EIM40222 - Employee not resident or not ordinarily resident in the United Kingdom: calculation of general earnings in respect of duties performed in the United Kingdom: example
Sections 25 and 27 ITEPA 2003
A US employer assigns a US citizen to the United Kingdom for a
period of 2 to 3 years. Residence status is self-determined as
resident but not ordinarily resident in years 1 and 2.
The employee is Head of European Operations, a post that
requires a proportion of the duties to be performed outside the
United Kingdom. In consequence general earnings are likely to be
split between Section 25 (UK-based earnings) and Section 26
(foreign earnings). The earnings for duties performed outside the
United Kingdom are charged under Section 26 if they are remitted to
the United Kingdom as defined in Section 33 (see
EIM40302).
Remuneration for year 1 is reported as below. In the year,
80/240 workdays were spent in the United Kingdom.
| Salary | £100,000 |
| Bonus | £100,000 |
| Car provided by the employer | £5,000 |
| House provided by the employer | £10,000 |
| School fees paid in the US | £10,000 |
| Total | £225,000 |
|
|
|
| Section 25 = £225,000 x 80/240 | £75,000 |
| Section 26 = 225,000 – 75,000 | £150,000* |
* chargeable if remitted to the United Kingdom.
Note: if in year 1 the employee was not resident
in the United Kingdom, £75,000 would be chargeable under
Section 27 and the balance (general earnings of £150,000)
would not be chargeable to United Kingdom income tax.
Appendix 2 at
EIM77020 contains further examples of
how to calculate general earnings in respect of duties performed in
the UK.
