Employee mobility and tax post Brexit

Published by Laurence Parry on 4 November 2020

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The UK has historically had some of the most flexible arrangements for inbound individuals and employees.

We have historically taxed people based on a combination of residence and domicile. Since 2012 we have had a statutory residence test that allows an individual to determine whether they are UK resident or not. It also allows an individual to plan to remain non-UK resident, and occasionally to become UK resident.

Domicile is more of a concept rather than a defined set of rules and is actually a concept based on personal law rather than just tax. Broadly, one inherits the domicile of one’s father at the date of birth. Domicile is very ‘sticky’ so that to change one’s domicile, one must move abroad and become resident with the intention to reside there permanently or indefinitely. Consequently, it is relatively easy to remain ‘non-domiciled’ by having a definite intention to move abroad when circumstances allow (most usually when children finish education or a business is sold).

To counter this, the Government has limited the benefits of being non-domiciled for tax purposes so that once one has been resident for 15 out of the last 20 years, you are classed as ‘deemed domiciled’ for all tax purposes.

However, for the first 15 years there are significant benefits from being non-domiciled, in that income or gains that are earned or realised abroad, are not taxable unless they are remitted to the UK. (The so called ‘remittance basis’).

We also have beneficial tax treatments for employees coming to the UK. If they come on a 24 month (or less) secondment, then all travel (including home to work), all food (for themselves, not their family), and their accommodation (again, restricted to what it would cost to house them, not their family) is all tax deductible, or non-taxable if paid by the employer. This is exactly the same rule as for secondments within the UK but may be of more benefit where someone is coming from overseas.

We also have an extension of the remittance basis for the first three years of residence, so that on a time apportioned basis, earnings that related to overseas workdays are not taxable if kept abroad.

Put together, the above has made the UK a very attractive place for inbound globally mobile workers, so much so that other countries are implementing similar or equivalent reliefs.

How will this change post Brexit?

As with so many things, we just don’t know yet. And as with so many things, it is a political decision.

Much of the debate has been about restricting freedom of movement, mainly meaning inbound freedom of movement. A simple way to disincentivise inbound movement would be to remove some of the tax reliefs and systems referred to above.

Alternatively, if the political agenda is to become a more global economic player, then it would make sense to retain the above reliefs.

There has been no indication as to which way the Government may jump. What is true is that there is little Parliamentary time, or indeed apparent inclination, to look at the above issues. As is often the way, inertia may well win in the end.

For further information and guidance on this topic, or for any tax queries, please contact me here.

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