Overseas Workday Relief
What is Overseas Workday Relief (OWR)?
Overseas Workday Relief is a tax relief that is applicable to income earned outside of the UK by those who are non UK domiciled. If you qualify it means that such earnings are regarded as tax free by HMRC.
Who can claim Overseas Workday Relief?
You must meet all of the following precise criteria to be eligible to claim Overseas Workday Relief:
- UK tax resident
- Non UK domiciled during the tax year
- Income paid into an offshore bank account
- The current tax year is either; one of the two tax years following a year of non residency in Britain or, after three tax years of non UK residency in a row this is the following year
- Your job requires you to spend some, or all of your working life in a country other than Britain and you use the ‘remittance’ basis of taxation for that income.
If your situation ticks off everything on this list, then your ‘foreign earnings’ will not be taxed by the UK government.
What are ‘foreign earnings’?
‘Foreign earnings’ refers to the income you earn whilst working abroad.
Can I claim Overseas Workday Relief if I am not UK resident during the relevant tax year?
You cannot claim OWR if you are not UK resident during the tax year in question. This is because, even remitted, income earned when you are not UK resident for tax purposes is not subject to UK tax.
Can I only claim for four years Overseas Workday Relief?
No, there is no ceiling on the number of tax years you can claim OWR for and you can submit again, even if you have received the benefit before. You do have to meet all the criteria listed above and were non resident in the UK for three continuous tax years.
I am eligible for OWR, but this tax year is a split year, can I still submit a claim?
You can still get OWR on the foreign earnings connected to the UK element of your split treatment.
How will the 2013 changes to OWR affect my claim?
On 6th April 2013 the Statutory Residence Test was launched. This defined individuals as either ‘Not Resident’ or ‘Resident’ in the UK. The previous status of ‘Resident but Not Ordinarily Resident’ is no longer an option. The impact on OWR applicants was dealt with in the 2013 Finance Bill and has made things trickier to understand for those claiming OWR.
Basically:
- You can still claim OWR if you were ‘Resident but Not Ordinarily Resident’ on 5th April 2013 and fulfilled all the necessary criteria at that time.
- After 6th April 2013, once you have been a UK non resident for three consecutive years, the new OWR rules become applicable.
- You can claim OWR from 6th April 2013 under the new rules, even if you were Ordinarily Resident in the UK and not able to claim in the previous tax years.
Is Section 690 ITEPA 2003 still part of the new OWR rules?
Yes, this section still stands under the new rules. It means that your employer can ask HMRC’s permission to only apply PAYE on the proportion of your income that is made doing work in the UK.
What is a ‘qualifying account’ and why do I need one to claim OWR?
You do not have to have a qualifying account in order to claim OWR, it just makes the overall administration simpler. If you don’t have a qualifying account, you must check the remittance position on every transaction.
As part of the OWR rules, you have to make sure that you don’t remit any of your foreign earnings to Britain. A ‘qualifying account’ is necessary to use the Special Mixed Fund rules which mean that you can work out one annual total of remittance to Great Britain; much less complicated.
A ‘qualifying account’ must be an overseas bank account in your name and have a maximum balance of £10 on the day of your first qualifying earnings is paid into the account.
