Know your immigration law - how much could you be saving?

The Government has recently amended the structure in which immigration leave is granted, causing considerable tax implications. Previously, for a work permit holder, leave was granted for up to five years. Under the new replacement system (Tier 2), leave is granted for three years, followed by an extension of two years, after which permanent residence may be applied for.

Previously, individuals were able to apply for a five year work permit without losing their ability to claim Resident Not Ordinary Resident (RNOR) tax status for the first three years of their stay. Now however, as the UK Border Agency and HMRC work closer together, applying to extend immigration leave will mean that HMRC is made aware of the individual’s intention to remain in the UK for more than three years and will consequently alter the individual’s tax status for that entire tax year.

For an individual who applies to extend their immigration leave on 1 April this will have very significant implications to their tax costs as the alteration to their tax status will be applied retrospectively to that entire tax year. Equally this cost may be a benefit paid for by the employing company and accordingly, for those companies with significant numbers of international assignees, the costs are potentially huge.

Indeed, immigration law has become a cost risk that all companies must be aware of since the new illegal working legislation came into force in February 2008. Under its requirements, a company found to have employees working illegally will be fined £10,000 per employee unless the appropriate right to work checks were carried out prior to their commencing employment. If the employer is deemed to have known the individual was working illegally they can be imprisoned for up to two years and/or given an unlimited fine. Anti-discrimination legislation and the reality of immigration law means that right to work checks should be carried out on all employees, not just those from outside of the European Union.

Concurrently, in view of very recent employment case law, employers can not bar non-Europeans at the outset, from applying for positions with their company. Immigration law is no longer the realm of foreigners but a serious risk management consideration for all employers.

What employers need is knowledgeable training and assistance to work their way through this often unconsidered area. PwC Legal's team of immigration lawyers is experienced in precisely this. They are also aware of when to raise potential tax and employment law issues so that clients can consider their options in light of all the relevant information and determine the best time to extend immigration leave.

Contact details
Email: Naomi Hanslow
Tel: +44(0)113 289 4151