C2Part 2Employment income: charge to tax
Chapter 5F11Taxable earnings: remittance basis rules and rules for non-uk resident employees
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
F12Remittance basis rules for F23employees outside section 26
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
Words in cross-heading substituted (with effect in accordance with Sch. 46 para. 25 of the amending Act) by Finance Act 2013 (c. 29), Sch. 46 para. 7(2)(b) (with Sch. 46 para. 26)
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 F13remittance basis applies and employee F24outside section 26
1
This section applies to general earnings for a tax yearF4, 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
F20b
the employee does not meet the requirement of section 26A for 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.
F53
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 year F6....
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 F7section 15.
F36
See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc.
F197
Section 15(1) does not apply to general earnings 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 F9section 22.
2
General earnings for a tax year are “overseas earnings” for that year if—
F10a
section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the employee for that year,
F18aa
the employee does not meet the requirement of section 26A for 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
a
in the case of a tax year that is not a split year, the full amount of the overseas earnings for that year, and
b
in the case of a split year, so much of the full amount of the overseas earnings for that year as is attributable to the UK part of the year.
Step 2
Subtract any amounts that would (assuming they were taxable earnings) be allowed to be deducted from F17the earnings identified under step 1 under—
a
section 232 or Part 5 (deductions allowed from earnings),
F1b
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.
F154
Any attribution required for the purposes of step 1 or step 2 in subsection (3) is to be done on a just and reasonable basis.
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.
F212A
If the tax year is a split year as respects the employee, subsection (2) has effect as if for “the aggregate earnings for that year from all the employments concerned” there were substituted “
so much of the aggregate earnings for that year from all the employments concerned as is attributable to the UK part of that year
”
.
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).
F223A
Any attribution required for the purposes of subsection (2A) is to be done on a just and reasonable basis.
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 F2section 995 of ITA 2007 (in accordance with section 719 of this Act), and
b
in rule C “control” means control within the meaning F14given by sections 450 and 451 of CTA 2010 (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 F8section 15(1).
Pt. 2 applied (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), ss. 969(4)(a), 1329(1) (with Sch. 2 Pts. 1, 2)