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HMRC internal manual

Employment Income Manual

The general rule for employees: expenses: expenses that are deductible where some or all of the duties are performed outside the UK: deductions from earnings charged on remittance under Section 26 ITEPA 2003

Section 353 ITEPA 2003

EIM31750 explains how the deduction rules are adapted by section 354 ITEPA 2003 to apply to employees who perform part of their duties in the UK and part elsewhere and who are chargeable on receipt on their UK based earnings under section 25 or section 27. The purpose is to prevent a deduction from the earnings charged on receipt for expenses that are incurred in performing the non-UK duties of the employment.

Where such an employee is resident but not ordinarily resident in the UK the earnings for the non-UK duties are brought into charge as earnings charged on remittance under section 26 to the extent that those earnings are remitted to the UK, see EIM40301.

Section 353 ITEPA 2003 determines the extent to which expenses that are incurred in the performance of the duties giving rise to earnings charged on remittance under section 26 can be deducted from those earnings.

A deduction can be permitted for expenses that meet the tests for a deduction in sections 336 to 342 ITEPA 2003 if they are:

  • paid out of the earnings remitted to the UK, or
  • paid in the UK
    • in that tax year, or
    • in any earlier tax year in which the employee was resident in the UK

This is subject to a condition in section 330 ITEPA 2003 that a deduction is only permitted to be made once for an expense. So a deduction under the second bullet above can only be permitted where the expense has not already been deducted from other earnings.

The effect of this restriction is illustrated by example EIM31756.

No deduction for capital allowances can be given against earnings charged on remittance,see EIM36880.

Employees using their own vehicle or bicycle for business journeys are not permitted relief under sections 336 to 340 ITEPA 2003 but may be entitled to mileage allowance relief, see EIM31330. In these cases, section 232 ITEPA 2003 determines the amount of mileage allowance relief that can be deducted from earnings charged on receipt and on remittance (see EIM31760).