Location of employer and effect on liability

By Tolley in association with Paul Tew
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The following Employment Tax guidance note by Tolley in association with Paul Tew provides comprehensive and up to date tax information covering:

  • Location of employer and effect on liability
  • Taxation of UK employment
  • Chargeable overseas earnings
  • Dual contract
  • Double tax treaty relief
  • National Insurance
  • Temporary workplace
  • Intermediaries legislation

Taxation of UK employment

Employment income is charged to tax under ITEPA 2003, ss 15–27.

Non-resident employees’ UK-based earnings are taxed under ITEPA 2003, s 27. Employees who are not resident in the UK are not chargeable to UK tax on general earnings for duties performed overseas. For this purpose, the critical test is the place of performance of the duties, not the location / residence of the employer.

An employee who is resident in the UK is taxed on his general earnings for the tax year under ITEPA 2003, s 15 other than in the two following situations:

  • where a UK resident employee is able to claim overseas workday relief, earnings attributable to overseas duties will be taxable under ITEPA 2003, s 26 to the extent that they are remitted to the UK. The earnings attributable to UK workdays continue to be subject to tax under ITEPA 2003, s 15.
  • where a non-UK domiciled employee has chargeable overseas earnings, they are taxed under ITEPA 2003, s 22 to the extent that the earnings are remitted to the UK ― see the Remittance basis ― overview guidance note

Where earnings need to be apportioned to decide the extent of earnings attributable to UK duties, the apportionment must be on a just and reasonable basis.

ITEPA 2003, s 41L

If the tax year is a split year, ITEPA 2003, s 26 applies only to the foreign earnings attributable to the UK workdays.

Where an individual is paid in the UK for all duties, irrespective of where carried out, the income attributable to foreign earnings is received in the UK and is therefore within the meaning of ‘remitted to the UK’ and is taxable under ITEPA 2003, s 26. Where

More on Non-UK employers: