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 Further details are, however, retained below, both for historical reference and for the benefit of the small minority of individuals who may still qualify.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

Enterprise investment scheme tax relief

Enterprise investment scheme tax reliefOverview of EIS tax reliefsThe enterprise investment scheme (EIS) offers significant tax reliefs to encourage individuals to invest money in qualifying shares issued by qualifying unquoted companies. The scheme is designed to encourage investment in small,

Read more Read more

Repairs and renewals

Repairs and renewalsThe key consideration in determining whether expenditure on repairs and renewals is allowable as a deduction for tax purposes is whether it is capital or revenue in nature. In some cases, it can be relatively straightforward to identify revenue repairs. HMRC provides the

14 Jul 2020 13:23 | Produced by Tolley Read more Read more

Research and development (R&D) relief ― overview

Research and development (R&D) relief ― overviewThis guidance note provides an overview of the research and development (R&D) tax reliefs for companies.See the Research and development tax relief summary diagram which summarises the R&D tax relief.See also Simon’s Taxes D1.401.For a factsheet which

14 Jul 2020 12:22 | Produced by Tolley in association with Will Sweeney Read more Read more