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 Further details are, however, retained below, both for historical reference and for the benefit of the small minority of individuals who may still qualify.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

Double tax relief

Double tax reliefWhen income arises in a foreign country to a UK resident company and that income is taxable in that foreign country, the UK may give the company relief for the foreign tax by crediting the foreign tax against the UK tax charged on that income. This might include withholding tax on

14 Jul 2020 11:31 | Produced by Tolley Read more Read more

Corrections and amendments to the IHT account

Corrections and amendments to the IHT accountThis guidance note explains how to deal with changes to the taxable values in the original inheritance tax account.Why do amendments arise?When the IHT account is first submitted to HMRC, it is based on information available at an early stage of the

14 Jul 2020 11:20 | Produced by Tolley Read more Read more

Indexation allowance and rebasing

Indexation allowance and rebasingThis guidance note explains the general rules surrounding the availability of indexation allowance (which was frozen at December 2017) on the disposal of company assets and provides information on the rebasing rules for assets held on 31 March 1982. For an overview

14 Jul 2020 11:59 | Produced by Tolley Read more Read more