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Hi Sam, my issue is hopefully an easy one. Currently working

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Hi Sam, my issue is hopefully an easy one. Currently working abroad in Azerbaijan through an agency. I get a net rate payment and they pay my tax in Azerbaijan. Tax is fairly easy in that I apply my gross payment to UK tax system and pay any difference if UK tax is more which is normally the case. Only thing I'm not sure about is I get £20 a day per diem which is subject to about 25% tax in Azerbaijan and what I can't work out is whether that per diem rate would be counted as being tax free in the UK. I know there is a £10 a night tax free per diem rate however there also appears to be some sort of subsistence rate as shown here
http://www.hmrc.gov.uk/employers/emp-income-scale-rates.htm
And not sure if I can utilise this alongside the £10 per diem allowance to effectively make my per diem rate tax free and reduce my tax liability. I know a few of my colleagues are going to do that on the basis of that is how they understand it but I would rather know what I am allowed to do. I have declared it and paid the tax on it but if I don't have to I will resubmit and request a refund.
Many thanks.
Paul
Submitted: 3 years ago.
Category: Tax
Expert:  Sam replied 3 years ago.
Hi

Thanks for your question and asking for me.

These subsistence rates apply to individuals who find themselves (as part of their overall duties) incurring travel and subsistence expenses.

From what you advise - you actually work abroad for the agency - so I assume live and work abroad with occasional visits back to the UK?
Can you advise further - as I fear that these rates will not apply to you, or your colleagues, but need to establish
1) When this employment abroad began
2) How long is set to last for (contract length or maybe indefinitely )
3) Do you work a rotation pattern
4) How often do you come back for visits to the UK (so visits back so far since 06/04/2013)
5) Are any of your duties performed in the UK

Thanks

Sam
Customer: replied 3 years ago.
Hi Sam,
The contract started nearly 3 years ago and is due to last until the end of 2015. My contract however doesn't state an end date and is open to 4 weeks notice either way.
I work 4 weeks in Azerbaijan and then return to the UK for 2 weeks. I don't carry out any work for the company in the UK and only get paid for the work I carry out in Azerbaijan. All accommodation and food costs are paid by the company directly. I do have one meal on a Sunday which I pay for as well as all alcoholic beverages.
I hope this information helps to complete your advice. Of course it is beneficial to me if the per diem rate is classified as tax free however I want to make sure I abide by the rules.
Kind regards

Paul McLean
Expert:  Sam replied 3 years ago.
Hi Paul

Thanks for your response - apologies for mine, I was with clients.

I can see that its correct that you remain treated as UK resident (and therefore liable to UK tax on this income) as you work 4 weeks out and then home for 2 weeks - so this forms a pattern that would see you in the UK for 121 days a year - and that yes, you can offset the foreign tax suffered -
But as for the expenses - these too are liable to tax in the UK I am afraid as they are paid in connection with your employment and usual work place, so cannot be treated as incurred through the performance of your duties.

So your colleagues are wrong, and the legislation you quote to me, relates to those that say work in the UK but are sent on a temporary assignment, either within the UK or abroad, and the WHOLE purpose of that trip is work related - so every expenses (and the permitted subsistence payments) can then be treated as incurred wholly and exclusively in the performance of those duties.

So any of your colleagues claiming this would be wrong to do so, and I do hope they might be prepared to follow your lead is getting this right.

Thanks for your question

Sam

Customer: replied 3 years ago.
Hi Sam,
Thanks again for the response. Just to ensure I fully understand your response. The tax is liable on the per diem because my work is carried out at my normal place of work i.e. in Azerbaijan. The meaning of "performance" is if I had to travel somewhere else that isn't my main place of work to carry out temporary work and in that scenario I could apply the tax free rulings.
Many thanks for the responses. Although I would have hoped for another answer I still prefer to have the correct answer so thanks for the clarification.
Best regards
Paul
Expert:  Sam replied 3 years ago.
Hi Paul

That is it pretty much in a nutshell

Thanks

Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13810
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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