Remittance basis ― overview with employment focus

Produced by Tolley in association with Sarah Robert of James Cowper Kreston
Remittance basis ― overview with employment focus

The following Employment Tax guidance note Produced 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, a calculation is needed to determine how much of the earnings represent UK duties and how much represent overseas duties. The overseas duties may then besubject to OWR.

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

The following conditions must bemet:

  1. the employee is not domiciled in the UK throughout the year

  2. the employee elects to betaxed on the remittance basis

  3. 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 a tax year they will receive a shorter period of OWR compared to an employee arriving at the beginning of a tax year. Planning can therefore betaken to maximise the relief by arriving at the beginning of a tax year.

The number of tax years for which an individual can beeligible for OWR in his lifetime is not limited. As long as there is a period of three consecutive tax years where he is not resident in the UK, he may beeligible for OWR even if he has already previously benefited from the relief. Employees coming to the UK for more than one secondment can therefore benefit from the relief. See Example 1, Example 2 and Example 3.

The relief is available even where the employee’s intention from the outset has been to settle in the

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