Part 2Employment income: charge to tax
Chapter 5F24Taxable earnings: remittance basis rules and rules for non-uk resident employees
Taxable earnings
20Taxable earnings under this Chapter: introduction
F91
This Chapter—
a
contains provision for calculating what are taxable earnings from certain kinds of employment in a tax year for which section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the employee, and
b
sets out what are taxable earnings from an employment in a tax year in which the employee is non-UK resident.
2
In this Chapter—
a
sections 29 and 30 deal with the year for which general earnings are earned,
F10b
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F11c
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d
sections 38 to 41 deal with the place where the duties of an employment are performed.
3
In the employment income Parts any reference to the charging provisions of this Chapter is a reference to any of F12sections 22, 26 and 27.
F27Remittance basis rules for UK ordinarily resident employees
S. 21 cross-heading substituted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by Finance Act 2008 (c. 9), Sch. 7 para. 12
21Earnings for year when employee resident and ordinarily resident, but not domiciled, in UK, except chargeable overseas earnings
1
This section applies to general earnings for a tax year in which the employee is resident and ordinarily resident, but not domiciled, in the United Kingdom except to the extent that they are chargeable overseas earnings for that year.
2
The full amount of any general earnings within subsection (1) which are received in a tax year is an amount of “taxable earnings” from the employment in that year.
3
Subsection (2) applies—
a
whether the earnings are for that year or for some other tax year, and
b
whether or not the employment is held at the time when the earnings are received.
4
Section 23 applies for calculating how much of an employee’s general earnings are “chargeable overseas earnings” for a tax year, and are therefore within section 22(1) rather than subsection (1) above.
C122Chargeable overseas earnings for year when F28remittance basis applies and employee ordinarily UK resident
1
This section applies to general earnings for a tax yearF14, to the extent that they are chargeable overseas earnings for that year, if—
a
section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the employee for that year, and
b
the employee is ordinarily UK resident in that year.
2
The full amount of any general earnings within subsection (1) which are remitted to the United Kingdom in a tax year is an amount of “taxable earnings” from the employment in that year.
F153
Subsection (2) applies whether or not the employment is held when the earnings are remitted.
4
Section 23 applies for calculating how much of an employee’s general earnings are “chargeable overseas earnings” for a tax yearF16....
5
Where any chargeable overseas earnings are taxable earnings under subsection (2), any deduction taken into account under section 23(3) in calculating the amount of the chargeable overseas earnings—
a
cannot then be deducted under section 11 from those taxable earnings, but
b
may be deducted under that section from any taxable earnings under F17section 15.
F136
See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc.
7
General earnings for the employee for the tax year fall within section 15(1) to the extent that they do not fall within subsection (1).
23Calculation of “chargeable overseas earnings”
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 F19section 22.
2
General earnings for a tax year are “overseas earnings” for that year if—
F20a
section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the employee for that year,
aa
the employee is ordinarily UK resident in that year,
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),
F4b
sections 188 to 194 of FA 2004 (contributions to registered pension 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.
24Limit on chargeable overseas earnings where duties of associated employment performed in UK
1
This section imposes a limit on how much of an employee’s general earnings are chargeable overseas earnings for a tax year under section 23 if—
a
in that year the employee holds associated employments as well as the employment to which subsection (2) of that section applies (“the relevant employment”), and
b
the duties of the associated employments are not performed wholly outside the United Kingdom.
2
The limit is the proportion of the aggregate earnings for that year from all the employments concerned that is reasonable having regard to—
a
the nature of and time devoted to each of the following—
i
the duties performed outside the United Kingdom, and
ii
those performed in the United Kingdom, and
b
all other relevant circumstances.
3
For the purposes of subsection (2) “the aggregate earnings for a year from all the employments concerned” means the amount produced by aggregating the full amount of earnings from each of those employments for the year mentioned in subsection (1) so far as remaining after subtracting any amounts of the kind mentioned in step 2 in section 23(3).
4
In this section—
a
“the employments concerned” means the relevant employment and the associated employments;
b
“associated employments” means employments with the same employer or with associated employers.
5
The following rules apply to determine whether employers are associated—
Rule A
An individual is associated with a partnership or company if that individual has control of the partnership or company.
Rule B
A partnership is associated with another partnership or with a company if one has control of the other or both are under the control of the same person or persons.
