International Gardening Leave - UK Tax Treament

[Cbrodd]

Hi,

I currently live in Denmark (since 1 May 2023, when I moved here from UK) and am soon due to go on Gardening Leave from my Danish based employer. I intend to go back to the UK 1 Sept 2025 and may spend a significant proportion of my gardening leave there - up to 7 months. How should any salary received during this period be treated (I will continue to pay Danish insurance and income tax on salary received). Thanks in advance.

[darthblingbling]

OECD guidance suggests that the source country will be where the work would have taken place should you not have gone on garden leave. Which I assume is Denmark.
This however does not prevent the UK from taxing it as you will be tax resident here, likely you'll get a tax credit in the UK for Danish tax due under treaty. You may even benefit from the new FIG regime if you're a qualifying new resident on return, but I'd imagine Danish tax is higher than UK tax anyway.
Social security is another matter, I'd imagine that there is something in the guidance on social security coordination between the EU and UK that would allow you to remain subject only Danish social security on this income, but I'm not 100% certain. Would be a matter for your employer to work out anyway.

[AGoodman]

If you are returning to Denmark after your time in the UK then you might remain treaty resident in Denmark throughout.

If so, you could benefit from Art 15(1) of the UK/Denmark tax treaty. You should take a look at Art 4 (and 15(1)) of the treaty here:

https://assets.publishing.service.gov.uk/media/5fcf53198fa8f54d6249e99b/UK-Denmark-MLI_-_in-force.pdf

and see if you would be considered treaty resident there or here during that period. Treaty residence gets a little murky when people move mid-year but if you will remain tax resident in Denmark, and keep your main home there etc, you might remain treaty resident there. If so, you may have to file a UK return but can claim treaty relief against any UK income tax.