EIM40004 - General earnings: examples of the charging provisions

Part 2 Chapters 4 and 5 ITEPA 2003

1. Resident and Ordinarily Resident

The European Sales Manager of a multi-national company is based in London. She frequently travels to Milan, Bonn and Paris to meet clients. Trips normally last for one week. Over a tax year she spends a total of about 3 months outside of the United Kingdom.

All of the emoluments from this employment are chargeable under Section 15, as the employee is resident and ordinarily resident in the United Kingdom.

2. Resident and Ordinarily Resident but not domiciled

A semi-retired employee of a US resident company lives in London. Although he has lived in the United Kingdom for over 20 years he has retained his US domicile. He maintains a small portfolio of Swiss clients. He travels to Zurich to see them. All of the duties of the employment are performed outside the United Kingdom.

The employee is chargeable under Section 22 on chargeable overseas earnings that are remitted to the United Kingdom. The general earnings are overseas earnings due to the residence and domicile status of the employee, the employment with a foreign employer (see EIM40031) and the performance of the duties of the employment wholly outside the United Kingdom. After calculating the amount of chargeable overseas earnings (see EIM40102), those earnings can only be charged under Section 22 to the extent that they are remitted to the United Kingdom (see EIM40302).

3. Not Resident

A non resident director spends two days each month in the United Kingdom at the premises of a small family company. She spends the time reviewing management accounts, discussing progress with team leaders and attending board meetings. Salary is paid into a Spanish bank account, the country in which the director resides.

The director is chargeable under Section 27 on general earnings from duties performed in the United Kingdom. General earnings from duties performed in Spain are not liable to United Kingdom income tax, as they do not fall under any of the charging provisions.

Double taxation treaties

When looking at the liability of foreign nationals working in the United Kingdom or United Kingdom residents working abroad it is important to consider the relevant double taxation treaties to determine whether the earnings are chargeable in two states and which state has primary taxing rights. See EIM40601 and subsequent.