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Foreign wage tax dulls UK consultants' overseas edge

BRITISH CONSULTANTS' competitive edge in bidding for overseas work has been jeopardised by changes to tax rules announced in last week's Budget.

Scrapping of the foreign earnings deduction will hit consultants hard and make it difficult for them to compete effectively for overseas work, said the British Consultants Bureau.

BCB executive director Colin Adams explained: 'This change will make a bad situation worse, particularly when you add the adverse exchange rate situation that we have got at the moment.'

The announcement means that expats working overseas for longer than a year and being paid by their UK employers will now have to pay UK income tax. Under the previous rules, tax only had to be paid on money earned during periods of less than 365 days.

Posford Duvivier director Alistair Stirling agreed that the move would significantly increase the cost to consultants, particularly in areas such as the Gulf states, where staff currently get their salaries tax- free.

According to Adams, the BCB was already lobbying the government to make changes to tax rules in order to put consultants on a more equal level with their European counterparts. 'BCB is concerned about the advantages that some other EU countries have over the UK in terms of expats working overseas,' Adams said. The difference in tax rules enabled consultants from some countries to submit more competitive bids.

But the change will not affect the double taxation agreements which exist between the UK and over 100 countries.

Helena Russell

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