Give us your details and we’ll be in touch asap

Insights

All Articles

Business Services

Business Tax

Personal tax

Probate and Inheritance Tax

VAT

Business Tax  •  Personal tax

Tax rules when employees are on secondment

By RJP LLP on 20 June, 2019

There are often times when an employer needs an employee to temporarily work from a location other than their usual permanent location. Depending on where that is, the costs involved can be quite significant and are usually paid for by the employer.

 

What are the tax implications?

Normally, travel costs that are paid for by an employee in this situation can be reimbursed tax-free by the employer. Any costs that are not reimbursed are usually eligible for tax relief for the employee who has incurred them. In these cases, travel costs include actual journey costs and also subsistence and accommodation costs for the period of the secondment.

Example: You have a company based in Guildford; your employee lives in Kingston and commutes to the office every day. Then, a client project based in Manchester requires him to be based there 5 days a week for 6 months. Rather than pay for a hotel every day, it is more cost effective to rent a flat for his use. This cost is allowed as part of the ‘travel costs’ accommodation allowance. The employee lives in rented accommodation and he decides to give up his flat in Kingston to save the rent and make alternative arrangements for the weekend. This is acceptable according to HMRC and he can claim all the costs and live rent free for the period without any tax liabilities.

Generally, these rules only apply for secondments that last for 2 years or less, after which time the employee must return to their original place of work. This is important to understand from the outset; if there is not going to be a job to go back to, the tax relief rules will not apply.

Allowable expenses for a secondment are not the same if an employee moves to take up a new role with a new employer, even if it’s a subsidiary company of their original employer. For instance, an employee of a US company comes to the UK to take up employment with a UK subsidiary for a year, with a view to subsequently returning home and resuming US employment. As the subsidiary company is classified as a separate entity and therefore a new employer, the reliefs won’t apply.

If the individual continues to be employed by the US parent throughout by classifying the move as a secondment to the UK (even though he is directed and physically paid by the UK subsidiary), relief should (subject to all the other conditions) be available. This can be a complex arrangement to structure but is very important to get right, since large amounts of tax relief may be at stake.

Read more articles like this

When to waive goodbye to a shareholder dividend

Compliance update: HMRC ramps up ‘VAT gap’ investigations

Payroll Clinic: How to process NICs for older workers  

VAT Domestic Reverse Charge: How will it impact the construction industry?

IR35 Update: Understanding the SDS (Status Determination Statement)

Share this:

All Articles

Business Services

Business Tax

Personal tax

Probate and Inheritance Tax

VAT

Image

There are many benefits to asking your accountant to handle probate

Did you know RJP LLP are licensed by the ICAEW to offer a full probate service.

This can save you time and money, plus we can advise on matters related to inheritance tax at the same time.