In this year’s Budget, the Government announced its intention to consult on whether entitlement to the UK personal allowance should be restricted for non-residents.
The consultation was opened by HM Treasury earlier this month, with the government body setting outs its case for removing access to the “generous” entitlement from UK non-residents.
The Treasury pointed out that countries including “most in the EU”, the US, Canada and Australia, already restrict the benefit so that it is principally available only to individuals who are resident for tax purposes.
Furthermore, the Treasury said it has been increasing the personal allowance in recent years, with it having risen by more than 60% during the term of the current Conservative led coalition government and due to increase by £500 to £10,500 from April 2015.
It added it wants a tax system that is simple to understand and administer. The consultation also said the government “is committed to ensuring that everybody benefitting from the UK’s economic and social environment pays a fair amount of tax in the UK”.
However, James Hender, head of the private wealth group at Saffery Champness, said if the changes do “come to pass”, the impact for those UK firms seconding employees to work abroad for a period of time could be considerable.
“Unless secondees receive a pay rise to compensate for the loss of UK personal allowances, they could be significantly worse off by accepting to work abroad for their companies," said Hender.
“In addition, it could cause accounting headaches for both companies and employees using secondments as they will have to think harder about how, when and where to pay salaries and benefits. This may impede their ability to send staff where they are most needed, counter to companies’ growing need for truly globally mobile workforces.”
Hender added that there could even by an impact for expatriate retirees as, unless a “very high percentage of their income derives from the UK, they could be caught in the net”.