Contractors' Questions: Can I offset overseas expenses against tax?

Contractor’s Question: I will be commuting to work in London from my home in Norway. I will have to rent a room and fly back to Norway every weekend. Will my living and commuting expenses be off-settable against my taxes?

Expert’s Answer: Your question is part of an interesting larger topic – what are allowable tax deductions in the UK? I will aim to offer general guideline as well as some that specifically relates to workers like you, who are coming into the UK for an assignment.

Generally-speaking, and provided that expenses are the burden of the worker rather than reimbursed by a client, the cost for secondary accommodation (where a primary residence is being maintained in the home country) and travel between the country of work and your home location are the commonly allowed items on which a tax benefit can be claimed. These would tend to be the largest portion of the costs associated to working abroad and are the typical expenses which are acceptable tax deductions for contract workers working on an international assignment.

Speaking more specifically about your situation, commuting from your home in Norway to work during the week in the UK, the same general principles apply.

HM Revenue & Customs guidelines state that travel costs incurred between the country outside the United Kingdom in which the employee normally lives and any place in the United Kingdom where duties are performed are to be considered reimbursable as long as the employee will return there after performing the duties in the UK. It is however important to note that this benefit is only available to individuals who are not ordinarily resident in the UK or non-UK-domiciled.

Furthermore, family travel to visit the employee working in the UK may also be treated as reimbursable up to a maximum of two journeys per year.

Regarding accommodation specifically, HMRC considers that temporary accommodation (hotel or B&B) is reimbursable; once again only for non-domiciled or not ordinarily resident individuals. Alternatively an employee may take out a lease on a property in order to carry out employment at a temporary location. A copy of the rental/lease agreement must be provided. In addition to the cost of rent, an employee may also make a claim for related costs including council taxes, water rates etc, provided the total cost does not exceed the cost of hotel accommodation of an appropriate standard.

Finally, it should be expected that these are only available for up to two years, after which the assignment will no longer be considered temporary in nature.

As ever, the above is based on the information provided and doesn’t consider other circumstances. Before accepting the role and making the move, I suggest you seek considered advice from a specialist to ensure you have all the relevant information.

The expert was Matt Walters of Capital Consulting, a leading advisory to UK contractors working overseas.  

Editor's Note: Related Reading -

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