EIM13690 - Termination payments and benefits: Section 401 ITEPA 2003: exceptions: foreign service: definition

Section 413 ITEPA 2003

EIM13680 explained that a payment or benefit may be excepted from Section 401 ITEPA 2003 if sufficient of the employee's service counts as foreign service. Foreign service has a special meaning for this purpose.

This guidance deals only with periods of service after 5 April 2003. To determine whether periods falling before that date count as foreign service, see SE13690 (the rules are the same but they are expressed in different statutory language).

A period of service falling after 5 April 2003 is foreign service if either:

  1. the earnings from the employment are not general earnings (see EIM00511) to which Section 15 or Section 21 ITEPA 2003 apply (see EIM40003). This will be the case where:
  • the employee is not resident and ordinarily resident in the UK. So for example if the employee is not resident, neither Section 15 nor Section 21 apply so during that period the employee's service is foreign service, or
  • the employee is resident and ordinarily resident in the UK but is not domiciled in the UK, is working for a foreign employer and is carrying out all the duties of the employment outside the UK

or

  1. the employee is a seafarer eligible for 100% deduction from earnings under Part 5 Chapter 6 ITEPA 2003 (see EIM33000).

If there is a period of service when there are no earnings from the employment, apply the above rules in the same way as if there were.

Give the exemption if any one of the requirements from the table below are met (see example EIM13970):

Total period of service down to the relevant date (see EIM13680)

Requirement for exemption to be given
All cases of whatever duration.3/4 of the whole period of service is foreign service.
More than 10 years.The last 10 years are foreign service.
More than 20 years.1/2 of the whole period of service (including 10 of the last 20 years) is foreign service.

For this purpose treat successive employments with different members of the same group of companies as if they were a single continuing employment where the payment takes account of that service, see example EIM13975.

If service before 6 April 1974 is involved, see EIM13705.

Note: a taxpayer with some foreign service who does not meet the requirements in the table above may be able to claim a foreign service reduction instead, see EIM13700.

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