GUEST COMMENT: If you’re a UK banker who’s moving overseas, you need to think hard about the tax implications

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There is more to moving overseas to work than simply finding a suitable role and arranging accommodation. It is very important that the tax and social security implications of an overseas assignment are considered at the earliest stage to minimise liabilities and avoid penalties for non-compliance.

If your assignment is short term, it will usually be possible to set up contractual arrangements enabling a double tax treaty income tax exemption. This will prevent you from paying tax in the country you’re moving to, and allow you to continue paying taxes in the UK instead. However, international assignments in the financial sector will normally be for longer than six months which means that host country taxation applies.

In this case, it will be important for you, as an employee, to be treated as non-UK resident from the start of the overseas assignment to avoid also having a UK liability. Whilst the UK will usually give a tax credit for any host country income tax, this will be of small comfort if the UK's tax rate is higher than that of the host country.

The current rules for determining residency, largely based on a mix of case law and HMRC practice, are to be replaced with a statutory residence test from 6 April 2013. If you are leaving the UK to work overseas for at least one full tax year, non-residence can currently be achieved from the date of departure under the "full-time work abroad" test, subject to the number of days spent in the UK both working and not working, and this will continue under the new statutory residence test. But the devil is in the detail and you should familiarise yourself with the rules to avoid accidental UK residence.

Where the full-time work abroad test is not satisfied, it is still possible to achieve non-residence, but regard must then be made to the "ties" which you retain in the UK.

Remember that the social security position is different to the tax. Whether or not you can remain within the UK NIC system when leaving the UK on temporary assignment will depend on a number of factors, including which country is the host and the contractual arrangements.

Many senior executives in the financial sector will have interests in shares in their employer and/or a fund they manage, such as direct holdings, carried interest, co-invest or option arrangements.  The tax treatment of share-based interests in a cross-border working situation can be particularly complex, but there may be scope in some cases to mitigate liabilities by, for example, advancing or deferring the grant or vesting of awards, or the sale of shares, to pre or post-residency periods.

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