Rule C
A company is associated with another company if one has control of the other or both are under the control of the same person or persons.
6
In subsection (5)—
a
in rules A and B “control” has the meaning given by F5section 995 of ITA 2007 (in accordance with section 719 of this Act), and
b
in rule C “control” means control within the meaning of section 416 of ICTA (meaning of expressions relating to close companies).
7
If an amount of chargeable overseas earnings is reduced under step 3 in section 23(3) as a result of applying any limit imposed by this section, the amount of general earnings corresponding to the reduction remains an amount of general earnings within F18section 15(1).
F29Remittance basis rules: employees not UK ordinarily resident
S. 25 cross-heading substituted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by Finance Act 2008 (c. 9), Sch. 7 para. 17
F2325UK-based earnings for year when employee resident, but not ordinarily resident, in UK
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C226Foreign earnings for year when F30remittance basis applies and employee not ordinarily UK resident
1
This section applies to general earnings for a tax year F7where section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the employee for that year and the employee is not ordinarily UK resident in that year, if the general earnings are neither—
a
general earnings in respect of duties performed in the United Kingdom, nor
b
general earnings from overseas Crown employment subject to United Kingdom tax.
2
The full amount of any general earnings within subsection (1) which are remitted to the United Kingdom in a tax year is an amount of “taxable earnings” from the employment in that year.
F83
Subsection (2) applies whether or not the employment is held when the earnings are remitted.
4
Section 28 explains what is meant by “general earnings from overseas Crown employment subject to United Kingdom tax”.
F65
See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc.
6
General earnings for the employee for the tax year fall within section 15(1) if they do not fall within subsection (1).
Employees not resident in UK
27UK-based earnings for year when employee not resident in UK
1
This section applies to general earnings for a tax year in which the employee is not resident in the United Kingdom if they are—
a
general earnings in respect of duties performed in the United Kingdom, or
b
general earnings from overseas Crown employment subject to United Kingdom tax.
2
The full amount of any general earnings within subsection (1) which are received in a tax year is an amount of “taxable earnings” from the employment in that year.
F223
Subsection (2) applies whether or not the employment is held when the earnings are received.
4
Section 28 explains what is meant by “general earnings from overseas Crown employment subject to United Kingdom tax”.
F215
Sections 18 and 19 (time when earnings are received) apply for the purposes of this section.
Special class of earnings for purposes of sections 25 to 27
28Meaning of “general earnings from overseas Crown employment subject to UK tax”
1
This section explains for the purposes of sections 25 to 27 what is meant by “general earnings from overseas Crown employment subject to United Kingdom tax”.
2
“Crown employment” means employment under the Crown—
a
which is of a public nature, and
b
the earnings from which are payable out of the public revenue of the United Kingdom or of Northern Ireland.
3
“General earnings from overseas Crown employment” means general earnings from such employment in respect of duties performed outside the United Kingdom.
4
Such earnings are to be taken as being “subject to United Kingdom tax” unless they fall within any exception contained in an order under subsection (5).
5
F3the Commissioners for Her Majesty’s Revenue and Customs may make an order excepting from the operation of sections 25(2) and 27(2)—
a
general earnings of any description of employee specified in the order;
b
general earnings from any description of employment so specified.
6
The F2Commissioners may make the order if they consider that such earnings should not be subject to those provisions having regard to the international obligations of Her Majesty’s Government and such other matters as appear to them to be relevant.
7
An order may make provision by reference to all or any of the following—
a
the residence or nationality of the employee;
b
whether the employee was engaged in or outside the United Kingdom;
c
the nature of the post, the rate of remuneration and any other terms and conditions applying to it.
8
Subsection (7) does not affect the generality of the power to make provision by reference to such factors as the Board consider appropriate.
Year for which general earnings are earned
29Meaning of earnings “for” a tax year
1
This section applies for determining whether general earnings are general earnings “for” a particular tax year for the purposes of this Chapter.
2
General earnings that are earned in, or otherwise in respect of, a particular period are to be regarded as general earnings for that period.
3
If that period consists of the whole or part of a single tax year, the earnings are to be regarded as general earnings “for” that tax year.
