Dual contracts

By Tolley in association with Paul Tew

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

  • Dual contracts
  • Introduction
  • What are dual contracts?
  • History of dual contracts
  • HMRC approach to dual contracts
  • Finance Act 2014
  • PAYE


UK resident individuals who are non-UK domiciled under general law can benefit from the remittance basis of taxation which allows for relief from UK tax for non-UK sources of income which are not brought in (or remitted) to the UK in any way.

One way in which the remittance basis can be utilised for employees is through the use of dual contracts. This guidance note provides an overview of the operation of such contractual situations, the difficulties that can be encountered if they are used and the anti-avoidance legislation which took effect from 6 April 2014.

What are dual contracts?

A UK resident but non-UK domiciled employee who claims the remittance basis and only works 100% outside the UK for a non-UK resident employer is taxable on his employment income on the remittance basis. The earnings from such an employment are known as ‘chargeable overseas earnings’. The exception to this rule is where the individual qualifies for Overseas workday relief (OWR). See the Overseas workday relief guidance note for more details.

ITEPA 2003, ss 22, 23

In summary, before 6 April 2013, an employee qualified for OWR when the employee was resident but not ordinarily resident and after 5 April 2013 the employee qualifies for OWR when he meets the ITEPA 2013, s 26A conditions. When an employee qualifies for OWR, he does not have chargeable overseas earnings.

The requirement for no duties to be performed in the UK for the remittance basis to apply means that where an individual is also required to work in the UK in a different role, dual contracts may be implemented to reflect the two roles. One role will be UK based and a UK contract is executed to govern the duties and responsibilities of that role. The second role will typically be carried out for a non-UK

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