Introduction: Why Detached Duty Relief Matters for US Executives in London
Detached duty relief is the UK rule that lets an employee sent to a temporary workplace for 24 months or less receive accommodation, subsistence and travel costs free of UK income tax. For a senior American in London, that can mean £80,000 to £120,000 a year of tax-free rent, meals and flights home. At a 45% marginal rate, the saving often exceeds £40,000 a year.
However, the relief is fragile. One sentence in an assignment letter can switch it off from day one. Moreover, the IRS applies a different test. The same housing HMRC treats as tax-free can still be taxable wages on your US return. At TaxYork, we see this mismatch every season, and it is the reason this guide exists.
What Detached Duty Relief Actually Covers
Detached duty relief is not a separate statutory relief with its own form. Instead, it is the practitioner name for the ordinary travel expense rules in sections 338 and 339 of the Income Tax (Earnings and Pensions) Act 2003. Specifically, section 339 ITEPA 2003 defines a temporary workplace, and section 338 allows a deduction for the full cost of travelling to one. Following the old case of Nolder v Walters, HMRC accepts that "travel" includes accommodation and meals while you stay away, as its guidance on associated subsistence confirms.
As a result, you will also hear it called temporary workplace relief or TWR. The label changes, but the legal test does not.
Who This Guide Is Written For
This guide is written for US citizens and green card holders seconded to Britain by an American employer: managing directors, partners, investment bankers and founders running a UK build-out. Furthermore, it covers the tax return preparation that follows on both sides of the Atlantic. For short trips, our guide to short-term business visitor rules for US executives will fit you better.
The 24-Month Rule Behind Detached Duty Relief
The heart of detached duty relief is a two-part test. First, the UK office must be capable of being a temporary workplace. Second, a further anti-avoidance rule must not convert it into a permanent one.
Limited Duration and the Temporary Workplace
A workplace is temporary if you attend it only to perform a task of limited duration or for a temporary purpose. Consequently, a London secondment to integrate an acquisition, open a trading desk or run a regulatory project normally passes the first limb. Notably, it does not matter that you attend every working day.
The second limb is the one that catches executives. According to HMRC's 24-month rule guidance, a workplace cannot be temporary if you spend, or are likely to spend, 40% or more of your working time there over a period that lasts, or is likely to last, more than 24 months. Therefore a full-time posting expected to run 25 months fails. One expected to run 23 months passes.
How HMRC Reads the Expectation
The test looks forward, not backward. In other words, HMRC asks what it was reasonable to expect at each point in time, not what eventually happened. An obvious starting point is what your employer told you, usually in the assignment letter. Additionally, HMRC considers the expected length of the project and any informal understandings, written or not.
HMRC's own secondment appendix at EIM77010 gives a telling example. A project manager receives a six-month secondment, but everyone expects it to roll over for the full three years of the project. HMRC treats the expectation as three years, so detached duty relief is lost from the start. In practice, a short headline term with a nod-and-wink extension does not work.
Moving home is also relevant. Selling your US house does not automatically defeat the claim, although HMRC treats it as an important factor, as its guidance on finding the expected period explains.
Extensions, Shortened Postings and the Change of Expectation
Expectations can change, and the relief follows them. If a 20-month posting is extended to 30 months, detached duty relief stops from the date the extension becomes the reasonable expectation. Importantly, the earlier months are not clawed back.
The rule also works in reverse. In HMRC's example, a posting planned for 28 months is cut to 18 months after ten months. No relief is due for the first ten months, yet the final eight months qualify in full. Consequently, the date of every board decision and every email about duration matters, and we recommend keeping them on file.
Secondment or New Job? The Continuing-Employment Test
Detached duty relief only works if London is a temporary workplace within a continuing employment. If the move is really a new job, London becomes your permanent workplace. Every commuting cost is then private.
The Fixed-Term Appointment Trap
Section 339(5) contains a trap for new hires. If your attendance at the workplace covers all, or almost all, of the period you are likely to hold the employment, it is not temporary. HMRC's fixed-term appointment guidance says it will not normally challenge a claim where the workplace period is under 80% of the expected employment.
For example, an American hired by a UK subsidiary on an 18-month contract to run its London office fails this test. By contrast, a 15-year veteran of a New York bank who is sent to London for 18 months and then returns passes easily.
What HMRC Looks for in the Paperwork
HMRC looks at substance. Factors pointing to a new employment include a separate contract with a different company, termination of the US contract and a major change of duties. Meanwhile, factors pointing to one continuing employment include retained pension and seniority rights, continued share plan participation and a guaranteed return role.
In HMRC's own examples, a French banker whose contract is terminated and replaced by a UK subsidiary contract has a new job. However, a Swedish employee paid locally by the UK subsidiary but keeping her home pension and seniority has only one employment. Therefore US employers should draft secondment agreements that keep the US contract alive, preserve 401(k) participation and promise a role back home.
