When Work Takes You Abroad: Navigating Tax Obligations

The Challenge

Our client, a high‑income UK individual, had worked in Germany for a two‑year period while remaining UK tax resident throughout. They worked on a two‑weeks‑on, two‑weeks‑off rotation, returning to the UK between assignments, and their only permanent residence remained in the UK.

During this time, German tax was deducted at source through the employer’s payroll on all earnings relating to the overseas work. Any additional UK tax due was paid to HMRC where required.

After returning to the UK to work full‑time for a new employer, the client began receiving notifications from HMRC stating that UK tax returns were outstanding for the relevant years and that further UK tax was owed on the overseas earnings.

Although an accountant initially submitted tax returns claiming credit for the German tax paid, HMRC continued to dispute the position and insisted that additional UK tax was due, creating ongoing uncertainty for the client.

The Solution

We carried out a detailed review of the client’s working arrangements, UK tax residence status, and the UK–Germany Double Taxation Agreement. This identified a niche residency rule that had been overlooked and confirmed that the client’s earnings should not have been taxed in Germany in the first place.

As a result, the German tax authorities had no taxing rights over the income, and the employer had incorrectly deducted German tax at source. Our advice was therefore to reclaim the German tax paid and settle the UK tax properly with HMRC.

By correcting the underlying tax position, rather than continuing to rely on foreign tax credits, the issue was resolved conclusively.

The Value

Our advice provided the client with a clear and definitive resolution to a long‑running dispute with HMRC. By reclaiming the incorrectly deducted German tax and correctly settling the UK liability, the client avoided ongoing challenges, uncertainty, and potential penalties.

Most importantly, the client now has peace of mind that their tax affairs are correct and fully up to date, with confidence that the position is technically robust under both UK law and the relevant double taxation agreement.