of taxation. Her foreign earnings for 2012 to 2013 are eligible for Overseas Workday Relief and are only taxable if and when they are remitted to the UK. As Greta was eligible to Overseas Workday Relief for 2012 to 2013, the new rules do not apply.

In March 2015 Greta decides to settle in the UK and buys a house here. As a result, she would’ve been ordinarily resident in the UK from 6 April 2014 if the rules had not changed.

Greta may have Overseas Workday Relief on her foreign earnings for 2013 to 2014 because she would have been not ordinarily resident and eligible for relief for that year if the rules had not changed.

For 2014-15 she is not eligible for Overseas Workday Relief because she would have been ordinarily resident for that year. She is not eligible under the new rules because they do not apply to her.

Example 9

Herman was born in the UK and is domiciled here. He’s lived and worked overseas for eight years before coming here on 1 December 2012 for a work secondment which is expected to last for 30 months. During the secondment Herman performs some of his employment duties overseas.

For 2012 to 2013 he’s resident but not ordinarily resident in the UK and claims the remittance basis of taxation. Although he is domiciled in the UK he’s still able to claim the remittance basis of taxation because he’s not ordinarily resident. His foreign earnings for 2012 to 2013 are eligible for Overseas Workday Relief.

As Herman was eligible for Overseas Workday Relief for 2012-13, the new rules do not apply.

The work secondment ends on 1 June 2015 when Herman leaves the UK to live and work overseas for the next five years.

Herman is resident in the UK for 2013 to 2014, 2014 to 2015 and 2015 to 2016. However, he is not able to claim the remittance basis of taxation for these years because he’s domiciled in the UK. If the rules had not changed he would have been not ordinarily resident for 2013 to 2014, 2014 to 2015 and 2015 to 2016.

Under the transitional rules he’s able to access the remittance basis. His foreign earnings for 2013 to 2014, 2014 to 2015 and 2015 to 2016 are eligible for Overseas Workday Relief on the same basis as for 2012 to 2013.

Example 10

Overseas Workday Relief and the interaction with Condition B.

Guy arrives in the UK on 6 August 2017. He performs his duties partly in the UK and partly abroad, and he is eligible for Overseas Workday Relief.

Guy leaves the UK on 2 September 2020, having been eligible for Overseas Workday Relief for 2017 to 2018, 2018 to 2019 and 2019 to 2020. He is not eligible for Overseas Workday Relief for 2020 to 2021, the year of his departure (the relief is only available for the first 3 years).

Guy remains overseas for the following 3 full UK tax years – 2021 to 2022, 2022 to 2023 and 2023 to 2024, and returns to the UK on 8 July 2024. He is eligible for Overseas Workday Relief for the next 3 years, and leaves the UK on 10 August 2027.

If Guy continues his pattern of working both overseas and in the UK indefinitely, the maximum number of years Guy will be resident in the UK in any 20 year period is 12 years. He will never meet Condition B.

Example 11

Overseas Workday Relief and the interaction with Condition A.

Francoise was born in the UK with a UK domicile of origin.

Francoise moved to New Zealand with her family at age 14 and acquires a domicile of dependency there which became a domicile of choice. She does not return to the UK until 12 October 2015 when she is 24 and takes up employment based partly in the UK and partly in Germany.

Francoise meets the pre 6 April eligibility conditions for claiming Overseas Workday Relief. She applies for it for the 2015 to 2016 tax year (a split year), and the 2016 to 2017 tax year (year of arrival plus 1).

However due to the changes applicable from the 6 April 2017 Francoise will not be eligible for Overseas Workday Relief for 2017 to 2018. She meets Condition A of Section 835BA, and will be treated as deemed domicile from 6 April 2017. She cannot therefore claim remittance basis and so fails the validity conditions necessary for Overseas Workday Relief

Francoise will be taxable for both those duties performed in the UK and those in Germany, in the UK from 6 April 2017.

Glossary

Domicile

A taxpayer’s domicile is usually where they have their permanent home. Domicile is a general law concept; it is not defined in tax law. A taxpayer’s domicile is distinct from their nationality and citizenship and from their place of residence. A taxpayer can be resident for tax purposes in the UK but have a domicile somewhere else, in which case they would be non-domiciled in the UK. Find out more about domicile.

General earnings

General earnings include:

• salary
• wages
• fees
• gratuities
• profit (incidental benefit of any kind) obtained by the employee if it is money or money’s worth (see EIM00530)
• anything else that constitutes an emolument of the employment

This is a wide definition. The second and third bullet points ensure that all money payments that are similar to salaries, fees and wages are taxed as earnings. For example, bonuses, commissions, tips, overtime pay and extra money earnings of any kind.

It also includes many benefits in kind. For more detail see EIM00511.

Ordinarily resident and ordinary residence

The information given here about ordinary residence applies to tax years before 2013 to 2014. ‘Ordinary residence’ is different from ‘residence’. It’s not defined in tax law and is based on cases heard by the Courts. If you’re resident in the UK year after year, this would indicate that you normally live here and you are therefore ‘ordinarily resident’ here.

You’ll find detailed information on ordinary residence and how it may affect the way you are taxed in the UK for the tax years before 2013 to 2014 in HMRC6 parts 3, 6 and 7.

Overseas part of the year

Under the split year treatment, the overseas part of a tax year is the part of the tax year when you are charged to UK tax as if you were not UK resident.

Partner

Your spouse, civil partner or a person you live with as a spouse or civil partner.

Relevant person

A relevant person is:

• you
• your partner
• your children or grandchildren who are under 18 years of age
• your partner’s children or grandchildren who are under 18 years of age
• trustees when you or another relevant person is a beneficiary of the trust
• close companies when you or another relevant person is a participant in the close company – for example as shareholders
• a company which is a 51% subsidiary of a close company in which you or another relevant person is participant

Remittance

Foreign earnings are remitted to the UK if they’re:

• brought to
• received
• used

either directly or indirectly in the UK for:

• your benefit
• the benefit of any other relevant person

There’s also a remittance when a service provided in the UK, to you or any other relevant person, is paid for outside the UK with your foreign income and gains. Money or property does not have to be physically imported from overseas for a remittance to occur. You’ll find more detailed information on what constitutes a remittance in RDRM33000.

Remittance basis

This is an alternative basis of taxation which a taxpayer can use only if they’re resident, but not domiciled in the UK.

Split year

A tax year in which an individual is resident is to be split into a UK part and an overseas part in certain circumstances. Where a tax year is a split year as regards a taxpayer, new rules apply for the taxation of certain income. For further detail about split years see RDRM12000 onwards.

Statutory residence test

The rules which determine an individual’s UK tax residence status are now in statute. The new statutory residence test came into force from 6 April 2013 (2013 to 2014 tax year). The statutory residence test explains these rules.

Tax year

A UK tax year starts on 6 April and ends on 5 April the following year.

UK part of the year

Under the split year treatment, the UK part of a tax year is the part of the tax year when you are charged to UK tax as a UK resident.