What You Can Claim Under Detached Duty Relief
Once the temporary workplace test is met, detached duty relief covers the additional costs you incur because of the business travel. Notably, HMRC does not deduct the costs you save at home, so a restaurant meal in London qualifies in full.
Accommodation: The Hotel Benchmark and Seniority
Under detached duty relief, HMRC allows an appropriate standard of hotel accommodation for the whole secondment. Furthermore, it expressly accepts that the standard can reflect your seniority. A serviced apartment or rented flat is usually cheaper than a hotel, so HMRC will not restrict the claim where the total cost is reasonable compared with a suitable hotel.
That total can include utilities and the reasonable cost of furniture. Interestingly, HMRC accepts the rent as an additional cost even where you sell your home abroad, because you will need a new home when you return. As a result, a one-bedroom flat in Canary Wharf or Mayfair for a managing director is generally defensible.
Subsistence, Utilities and Travel Home
Meals, reasonable daily subsistence and travel between your home and the London workplace all qualify for detached duty relief. For a US executive, that usually means transatlantic flights home. Additionally, the initial journey to London and the final journey back qualify.
What does not qualify is equally important. A cash allowance without receipts is taxable earnings. Moreover, the relief is limited to what you actually spend, so a generous flat-rate housing allowance only escapes tax to the extent it matches real, reasonable costs.
Family Costs and the Special Foreign Travel Rules
The core detached duty relief covers you, not your family. Where a larger flat or a family-friendly location raises the cost, HMRC may restrict the claim to the part attributable to your own business need. In practice, advisers usually agree a modest apportionment rather than losing the whole claim.
However, a separate set of foreign travel rules can help. According to HMRC's special rules on foreign travel, a non-resident or qualifying new resident who comes to work in the UK can claim unlimited journeys home for five years. Additionally, where your UK work keeps you here for 60 days or more, your employer can pay for your spouse and children to visit, up to two outward and two return journeys each per tax year. These rules sit alongside detached duty relief and survive even when the 24-month test fails.
The US Side: Why the IRS Draws the Line at One Year
This is the gap almost every UK guide on detached duty relief ignores. A US citizen or green card holder is taxed on worldwide income, so the IRS reviews your London housing under its own rules. Those rules are stricter.
Section 162 and the Indefinite Assignment
Under Internal Revenue Code section 162, travel expenses while "away from home" are deductible. However, the statute says you are not temporarily away from home during any period of employment that exceeds one year. The IRS's Topic 511 on business travel and Publication 463 apply this bluntly: if you realistically expect an assignment to last more than a year, it is indefinite from the start.
Consequently, a 22-month London posting that qualifies for detached duty relief fails the US test on day one. Your tax home moves to London, the flat is personal living cost, and every pound your employer pays is US wages.
Accountable Plans and Medicare Tax
A US employer can only reimburse expenses tax-free under an accountable plan if the expense would have been deductible. The Treasury regulation on reimbursement arrangements requires a business connection, substantiation and the return of excess amounts. An indefinite assignment breaks the first condition.
As a result, the housing and subsistence that detached duty relief shelters in Britain appear on your W-2. Even with a certificate of coverage keeping you in the US system, Medicare tax at 1.45% plus the 0.9% Additional Medicare Tax applies to every dollar. Social Security tax usually does not, because a senior executive has already passed the wage base.
The sweet spot is an assignment realistically expected to last twelve months or less. In that case, both the UK and the US exempt the costs, and nothing hits your W-2.
Foreign Tax Credits, the Housing Exclusion and State Tax
Fortunately, extra US wages rarely produce extra federal tax for a London executive. UK rates of 40% and 45% usually exceed your average US rate, so the foreign tax credit on Form 1116 typically covers the US tax on UK-source pay. That said, detached duty relief lowers your UK tax, so it also shrinks your excess credits. For most returning executives, those carryforwards would expire unused anyway.
Alternatively, you can elect the foreign earned income exclusion of $132,900 for 2026 plus the foreign housing exclusion. IRS Notice 2026-25 sets the 2026 London housing cap at $68,600. However, for seven-figure earners the credit method almost always wins, and the exclusion locks you in for years.
State tax is the real danger. New York and California give no credit for UK tax, so if you remain a resident there, the housing is taxed again with no offset. Our analysis of New York statutory residence for Americans in London explains when the connection breaks.
Payroll Mechanics: PAYE, National Insurance and Overseas Workday Relief
Getting detached duty relief right is also a payroll exercise. The UK host company is usually the economic employer, so PAYE must run from the start, often through a shadow payroll for US executives.
The Paid-or-Reimbursed Exemption
Since April 2016, employers do not need a dispensation. Instead, qualifying expenses they pay or reimburse are exempt from PAYE and reporting if the employee could have claimed a deduction. However, the exemption does not apply to expenses funded through salary sacrifice. Additionally, the employer must operate a checking system, keep receipts and monitor duration.
