The UK tax treatment of dual contracts [Archived]
Produced in partnership with Darren Oswick of Simmons & Simmons

The following Tax practice note produced in partnership with Darren Oswick of Simmons & Simmons provides comprehensive and up to date legal information covering:

  • The UK tax treatment of dual contracts [Archived]
  • HMRC’s original approach to dual contract arrangements
  • HMRC’s 2005 commentary on dual contract arrangements
  • Are dual contracts a way of avoiding tax?
  • Restrictions on dual contracts in intra-group structures introduced in the Finance Act 2014
  • Condition 1
  • Condition 2
  • Condition 3
  • Condition 4
  • Condition 5
  • More...

The UK tax treatment of dual contracts [Archived]

ARCHIVED: This Practice Note has been archived and is not maintained.

One of the features of the UK employment income tax rules has long been to afford certain tax advantages to UK resident but non-UK domiciled employees who are able to structure their employment arrangements in a particular way.

An employee who is both UK resident and UK domiciled for tax purposes will be taxed on their worldwide income under UK domestic law. This is irrespective of who their employer is and where they perform the duties of their employment.

However, an employee who is UK resident but not UK domiciled, and who claims the remittance basis of taxation for a particular tax year, will only be taxed on ‘chargeable overseas earnings’ for a tax year to the extent that those earnings are remitted to the UK. For background details on the meaning of domicile and the remittance basis, see: Domicile and remittance subtopic.

Earnings from an employment will be ‘overseas earnings’ if:

  1. the remittance basis applies to that employee for the year in question

  2. the employee does not meet the requirement of section 26A of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) for the tax year (broadly, the employee must not have been non-UK tax resident for certain periods in the lead up to the tax

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