Expatriate taxation - CIOT - The Chartered Institute of Taxation

CIOT RESEARCH PROJECT ON EXPATRIATE TAXATION
the standard BIK should be.
1.21 Point 4 Filling out arrival and departure forms. These forms have no
statutory basis, and so their completion is not essential – to the employee. As
the employee derives no benefit from their completion and is not under a
statutory obligation to complete the forms, there is arguably no BIK. Where
there is modified PAYE/NIC, there is usually a requirement to complete the
P86 as this form notifies HMRC of the status of the individual as well as their
arrival, and thus the expectation of PAYE/NIC to be paid by the individual.
This makes it a contractual obligation of the employer, and again no BIK is
due.
1.22 Point 5 Giving tax advice. As above, there is no statutory need for this item
so it is a benefit – but for whom Where the aim is to reduce the burden of
taxation on the employer, as is the case for tax-equalised employees, it
should not be seen as a benefit to the employee. Rather, the employee is
helping the adviser to reduce the tax burden of the employer. This remains
true even if the tax is due and paid in the name of the employee, as the
ultimate liability remains with the employer. In “modified-PAYE cases” there is
even an agreement (within Appendix 6 of the HMRC Employment Manual)
which makes it a condition that the employer guarantees payment of the
employee’s tax.
1.23 However, where the tax is to be paid by the employee who is not taxequalised,
the liability is nothing to do with the employer, and there is clearly a
benefit. This benefit could be for more than simple income tax, as is (but not
always – it will depend upon the expatriate policy of the employer) the case
with Inheritance Tax, Capital Gains Tax, tax on investments and assistance
with the family’s tax obligations.
Proposal
1.24 This is such a contentious and complex area that it is beyond the wit of most
to come to a strictly correct position without spending, in most cases, more
time than the tax collected would warrant to calculate the BIK. It has certainly
been the case for the last 20 years.
1.25 However, there is already a precedent for evaluating a fixed rate for the
taxable value of accountants’ fees for Lloyds Underwriters and for workman’s
clothing. There should be serious consideration given to having a standard
charge for expatriates provided with a tax return service by their employer’s
advisers. The amount needs to be determined in consultation with the
advisers and the employers.
1.26 To understand where HMRC are coming from, if there are 50,000 expatriates
being provided with a tax return service, and the standard charge was
£100/150/200 per expatriate, and the tax rate were on average a gross-up tax
of 55%, then the tax at stake would be £3M, £4.5M and £6M.
1.27 However, for each employee, if the tax at stake were within this range, then
the annual effort to determine how much extra tax they would derive, by both
the taxpayer and his adviser, seems huge in comparison to the tax collected.
Peter Ashby 14 6.2.07