SE31751 - The Schedule E expenses rule: expenses that are deductible from income charged under Case II or Case III of Schedule E: deductions from Case II income: example

An employee who is neither resident nor ordinarily resident in the UK performs part of the duties of the employment in London and part in Paris. In 2000/2001 the employee worked for a total of 250 days, of which 50 were worked in London. The total emoluments were £50,000. The employee incurred expenses of £500 that qualify for relief under Section 198(1) ICTA 1988. Of this total £200 was incurred in performing duties in Paris.

The employee is chargeable under Case II of Schedule E on the emoluments for the UK duties, see SE40201. The emoluments are computed in accordance with SE40221. There is no charge on the remaining emoluments of the employment.

Section 198(2) prevents a deduction for the £200 expenses incurred in performing duties outside the UK, see SE31750. The practical effect is that no relief is permitted for expenses that are incurred in earning emoluments that are not brought into charge.

The employee’s net chargeable emoluments are computed as follows: