Hoovering up talent from abroad!

Clark… have you seen the news that Dyson has announced it is moving its headquarters from the UK to Singapore?

No I didn’t. Well there is an industry struggling with labour shortages. Where it will find the workers to pick fruit and vegetables this summer is a serious question.

Ha! Yes indeed Clark. You and me included! Anyway, for now companies are going to need to understand how to bring in workers. Thankfully for more skilled labour required in the entrepreneurial sector there are, and always have been, many options for those from outside of Europe in terms of visas and indeed tax reliefs to support their relocation into the UK. Indeed so much of the talent in the UK is not from Europe but from further a field.

Good one, Clark, if not a bit cheesy (even for your standards)!

Indeed! It breaks my heart to think that some UK companies are not aware of the wonders of ‘Detached Duty Relief (DTR)’!

Well, if an employee of an overseas company attends a temporary workplace in the UK for a period of up to 24 months they may be able to obtain relief for the cost of travel to and from that workplace, accommodation and subsistence attributable to attendance at that workplace.

No catch! Naturally some conditions apply such as:

• The secondment must be part of the duties of continuing employment rather than the commencement of a new employment.
• If at any point it is expected that the employee’s duties in the UK will exceed 24 months, the tax relief is lost from the date of the change in expectation.
• The expenses must relate to the individual employee and does not extend to their family.
• Records of expenditure (such as receipts and invoices) must be kept to support any claim.

Ever the optimist aren’t you! If the individual pays for the expenses out of his own pocket then the expenses incurred are offset against the individual’s income, therefore reducing their taxable income!

Alternatively, if the employer reimburses the individual for expenses they have incurred, the amounts reimbursed are declared on the employee’s form P11D for the relevant tax year. On the form P11D, detached duty relief is applied resulting in a nil taxable benefit arising. Not so bad see?

Apart from having a highly talented and skilled individual in the workforce, when the employer reimburses the individual for the costs incurred, the payment is deductible for corporation tax purposes.

In addition, reimbursing employees for expenses such as rent would usually constitute a taxable benefit and incur a Class 1A national insurance contribution (NIC) charge at 13.8%. Provided the expenses qualify for detached duty relief, the reimbursement will not result in a NIC liability! In essence this means that the accommodation and living costs can be paid tax free, and the company doesn’t have to pay employers national insurance on top of this amount – a significant tax saving for the employer.

Sure. Let’s imagine that the total annual budgeted salary cost for an employee is £100,000 and their costs are as follows:

• Accommodation=£2500 per month
• Living costs (travel, food and drink)=£1000 per month

Over 12 months, the total costs for living and accommodation will be £42,000 (£3500 x 12).

DTR means that £42,000 can be paid tax free and £58,000 paid as a taxable salary.

For a £100,000 salary, an employer would normally pay £12,609 in NICs.

Applying DTR, as in the example above, the employer would pay £6,813 in NICs.

That’s a saving of almost £6,000 for the employer!

(Do note that DTR needs to be applied and administered in the correct way by working through the facts of the arrangement and notifying HMRC appropriately, you can’t just start handing them a tax free amount!)

Yes, there could also be a complete exemption from National Insurance for the employee and the employer for the first year or more depending on which country they come from.

Yes way! Again this depends which country you are coming from.

For workers who intend to remain in the UK for up to 3 years and who have business trips outside of the UK there may be a tax exemption available on the proportion of their employment income relating to days spent working abroad. This is otherwise referred to as Overseas Workday Relief (OWR).

As with DTR, there are some complex rules surrounding OWR but provided the rules are applied correctly and advice is sought early, overseas workers can benefit from significant tax planning opportunities.

Talking about visas and given that I have shared my knowledge with you, are there any particular visas recommended for people looking to come and work in the UK?

Sounds ideal. As with detached duty relief, I imagine there must be some qualifying criteria?

What about if you are an overseas company with a UK subsidiary or branch operating already? Are there any visa options that will still allow for DTR?

Common ownership and control meaning that the UK entity is a wholly owned subsidiary of the overseas company or that both entities have the same majority shareholder/s?

And where does DTR come into all this?

Maybe Mr. Dyson should think about creating the “Oury and Clark” model vacuum, he could be hoovering up all the best talent with us in the bag!