EIM31756 - The general rule for employees’ expenses: expenses that are deductible where some or all of the duties are performed outside the UK: deductions from earnings charged on remittance under Section 26 ITEPA 2003: example
In 2003/2004 an employee is resident but not ordinarily resident
in the UK. She performs part of her duties in Liverpool and part in
Dublin. Her total earnings are £40,000 and she works 60 days
in Liverpool and 180 days in Dublin. She meets expenses of
£2,500 that pass the tests for a deduction under Section 336
ITEPA 2003. She is paid the whole of her earnings in Dublin and
then pays £22,000 of these earnings into a bank account in
Liverpool.
Of the expenses
- £1,000 is spent in Dublin and
- £1,500 is spent out of her bank account in Liverpool, consisting of
- £800 relating to her duties in Liverpool,
- £700 relating to her duties in Dublin.
Her net taxable earnings are computed as follows:
| Earnings charged on receipt under Section 25 | £40,000 x 60/240 | = | £10,000 |
| Expenses deductible under Section 354, see EIM31750 | £800 | ||
| Net earnings charged on receipt under Section 25 | £9,200 | ||
| Earnings charged on remittance under Section 26, see EIM40304 | £22,000 - £10,000 | £12,000 | |
| Expenses deductible under Section 353, see EIM31755 | = | £700 | |
| Net earnings charged on remittance under Section 26 | £11,300 | ||
| Net taxable earnings | £9,200 + £11,300 | = | £20,500 |
No relief is permitted for the £1,000 spent in Dublin.
