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HMRC internal manual

Employment Income Manual

Termination payments and benefits: example: exceptions: foreign service reduction: interaction with £30,000 threshold

Section 414(2) ITEPA 2003

An employee fails to qualify for full foreign service exemption under EIM13690. There is, however, some foreign service during the employment, so the foreign service reduction in EIM13700 is considered.

An employee receives a termination payment within Section 401 ITEPA 2003 of £100,000. To calculate the foreign service reduction, the first step is find the amount charged to tax (or, more accurately, the amount that would otherwise count as employment income, see EIM13700), as follows:

Termination payments and benefits within Section 401 ITEPA 2003 £100,000
Threshold (see EIM13505) £30,000
Amount charged to tax £70,000

The reduction is then calculated using the £70,000 figure, see example EIM13985.