SE13690 - Termination payments and benefits: Section 148 ICTA 1988: exemptions: 'foreign service': definition

Paragraph 9(2) Schedule 11 ICTA 1988 (Paragraph 10 Schedule 11 ICTA 1988, as enacted before FA 1998, for payments and benefits received before 6 April 1998)

SE13680 explained that a payment or benefit may be excepted from Section 148 ICTA 1988 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 before 6 April 2003. To determine whether periods falling after that date count as "foreign service", see EIM13690 (the rules are the same but they are expressed in different statutory language).

A period of service falling before 6 April 2003 is "foreign service" if either:

1. the emoluments from the employment are not chargeable under Case I of Schedule E. 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, the employee is not chargeable under Case I (see SE40002) 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

2. the employee is eligible for 100% 'foreign earnings from the emoluments (see SE33000).

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 SE13970):

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 SE13975.

If service before 6 April 1974 is involved, see SE13705.

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 SE13700.