What are tax implications of going abroad to work?

Many doctors during their careers will be presented with opportunities to work overseas. The length of time you are working aboard and the working arrangements result in different tax consequences under the UK tax system. 

Richard Norbury highlights some of the common tax ramifications when working abroad or moving to the UK.

As your reputation builds, you may be requested to see or operate on patients outside of the UK. This would usually be on a self-employed basis or via your limited company.

These types of arrangement may come in the form of short trips working abroad before returning here.

As a UK taxpayer, you or your limited company are subject to UK tax on your worldwide income and therefore the income generated follows the usual UK tax rules. 

However, it may be that the country you are working in also requires some form of tax payment under its tax system. Some countries require that payments made to you or your company have tax taken at source from the payment. This is referred to as ‘withholding tax’. 

The good news is that the UK has what is known as double taxation treaties with lots of countries around the world. If there is a treaty, when calculating your tax liabilities for the year, you are able to deduct some or all the tax paid in the foreign country so that you are only taxed on the higher of UK tax or local tax. 

Provided the trip is ‘wholly and exclusively’ in relation to the purpose of your trade, it is likely that you will be able to claim tax relief on some of the costs incurred while travelling abroad.

It is very important to discuss any plans to work outside the UK with an accountant before undertaking any work.

VAT

VAT is a very complex tax. While services provided by doctors’ businesses usually are exempt from VAT under the healthcare exemptions, working outside of the UK can add complexities. 

You may also need to consider any VAT equivalent taxes in the country you are working in.

The devil is often in the detail when it comes to VAT. It is strongly recommended that you take advice from a specialist VAT advisor before starting any work outside the UK. 

Moving abroad

Opportunities may arise for you to relocate from the UK to a different country in the medium to long term. 

When you leave the UK, the date you are deemed to have left the UK system depends on a number of factors and whether or not you have severed ties with the UK.

There is no defined description as to what severed ties with the UK means in HM Revenue and Customs’ (HMRC’s) eyes. 

However, strong indications of severing ties would be things such as:

  • Taking a permanent salaried role in another country; 
  • Selling your family home;
  • Your spouse and dependents moving with you.

If you are deemed to have severed ties with the UK, then you would be able to claim what is called ‘split-year treatment’. 

This status means in the tax year that you leave the UK, you are only subject to UK tax from 6 April to the date you leave the UK system. 

In plain language, the UK income generated before you left would be subject to UK tax and any foreign income earnt after you left would not be subject to UK tax.

If ‘split-year treatment’ is not applicable, whether you are considered to be a UK tax resident usually depends on how many days you spend in the UK within the tax year – 6 April to 5 April the following year. 

Whichever status applies to you, great care must be taken when visiting the UK because the number of days you can spend here once you have left the UK tax system are very strict.

While it is not tax advice, if you pay for indemnity cover outside of the NHS, you should speak to your indemnity provider to ensure that you have ‘run-off cover’ to cover any claims made against you after you cease UK work.

Ascertaining your tax status when leaving the UK is very complicated and taking advice prior to moving can ensure you understand your tax obligations.

You would also need to consider your obligations in the country you are moving to, especially if you are considering private work that may not be taxed at source. Seeking the advice of an accountant in that particular country would also be highly recommended.

Tax planning

If you do work abroad for a period, then this may offer some tax planning opportunities in the UK tax system. 

This could include drawing dividends from a UK limited company or making use of your pension savings annual allowance in the years you are not considered to be UK tax resident. Care should be taken to ensure this does not cause tax liabilities in other countries. 

It is always a good idea to have a consultation with a specialist medical accountant if you are considering working abroad in any capacity so that they can review your overall position and advise you accordingly.

Richard Norbury (right) is a partner at Sandison Easson & Co, specialist medical accountants