Income Tax (Earnings and Pensions) Act 2003 (c. 1)

Part 2 U.K. Employment income: charge to tax

Chapter 5 U.K. Taxable earnings: rules applying to employee resident, ordinarily resident or domiciled outside UK

Employees resident and ordinarily resident in UK U.K.

23 Calculation of “chargeable overseas earnings” U.K.

(1) This section applies for calculating how much of an employee’s general earnings for a tax year are “chargeable overseas earnings” for the purposes of sections 21 and 22.

(2) General earnings for a tax year are “overseas earnings” for that year if—

(a) in that year the employee is resident and ordinarily resident, but not domiciled, in the United Kingdom,

(b) the employment is with a foreign employer, and

(c) the duties of the employment are performed wholly outside the United Kingdom.

(3) To calculate the amount of “chargeable overseas earnings” for a tax year—

Step 1

Identify the full amount of the overseas earnings for that year under subsection (2).

Step 2

Subtract any amounts that would (assuming they were taxable earnings) be allowed to be deducted from those earnings under—

(a) section 232 or Part 5 (deductions allowed from earnings),

(b) section 592(7) of ICTA (contributions to exempt approved schemes),

(c) section 594 of ICTA (contributions to exempt statutory schemes), or

(d) section 262 of CAA 2001 (capital allowances to be given effect by treating them as deductions from earnings).

Step 3

Apply any limit imposed by section 24 (limit where duties of associated employment performed in UK).

The result is the chargeable overseas earnings for the tax year.