4
If that period consists of the whole or parts of two or more tax years, the part of the earnings that is to be regarded as general earnings “for” each of those tax years is to be determined on a just and reasonable apportionment.
5
This section does not apply to any amount which is required by a provision of Part 3 to be treated as earnings for a particular tax year.
30Treatment of earnings for year in which employment not held
1
This section applies for the purposes of this Chapter in a case where general earnings from an employment would otherwise fall to be regarded as general earnings for a tax year in which the employee does not hold the employment.
2
If that year falls before the first tax year in which the employment is held, the earnings are to be treated as general earnings for that first tax year.
3
If that year falls after the last tax year in which the employment was held, the earnings are to be treated as general earnings for that last tax year.
4
This section does not apply in connection with determining the year for which amounts are to be treated as earnings under Chapters 2 to 11 of Part 3 (the benefits code).
F26...
S. 31 cross-heading omitted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 7 para. 21
F2531Receipt of money earnings
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F2532Receipt of non-money earnings
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F2533Earnings remitted to UK
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F2534Earnings remitted to UK: further provisions about UK-linked debts
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Relief for delayed remittances
F2535Relief for delayed remittances
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F2536Election in respect of delayed remittances
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F2537Claims for relief on delayed remittances
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Place of performance of duties of employment
38Earnings for period of absence from employment
1
This section applies if a person ordinarily performs the whole or part of the duties of an employment in the United Kingdom.
2
General earnings for a period of absence from the employment are to be treated for the purposes of this Chapter as general earnings for duties performed in the United Kingdom except in so far as they would, but for that absence, have been general earnings for duties performed outside the United Kingdom.
39Duties in UK merely incidental to duties outside UK
1
This section applies if in a tax year an employment is in substance one whose duties fall to be performed outside the United Kingdom.
2
Duties of the employment performed in the United Kingdom whose performance is merely incidental to the performance of duties outside the United Kingdom are to be treated for the purposes of this Chapter as performed outside the United Kingdom.
3
This section does not affect any question as to—
a
where any duties are performed, or
b
whether a person is absent from the United Kingdom,
for the purposes of section 378 (deduction from seafarers' earnings: eligibility), and section 383 (place of performance of incidental duties) applies instead.
40Duties on board vessel or aircraft
1
Duties which a person performs on a vessel engaged on a voyage not extending to a port outside the United Kingdom are to be treated for the purposes of this Chapter as performed in the United Kingdom.
2
Duties which a person resident in the United Kingdom performs on a vessel or aircraft engaged—
a
on a voyage or journey beginning or ending in the United Kingdom, or
b
on a part beginning or ending in the United Kingdom of any other voyage or journey,
are to be treated as performed in the United Kingdom for the purposes of this Chapter.
3
Subsection (2) does not, however, apply for the purposes of section 24(1)(b) (limit on chargeable overseas earnings under section 23 where duties of associated employment performed in UK) in relation to any duties of a person’s employment if—
a
the employment is as a seafarer, and
b
the duties are performed on a ship.
4
Instead, any duties of the employment which are performed on a ship engaged—
a
on a voyage beginning or ending outside the United Kingdom (but excluding any part of it beginning and ending there), or
b
on a part beginning or ending outside the United Kingdom of any other voyage,
are to be treated as performed outside the United Kingdom for the purposes of section 24(1)(b).
5
For the purposes of subsections (3) and (4)—
a
employment “as a seafarer” means an employment consisting of the performance of duties on a ship or of such duties and others incidental to them;
F1b
“ship” does not include an offshore installation;
c
the areas designated under section 1(7) of the Continental Shelf Act 1964 (c. 29) are treated as part of the United Kingdom.
41Employment in UK sector of continental shelf
1
General earnings in respect of duties performed in the UK sector of the continental shelf in connection with exploration or exploitation activities are to be treated for the purposes of this Chapter as general earnings in respect of duties performed in the United Kingdom.
2
In this section—
“the UK sector of the continental shelf” means the areas designated under section 1(7) of the Continental Shelf Act 1964, and
“exploration or exploitation activities” means activities carried on in connection with the exploration or exploitation of so much of the seabed and subsoil and their natural resources as is situated in the United Kingdom or the UK sector of the continental shelf.
Pt. 2 Ch. 5 title substituted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by Finance Act 2008 (c. 9), Sch. 7 para. 10