Overseas workday relief

Overseas workday relief

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Can anyone point me towards legislation or anything published as guidance by HMRC to confirm how working days are calculated for OWR purposes? I assume it is on working days for a tax year not total days.

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Portia profile image
By Portia Nina Levin
27th Nov 2015 15:46

Why do you need to calculate working days?

"Overseas workdays relief" is a complete misnomer by HMRC. If you satisfy the residence conditions your earnings from duties performed outside the UK.

Presumably you want to apportion somebody's earnings between those for duties performed in the UK, and those for duties performed outside the UK. In that respect ITEPA 2003, section 41ZA (supported by sections 38 to 41) is all there is.

Section 41ZA says that the apportionment is made on a just and reasonable basis, and section 39 provides for duties performed in the UK to be treated as performed outside the UK in certain circumstances.

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Replying to lionofludesch:
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By adambl
27th Nov 2015 16:02

Thanks for your reply. Yes as you say I need to apportion someone's earnings between duties in the UK and outside the UK for OWR. I am assuming I calculate the total workdays for a year excluding weekends, bank holidays etc and apportion those accordingly but what about travel days in and out of the UK and half days? It seems very odd to me that there is no HMRC guidance.

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Replying to Portia Nina Levin:
By cfield
22nd Oct 2017 12:03

Portia, pardon me for taking issue with a post you wrote almost 2 years ago, but your 41ZA only appears relevant to oil rig workers and the like.

The 41ZA comes from Finance Act 2013 Schedule 6 Part 1 section 3 and amends s41 of ITEPA 2003. This explicitly relates to "duties performed in the UK sector of the continental shelf in connection with exploration or exploitation activities". Hence, nothing to do with OWR.

It seems to me that the relevant authority is s193(1) of ICTA 1988 and Schedule 12 section 2(2) of the same Act. This tells us that the calculation should be "reasonable having regard to the nature of and time devoted to the duties performed outside and in the UK respectively and to all other relevant circumstances".

Section 3(2)(b) also allows intervening UK days to be counted so long as they don't come to more than 1/6th of the qualifying period. In most cases, that would probably just be for short trips back to the UK for meetings whilst working abroad.

I suspect in practice it means exactly the same as "just and reasonable". However, I think that day-counting is effectively necessary anyway as you need some sort of verifiable evidence (should the taxman ever argue the toss) that your calculation accords to Schedule 12.

Time devoted to duties performed outside the UK does seem to require your physical presence abroad, and hence a record of that time, although "nature of" and "other relevant circumstances" may allow some leeway for the calculation to be beefed up if those duties can be seen as more attributable to your salary than your normal duties.

Also, you can count "incidental" duties in the UK as per s39 of ITEPA. Typing long emails to the overseas office maybe. If you're anything like me, that can take half the day!

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Replying to cfield:
Portia profile image
By Portia Nina Levin
22nd Oct 2017 15:22

You need to invest in some legislation, Chris, rather than relying on the free stuff.

ICTA 1988 ceased being applicable, in relation to employment income matters, some 14 years ago. The whole thing has since been replaces and repealed.

ITEPA 2003, s 41ZA is a stand alone section inserted into ITEPA. It does not amend s 41. It is there to aid interretation of, iner alia, sections 38 through to 41, as well as for eliminating the non-UK earnings from taxation for the purposes of s 26 and s 27 (and consequently the claim under s 690, in which the OP was interested).

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Replying to Portia Nina Levin:
By cfield
22nd Oct 2017 16:07

Thanks for getting back so quickly Portia. Glad I'm not the only sad sack working on a Sunday!

Yes, ICTA is now defunct (as I ought to know from s419 no longer being referred to in relation to participator loans if nothing else). The reason I dug it up is because the Explanatory Notes to ITEPA 2003 section 22 point us towards ICTA section 192. Obviously that was before it was repealed.

If they didn't parachute those particular clauses into any superseding Act, then I agree, they are of mere historical interest now.

So just and reasonable is all we have. Seems odd that they allow us so much leeway on such a hugely significant relief for ex-pat workers, especially as they had perfectly good guidance in the old Act.

And yes, you're probably right, I should buy my own tax legislation. I had someone from Tolleys on the phone last week trying to persuade me to do just that.

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Portia profile image
By Portia Nina Levin
27th Nov 2015 16:08

I am not sure what guidance there needs to, or should, be for making a just and reasonable apportionment.

Just because HMRC have decided to call it "oversees workday relief" does not mean you have to do a daily calculation at all.

