SE40102 - Schedule E: exception from Case I in respect of foreign emoluments arising from duties performed wholly outside the United Kingdom

Section 19(1)1 and Section 192(2) ICTA 1988

Section 192(2) provides an exception from Case I of Schedule E for:

• Foreign emoluments arising from
• An employment the duties of which are performed wholly outside the United Kingdom

Foreign emoluments

Foreign emoluments (see SE40031) are defined in Section 192(1) ICTA as:

• Emoluments of a person who is not domiciled in the United Kingdom
• From an office or employment with an employer who is not resident in and resident outside of the United Kingdom
• The definition excludes the emoluments of an employee who is resident in the United Kingdom and the employer is resident in the Republic of Ireland.

Exception from Case I by virtue of Section 192(2)

Foreign emoluments are treated the same as other emoluments unless they arise from an employment, the duties of which are performed wholly outside the United Kingdom. 'Wholly' is qualified by Section 132(2) ICTA 1988 (see SE40204). In these circumstances the foreign emoluments are excepted from Case I of Schedule E. They are only chargeable under Case III if they are received in the United Kingdom (see SE40301).

See SE31770 for guidance on determining the amount of emoluments excepted from the Case I charge.

The benefit to the employee is clear. There is likely to be a big reduction in the amount of emoluments chargeable to income tax in the United Kingdom. You should examine the facts closely before accepting that emoluments fall within this exception. In particular you should find out whether the employer has any place of business in the United Kingdom. If you can trace an accounts file for the employer, ask the accounts Inspector for instructions on the employer's residence status.

See SE40103 advice on dual contract arrangements.