Overseas Workday Relief (OWR) can be a valuable tax relief available to UK tax residents who spend part of their working time abroad, allowing individuals to exclude income earned from duties performed overseas from their UK tax liability, provided certain conditions are met. OWR can significantly reduce your UK tax burden, making it worthy of consideration for anyone with a significant amount of overseas workdays.

Who Can Benefit from OWR?

To qualify, you must meet the following criteria:

1. UK Resident and Non-Domiciled: You must be a UK resident but not domiciled in the UK.
2. Overseas Duties: You must perform duties outside the UK, and these duties must be related to your employment.
3. Split-Year Treatment: You may need to consider split-year treatment if you become or cease to be a UK resident during the tax year.
4. Remittance Basis: You must claim the remittance basis of taxation for the tax year in which you want to claim OWR.

Key Conditions and Requirements

• Employment Contract: The work performed overseas must be under an employment contract. Self-employed individuals do not qualify for OWR.
• Segregated Bank Account: It is essential to have a separate offshore bank account where your overseas earnings are deposited. This helps in clearly identifying the income that qualifies for OWR.
• Record Keeping: Maintain detailed records of your workdays and locations, as well as the income earned from overseas duties. This documentation is critical for substantiating your OWR claim.
• Claiming Relief: You must actively claim OWR by submitting a self-assessment tax return and providing the necessary documentation to HMRC.

Benefits of Overseas Workday Relief

1. Reduced Tax Liability: By excluding overseas earnings from your UK taxable income, you can significantly reduce your overall tax liability.
2. Tax Efficiency: OWR allows you to manage your tax affairs more efficiently, ensuring you only pay tax on income that is rightly attributable to the UK.
3. Financial Planning: Utilising OWR can be an integral part of your broader financial planning strategy, particularly if you frequently work abroad.

Practical Steps to Take

• Consult a Tax Advisor: Engage with a tax advisor who has expertise in international taxation and OWR. They can guide you through the process and ensure you meet all requirements.
• Set Up a Segregated Account: Open a separate offshore bank account to receive your overseas earnings. This helps in clearly distinguishing between UK and non-UK income.
• Keep Accurate Records: Document your overseas workdays meticulously, including dates, locations, and the nature of duties performed. Also, keep records of income earned and deposited into the segregated account.
• Review Your Tax Status Annually: Regularly review your residency status and overseas workdays with your tax advisor to ensure you continue to qualify for OWR and maximize the relief available.

By reducing your UK tax liability on income earned abroad, Overseas Workday Relief allows you to manage your finances more effectively and retain more of your income. However, the rules surrounding OWR are complex, and you must meet all the necessary conditions to benefit.

If you have any questions or need assistance with Overseas Workday Relief or any other aspect of your tax affairs, please do not hesitate to contact us. Watch this short video for more: https://www.youtube.com/watch?v=PHtR24TQJqY

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