Foreign employment income and UK Tax

| 14th December 2012

Often, if you are employed by a foreign company, you will be living and considered resident there for tax purposes, and will not be liable to UK tax on those earnings. In some unusual cases however (for example, pilots) you may be living and resident, ordinarily resident and domiciled in the UK, whilst still performing your employment abroad and being employed by a foreign company.

So what tax implications are there in this scenario?

The first thing you have to consider is whether or not there is a tax treaty in place between the employment country and the UK, and if this specifies where the tax should be paid. More information on tax treaties can be found here. If you are not liable to UK tax, then you are in luck and you do not have to do anything further. However, if you are liable to UK tax then you will need to file for self-assessment, since any tax you have already paid has not been collected via PAYE, unlike UK employment. This does not mean that you will be paying tax twice in the long run – you will be credited for any tax already paid in the foreign country. Most deductions from the foreign payslip (for example, for social security) are not deductible. Deducted pension contributions, depending on the specific agreements in place between the UK and the foreign country, may provide tax relief in the same way that UK pension contributions would.

Specifically for pilots

If you are working as a pilot, there are some specific tax treatments which have been specified by HMRC (which can be found here). One important thing to note is that, as with any other industry, you cannot claim the cost of your usual commute as a travel expense. For a pilot, this could be a particular airport specified in your contract. However, if you were required to fly from a different airport than that specified, you could claim the cost of travel to get to that location.