Location of employer and effect on liability

Produced by Tolley in association with Paul Tew
Location of employer and effect on liability

The following Employment Tax guidance note Produced 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
  • Brexit
  • Chargeable overseas earnings
  • Dual contract
  • Double tax treaty relief
  • National Insurance
  • Temporary workplace
  • Intermediaries legislation

Taxation of UK employment

Non-resident employees’ UK-based earnings are taxed under ITEPA 2003, s 27. Employees who are only resident in the UK are not chargeable to UK tax on general earnings for duties performed in the UK. 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 their general earnings for the tax year under ITEPA 2003, s 15 other than in the two following situations:

  1. 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.

  2. 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.

If the tax year is a split year, ITEPA 2003, s 26 applies only to foreign earnings attributable to 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 earnings in relation to foreign duties are paid into an overseas bank account, they are taxed if and when remitted to the UK.


The UK negotiated a Withdrawal Agreement and left the EU on 31 January 2020 (referred to as ‘exit day’) with an 11-month implementation period up to 31 December 2020. While exit day was

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