Remittance basis ― overview

By Tolley in association with Tim Humphries of Menzies LLP
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The following Employment Tax guidance note by Tolley in association with Tim Humphries of Menzies LLP provides comprehensive and up to date tax information covering:

  • Remittance basis ― overview
  • Standard remittance basis claim
  • Overseas Workday Relief (OWR)
  • Dual contracts
  • Record keeping
  • Special mixed fund rules
  • Making a claim for the remittance basis
  • The remittance basis charge

A non-UK domiciled individual is entitled to claim the remittance basis of taxation so that they only pay tax on their UK source income and gains, and any offshore income and gains brought into the UK in some form. This guidance note considers the application of the remittance basis to employment income, how to make a claim for the remittance basis and areas to watch out for.

Standard remittance basis claim

In an employment context, the basic position is that under ITEPA 2003, s 22, the remittance basis can be claimed on earnings from a foreign employer which relate wholly to offshore duties and are paid into an offshore bank account. This is referred to in this note as a standard remittance basis claim. There are further scenarios in which it is possible to claim the remittance basis and these are explored further below.

Overseas Workday Relief (OWR)

A non-UK domiciled individual can claim OWR for the first three tax years for which they are resident in the UK. If the employee was previously UK resident, there must be a gap of at least three complete tax years before they can return to the UK and qualify for this relief again.

ITEPA 2003, ss 26–26A

The relief allows an employee to just be taxed on their earnings that relate to their UK duties and any sums that relate to the offshore duties which are remitted to the UK. At least the proportion of the salary which relates to the offshore duties should be paid into an offshore bank account and the remittance basis claimed on the employee’s self assessment return. It is difficult to know during the year exactly what proportion of the duties will be carried out offshore. Therefore, it might be better to pay all of the salary into an offshore account to ensure

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