You need to ask yourself to what extent were the duties of the employment performed in the UK (let us call that X%) and to what extent were the duties of the employment performed outside the UK (let us call that Y%). X% + Y% bust necessarily be 100%.

Then we take the remuneration (let us call that Z), and Z x Y% is taxable on the arising basis and z x X% is taxable on the remittance basis.

How was the salary paid incidentally?

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Replying to adam.arca:
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By adambl
27th Nov 2015 16:22

So if the client was travelling to the US and on a 8 hour flight leaving the UK at 12 noon would you treat that as an overseas workday and the return trip?

I take your point that there is no hard and fast rule and provided it is calculated on a just and reasonable basis HMRC should accept it.

The salary is paid by a UK employer and they have obtained clearance from HMRC to not tax a certain percentage as the client estimated his work abroad at the outset of the tax year (I am now having to complete a 2014/15 Return with the actual figures).

Thanks again.

 

 

 

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Portia profile image
By Portia Nina Levin
27th Nov 2015 16:34

When the client is on an aeroplane that has left the UK, then either:

they are sipping a G+T and watching a movie, in which case they just are not performing any duties of their employment, orthey are bashing merry hell out of their laptop, much to the annoyance of their fellow passengers, in which case they are performing employment duties outside the UK.

You need to let go of the overseas workday/UK workday concept. They apply for the purposes of the SRT, and have a (relatively) precise definition.

For this purpose, the concept of a workday is HMRC's fiction.

The law requires a just and reasonable apportionment, and so if a just and reasonable apportionment is made, HMRC MUST accept it, and have no business trying to substitute a just and reasonable apportionment of their own.

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By Asimadk
29th Dec 2016 11:24

Can I please ask someone about this Scenario:
Mr A eligible for OWR (not a split year):
- Over 365 days he was aboard for work purpose for 94 days.
-Over 260 working days he worked abroad for 70 days.

So when we apportion his income for overseas part of the year is it 94/365 or 70/260?

Or can we even consider 28 days statutory holiday and use 70/232 (argument is he worked 70 days abroad + 162 days in UK= 232 days)?

Specific answer would be much appreciated.

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Replying to Asimadk:
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By adambl
30th Dec 2016 11:38

The way we have always worked on this is to apply a "just and reasonable basis" which in your example would be 70/232. In other the OWR should be a relevant percentage of his total workdays for a year.

HMRC have agreed with our interpretation.

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Replying to adambl:
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By Asimadk
30th Dec 2016 11:47

Thank you Adambl, for your prompt answer.

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Replying to Asimadk:
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By adambl
30th Dec 2016 11:51

We've ask the clients to tell us if they have worked more than 3 hours in a day and if about that amount we treat that as a half day and (obviously) 7 hours plus as a full day.

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By sclinn
13th Jul 2017 14:12

Are there any special rules or considerations when the individual looking to pay taxes on a remittance basis and claim OWR and is part of a UK partnership? The individual in question is moving from overseas to the UK to become a partner in a consultancy LLP and traveling extensively abroad for the role. The LLP is looking to pay him gross into a foreign bank account and leave it to him to register and file a tax return. It all seems pretty straight forward, but I couldn't find anything relating to partnerships vs. employment. Many thanks for any insights.

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Replying to sclinn:
Portia profile image
By Portia Nina Levin
13th Jul 2017 14:20

So-called overseas workday relief is not relevant to a partner in a partnership.

A non-resident partner in a partnership is liable to UK tax on their share of their profits from the partnership to the extent that those profits are derived from carrying on that trade through a permanent establishment in the UK.

I'm guessing that your toes aren't really touching the bottom though.

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Replying to Portia Nina Levin:
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By sclinn
13th Jul 2017 17:59

Many thanks for the quick response. Sorry for being daft, but I want to make sure I understand your point correctly. The partner will be a non-dom resident in the UK. His income from the partnership is not a straight share, but relates to his contributions. Will his income be taxed based on where his contributions have been made (inside vs. outside the UK) or will the partnership situation govern his taxation. Please note that the partnership pays its partner gross and leaves it up to them to report and pay their taxes. Thanks again.

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Replying to sclinn:
Portia profile image
By Portia Nina Levin
13th Jul 2017 18:32

Where is the partnership business carried on (eg where are its contracts concluded).

As a UK resident he is taxable on his share of partnership profits, but the remittance basis may be available if the partnership business is carried on outside the UK.

You should probably pass this to someone experienced in this sort of client. Otherwise a severe @rse burning is almost inevitable.

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Replying to Portia Nina Levin:
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By sclinn
13th Jul 2017 18:35

LOL - many thanks for your response.

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