The cost of seconding employees from overseas could rise by almost 25% when tax changes are made next year, an expert has warned. Though planning could reduce the exposure, employers will face increased wage bills, he said.
Tax changes affecting all UK employees will hit firms which second workers hard, because they are often committed to paying those workers what they would earn in their home country said Chris Thomas, a tax law specialist at Pinsent Masons, the law firm behind OUT-LAW.COM.
"The new 50% rate and loss of personal allowances will be especially painful for employers which are committed to equalising the net benefits that employees enjoy in their home countries, as they will have to bear the whole cost themselves rather than passing it on to the employee," said Thomas.
A secondment is where the employee of one company goes to work on loan for another, usually with the salary met by the borrowing firm.
A new tax regime for people who live and work in the UK but are domiciled in other countries for the purposes of tax on foreign earnings will also hit firms hiring secondees, said Thomas.
"Coming on top of the new tax regime for 'non-doms' which was introduced last year, this is likely to be costly," he said. "The costs of seconding an employee with a net equalised salary of £100,000 could rise by up to £24,000 once all of the tax changes have taken effect."
Thomas said that companies could save up to 75p for each £1 spent on remuneration if they plan far enough ahead.
"Firms might consider planning such as salary sacrifice, the acceleration of bonuses or dividends, use of share incentives which generate capital gains rather than income, and the use of tax deferral trusts," he said.
Thomas said that savings were not guaranteed and were situation-specific. "Not all of these will be appropriate in every case, and the most suitable planning will vary depending on the needs of individual employers," he said. "However, it is definitely worth looking at the options, as it can deliver substantial bottom line savings without cutting benefits."
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