Foreign service exemption for termination payments

Produced by Tolley in association with Sue El Hachmi of Osborne Clarke LLP
Employment Tax
Guidance

Foreign service exemption for termination payments

Produced by Tolley in association with Sue El Hachmi of Osborne Clarke LLP
Employment Tax
Guidance
imgtext

What is ‘foreign service’?

Up to 5 April 2018 a full or partial exemption from UK tax was available on a termination payment where the employment included a period of ‘foreign service’. The definition of ‘foreign service’ is complex as it reflects the different rules that have applied to the taxation of foreign earnings over the years.

Moves were made to significantly limit such claims for 2018/19 onwards, as a result of which most employees no longer qualify for any form of relief, even if part of their termination payment can be said to relate to an earlier period of foreign service. Further details are, however, retained below, both for historical reference and for the benefit of the small minority of individuals who may still qualify.

In respect of service from the 2003/04 to 2012/13 tax years, foreign service in relation to a particular employment means service such that the earnings from that employment were either:

  1. not relevant earnings

  2. earnings in respect of which a 100% seafarers’ earnings deduction was available

ITEPA

Continue reading the full document
To gain access to additional expert tax guidance, workflow tools, generative tax AI, and tax research, register for a free trial of Tolley+™
Sue El Hachmi
Sue El Hachmi

Senior Associate at Osborne Clarke


Sue advises on the design and implementation of employee incentive arrangements for private and public companies, including all types of tax-advantaged plans and bespoke arrangements for senior executives and management.Sue also advises on the incentive-related aspects of corporate transactions and has experience of private equity transactions and public company takeovers, flotations and demergers.Sue is a member of the Share Plan Lawyers Group and a member of the UK BioIndustry Association Finance and Tax Advisory Committee.

Powered by Tolley+
  • 04 Sep 2026 11:50

Popular Articles

Associated companies ― from 1 April 2023

Associated companies ― from 1 April 2023Implications of associated companiesFrom 1 April 2023, the rate of corporation tax that a company is subject to depends on the level of its augmented profits. The rate of tax is based on a comparison of the company’s augmented profits against the corporation

22 Mar 2021 10:21 | Produced by Tolley Read more Read more

Spouse exemption from inheritance tax

Spouse exemption from inheritance taxArguably, the most important inheritance tax exemption is the spouse exemption from inheritance tax.There is no IHT to pay on gifts from husband to wife and vice versa, or from one civil partner to the other (referred to collectively in this note as ‘spouses’).

14 Jul 2020 13:56 | Produced by Tolley in association with Emma Haley at Boodle Hatfield LLP Read more Read more

Maintenance payments

Maintenance paymentsMaintenance payments are payments made by a taxpayer to their former or separated spouse / civil partner for the maintenance of that person or their children. To obtain any tax relief for maintenance payments, one of the couple must have been born before 5 April 1935 and the

14 Jul 2020 12:12 | Produced by Tolley Read more Read more