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HMRC internal manual

Employment Income Manual

From
HM Revenue & Customs
Updated
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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: example

In 2003/2004 an employee is resident but not ordinarily resident in the UK. