Beyond the UK: employer and employee tax consequences of overseas assignments

When UK technology and media companies begin to globalise, sending employees on overseas assignments will be a natural consequence. Make sure you consider the tax consequences to avoid unnecessary costs.

Step one is to understand the full cost of the international assignment, including the tax and benefit costs of living and working in the new jurisdiction. UK technology and media businesses should establish a comprehensive assignment policy, including topics such as duration, expenses, allowances and tax. This is the best way to keep costs under control and reduce the potential for disputes.

Know your compliance obligations
Employers have compliance obligations that must be met – otherwise costly penalties could be imposed. When sending employees on assignment outside the UK, technology and media businesses need to understand issues such as:

  • Wage withholding: unless the employee breaks UK tax residence, PAYE deductions may still be required – even if salary is paid outside the UK and local taxes withheld. Penalties for compliance failures can be harsh. The potential negative cashflow impact on the employee needs to be considered.

  • Post-assignment tax liabilities: sums paid to the individual after they return home, such as bonuses or share-related income, may be taxable in the overseas jurisdiction, the UK or both, so must be monitored.

  • Reporting of benefits and expenses: depending on the individual’s tax status, UK reporting obligations may continue, even if benefits and expenses are paid outside the UK. There may also be a National Insurance Contribution (NIC) payment and reporting consequences.

  • Share reporting: complex requirements can easily trip up international technology and media businesses. Don’t assume expats are exempt.

  • NICs: social security tax can be expensive for technology and media companies paying UK NIC rates. Periods of exemption and non-exemption need careful tracking. Social security treaties exist, but approval from HM Revenue & Customs is required to confirm an employee’s UK-exempt status.

Maximise your tax relief
Expat tax reliefs exist in jurisdictions around the world, as well as in the UK. Technology and media companies should consider how overseas assignments are structured (including living and travel expenses) in order to maximise the benefits for the company and the employee.

Support your employee
Working overseas should provide an exciting opportunity for UK expats, but can also present challenges, particularly in relation to tax. Access to a tax expert in the overseas jurisdiction can be helpful for initial briefings and on-going support, particularly in relation to registration with the tax authorities and completion of unfamiliar (and often complex) income tax returns. Such professional tax support could be included in employees’ assignment packages.


Mark Ayres