SE40004 - Examples of the Cases of Schedule E

Section 19(1)1 ICTA 1988

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 Case I of Schedule E 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 Case III of Schedule E on emoluments that are remitted to the United Kingdom. The emoluments are foreign emoluments (see SE40031) and the duties of the employment are performed wholly outside the United Kingdom. Even thought the employee is Resident and Ordinarily Resident the emoluments are excepted from Case I and fall into Case III if “received” (see SE40302) in the United Kingdom.

3. Not Resident

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

The director is chargeable under Case II of Schedule E on emoluments arising from duties performed in the United Kingdom. Emoluments arising from duties performed in Spain are not liable to income tax under Schedule E as they do not fall into any of the Cases.

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 states has primary taxing rights. See SE40601 and subsequent.