Remittance basis ― overview with employment focus

By Tolley in association with Sarah Robert of James Cowper Kreston
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The following Employment Tax guidance note by Tolley in association with Sarah Robert of James Cowper Kreston provides comprehensive and up to date tax information covering:

  • Remittance basis ― overview with employment focus
  • General earnings in respect of duties performed in the UK
  • Overseas workday relief (OWR)
  • Dual contracts
  • Matching earnings with workdays
  • What is a workday?
  • How to apportion earnings
  • Cash-flow issues
  • Overseas bank account
  • Payment of UK tax

General earnings in respect of duties performed in the UK

Employees who are resident but not domiciled in the UK for tax purposes are chargeable to income tax on general earnings for duties performed in the UK. Where all employment duties are UK duties, then all earnings are taxable in the UK. See ITEPA 2003, s 15.

Overseas workday relief (OWR)

Where duties are performed partly in the UK and partly overseas, acalculation is needed to determine how much of the earnings represent UK duties and how much represent overseas duties. The overseas duties may then be subject to OWR.

Employees who are non-domiciled but resident in the UK on ashort-term basis may benefit from relief from UK tax on overseas (or foreign) earnings under the OWR provisions.

The following conditions must be met:

  • the employee is not domiciled in the UK throughout the year
  • the employee elects to be taxed on the remittance basis
  • the employment duties are carried on wholly or partly outside the UK

The relief is available for the year of establishing UK residence and the following two years. If an employee arrives at the end of atax year they will receive ashorter period of OWR compared to an employee arriving at the beginning of atax year. Planning can therefore be taken to maximise the relief by arriving at the beginning of atax year.

The number of tax years for which an individual can be eligible for OWR in his lifetime is not limited. As long as there is aperiod of three consecutive tax years where he is not resident in the UK, he may be eligible for OWR even if he has

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