EIM40006 - Effect of non-residence on pre-commencement and post-cessation earnings

Sections 17 and 30 ITEPA 2003

Where the special rules in EIM40005 apply general earnings will be taxable when received if the charging provisions in Sections 15, 21, 25 or 27 apply in the last or first year the taxpayer held the job. The same is true if the taxpayer left the job at the time of going abroad.

Extra-Statutory Concession A11 (ESC A11) (see EIM42850), which provides split year treatment, cannot be used to take out of charge earnings which in substance relate to service in the United Kingdom. The same principle applies where the taxpayer takes up a new job on becoming resident in the United Kingdom.

In some cases however the taxpayer may leave the job after ceasing to be resident in the United Kingdom. Equally the job might start before the taxpayer arrives in this country. In these circumstances it may be reasonable to split the post-cessation or pre-commencement payment between the part of the year when the taxpayer falls within the relevant charging provision and the rest of the year. But this split should not necessarily be made on a time basis. For example, the post-cessation receipt may be primarily attributable to the taxpayer's service in the United Kingdom. If it is, a split that reflects the facts should be agreed.

If the taxpayer is unable to agree, the alternative is that the earnings are taxable on the strict statutory basis, that is, without the benefit of ESC A11. The entire sum will be taxable under Section 15 or 21 because the taxpayer is resident and ordinarily resident for the whole tax year.

See example EIM40007 for illustrations of Sections 17 and 30.