Where your employer pays a cash allowance instead, it goes through payroll as earnings. As a result, the saving from detached duty relief arrives later. You then claim detached duty relief yourself through Self Assessment, supported by receipts. Either way, the evidence burden is the same.
Certificates of Coverage and National Insurance
Under the US-UK totalisation agreement, an American employer can keep you in US Social Security for up to five years with a certificate of coverage. The IRS summarises this in its totalization agreements guidance. Consequently, UK National Insurance is usually not due, so the NIC saving that UK guides quote does not apply to you.
Stacking Overseas Workday Relief
Since 6 April 2025, a qualifying new resident with ten prior years of non-residence can also claim Overseas Workday Relief on earnings for workdays outside the UK. The relief is capped at the lower of 30% of employment income or £300,000 a year. Importantly, it works alongside detached duty relief rather than replacing it, so days spent in your New York or Dallas office trim the UK bill further. For arrival planning, HMRC's statutory residence test guidance (RDR3) confirms when your UK residence starts.
Case Study: A Dallas Managing Director's 22-Month London Posting
The following illustrative example shows detached duty relief at work with realistic figures. Daniel is a US citizen and managing director at a Dallas-based private equity firm. The firm seconds him to its London office from 1 February 2026 to 30 November 2027, a 22-month posting documented in a letter that guarantees his Dallas role on return. His wife and children stay in Texas, which has no state income tax.
The UK Numbers
Daniel's salary is £400,000. The firm rents a serviced flat in Canary Wharf at £6,500 a month, which is £78,000 a year, and reimburses £12,000 of subsistence and £6,000 of flights home. That is £96,000 a year of costs qualifying for detached duty relief.
For a full UK tax year, and ignoring Overseas Workday Relief on his Dallas days for simplicity, his salary alone produces UK income tax of £166,203. He loses his personal allowance entirely, pays 20% on £37,700, 40% on the next £87,440 and 45% on the remaining £274,860. Without detached duty relief, the extra £96,000 would be taxed at 45%, adding £43,200. With the relief, it adds nothing. Therefore the relief is worth £43,200 of UK tax a year, or roughly £79,000 across the posting.
The US Numbers
Using an illustrative rate of $1.30, Daniel's salary is $520,000 and the benefits are $124,800. Because the posting is realistically longer than one year, the IRS treats the $124,800 as wages. His W-2 shows $644,800, and filing jointly with a $32,200 standard deduction, his federal tax is about $151,949.
Around 95% of his workdays are in London, so the Form 1116 limitation lets him credit about $144,351 of UK tax. His UK tax of $216,064 comfortably covers that amount. As a result, he owes only around $7,598 of federal tax on his US-source workdays, plus $2,933 of Medicare tax on the housing. He carries forward roughly $71,713 of excess credits instead of $127,873, which costs him nothing in practice.
What a 30-Month Letter Would Have Cost
Suppose the firm's HR team had written "up to 30 months" to leave room for flexibility. Detached duty relief would then be unavailable from the first day, and Daniel would pay £43,200 more UK tax each year. Across 22 months, that is about £79,000 of avoidable tax. Furthermore, if the firm tax-equalises him, it grosses up the cost, which can push the true figure above £140,000. In our experience, two words in an assignment letter are among the most expensive words in cross-border tax.
How TaxYork Can Help
TaxYork provides comprehensive US and UK tax return preparation for executives on assignment. We review the assignment letter before you sign it, test the 24-month and continuing-employment rules, and document the detached duty relief position for payroll.
On the US side, our team handles US tax returns for expats, including Form 1116, Form 2555 modelling and W-2 reconciliation. Additionally, our tax treaty optimisation service aligns your credits, certificate of coverage and treaty residence. Where your employer equalises you, we reconcile the hypothetical tax under tax equalisation so neither side overpays. Independent guidance from the ICAEW tax faculty is a useful companion to this work.
Conclusion
Detached duty relief can remove £40,000 or more of UK tax a year from a senior US secondee's bill, provided the posting is realistically 24 months or less and sits inside a continuing employment. However, the IRS stops at one year, so the same housing usually becomes US wages. Fortunately, the foreign tax credit normally absorbs the federal cost, although Medicare tax and state tax can still bite.
Ultimately, the relief is won or lost in the drafting. Plan the letter, record every change of expectation and prepare both returns together, so detached duty relief survives any HMRC enquiry.
Contact Us
If you are about to accept a London posting or already have one, book a consultation with our US-UK team. You can also email hello@taxyork.com or call 020 3488 8606 to discuss your assignment letter, payroll set-up and US and UK tax returns.
Disclaimer
This article is provided for general information only and does not constitute tax, legal or financial advice. Tax rules in the United States and the United Kingdom change frequently, and their application depends on your individual circumstances. The figures in the case study are illustrative and use simplified assumptions, including a fixed exchange rate. You should obtain professional advice tailored to your situation before acting on any information in this article. TaxYork accepts no liability for any loss arising from reliance on this content.