Overseas Workday Relief

Overseas Workday Relief (OWR) is a tax relief available to UK residents who are considered non-domiciled for tax purposes and are taxed on a remittance basis. OWR aims to provide relief for non-domiciled individuals who work in the UK and overseas. The relief reduces the amount of foreign employment income subject to UK tax based on the proportion of workdays spent outside the UK.

To qualify for OWR, an individual must meet the following criteria:

1. Be a UK tax resident in the tax year they claim OWR.
2. Be non-domiciled in the UK for tax purposes.
3. Choose to be taxed on a remittance basis.
4. Have foreign employment income related to both UK and overseas workdays.

Overseas Workday Relief is calculated by apportioning the foreign employment income between UK and overseas workdays. As a result, only the income attributable to the UK workdays is subject to UK tax, while the income attributable to overseas workdays is not taxed in the UK, provided it is not remitted to the UK.

To calculate OWR, follow these steps:

1. Determine the total number of workdays in the tax year.
2. Determine the number of workdays spent outside the UK.
3. Calculate the proportion of overseas workdays to the total workdays (overseas workdays / total workdays).
4. Multiply the foreign employment income by the proportion calculated in step 3 to determine the income attributable to overseas workdays.

Effect of payment in the local UK or foreign account:

The impact of OWR on an individual’s tax liability depends on whether the foreign employment income is remitted to a UK account or kept in a foreign account.

1. If the foreign employment income is kept in a foreign account and not remitted to the UK, the income attributable to overseas workdays is not subject to UK tax. Only the income attributable to UK workdays is taxed in the UK.
2. If the foreign employment income is remitted to a UK account, the income attributable to overseas workdays becomes subject to UK tax upon remittance. However, OWR can still provide some tax relief, as the tax is only applied when the funds are brought into the UK.

It is essential to maintain accurate records of workdays, foreign employment income, and remittances to ensure compliance with UK tax rules and to maximize the benefits of OWR. It is always a good idea to consult a tax professional to ensure the correct relief application and avoid any tax-related issues.

You can call us to discuss your personal circumstances with our specialist tax advisors.