A Guide to Overseas Workday Relief

If you are a tax resident of the United Kingdom but are living overseas, you may be able to claim Overseas Workday Relief (OWR). Essentially, this means that the earnings you make during your time overseas will be deemed tax-free by Her Majesty’s Revenue and Customs (HMRC). 

If you think you might be eligible for this tax relief program, it’s always best to speak to a professional to conduct a thorough assessment of your income-earning circumstances and to build a case when claiming OWR with the HMRC. 

In this guide, we’ll take a look at some of the most commonly asked questions surrounding OWR to help you understand what the requirements are before claiming and what criteria you need to meet to qualify for the tax relief scheme.

What is Overseas Workday Relief?

If you are earning an income that is paid from the UK, but are choosing to live in another country, there is a tax relief scheme provided by the HMRC which effectively treats your UK income as foreign, exempting you from paying tax on this income. This is called overseas workday relief. It applies to those living in a foreign country and can provide tax relief on UK income that is either partly or fully earned while the UK tax resident is overseas. 

To qualify for this form of tax relief, there are several criteria one has to meet to make a valid claim with the HMRC. In the below list of frequently asked questions, we will give you an overall picture of the OWR and how you may be able to benefit from it if you meet the criteria stipulated by the HMRC. 

What are the criteria for claiming overseas workday relief?

To qualify for OWR there are some unquestionable criteria you have to meet. These are listed below: 

• You must be a UK-registered tax resident
• You have to declare that you are non-UK domiciled in the relevant tax year. This means you have to tell the HMRC that you are choosing to live overseas even though you are a UK resident. 
• You will need your UK income paid into an offshore account. This will make the administrative processes a lot easier to navigate. 
• Your employer or job forces you to work overseas or in a country other than Britain. 
• You have been living overseas for three or more consecutive tax years. 
• The tax year in which you make your claim is one of two tax years that follow one year of living outside of the UK. 

If you can comfortably say that you meet these criteria, you may be eligible to apply for OWR with the HMRC. To confirm your status, chat with a professional to find out more about the tax benefits you can claim under the OWR scheme. 

Can I claim a tax rebate for overseas workday relief?

Having looked at the above list of the criteria required for OWR, you might still be wondering whether or not you are eligible to claim a tax rebate under this scheme. If you are living outside of the UK by choice or because your work stipulates you have to do so, your income may be considered “foreign income” by the HMRC. If you meet the above criteria, you may be able to build a case that allows you to claim a tax rebate for OWR. 

If your income is classified under the term ‘foreign earnings’ it refers to the income you receive while you are living in a country other than Britain. Having your income classified as such allows you exemption from paying income tax in the UK, as laid out by OWR. 

For how many years can I claim overseas workday relief? 

If you continue to qualify for the OWR scheme, there is no set number of years the scheme applies to you and you can proceed in submitting OWR claims over and over again provided your circumstances are still in line with the HMRC’s required OWR criteria. You can continue to claim OWR if you are a UK tax-registered citizen residing in a forging country for three consecutive years. 

For the first tax year of living outside of the UK, you will have to stipulate that your employer required you to be in a foreign country for work, even though they intend to continue paying you from the UK based on your UK income. 

Is it compulsory to have a qualifying offshore account when claiming overseas workday relief?

Although it is not essential to have an offshore account into which you receive your UK income, it does make the administrative processes required for filing an OWR claim a lot easier. This is because it makes it easier to prove that you are residing in a foreign territory even though your employer is based in the UK, and you are receiving UK income. 

There are ways and means around submitting an OWR claim if you continue to be paid into a British bank account, however, professionals in the tax world do recommend receiving your income into a bank account with the same base as where you are residing. 

What does the term “non-UK domiciled” mean? 

The term “domicile” is used to reference the country or area you call home. To qualify for OWR, this means that you cannot be domiciled in a UK territory. OWR is an acknowledgement that you are earning a UK income but living in a foreign country and requires those who qualify to declare that they are not living in the UK. Any income they earn during their non-UK domiciled time will therefore be written off by the HMRC as foreign income. 

For example, if you were born in the UK to British parents, but you or your company are choosing for you to live in another country such as Germany, you will qualify as a UK tax resident in the capacity of not being domiciled in the UK. 

What is the best way to proceed with an OWR claim? 

If you think you may be eligible for an OWR claim, speak to a professional or to your UK employer who will be able to help build a case to submit to the HMRC. Our qualified team at Braant will be able to help you with such claims.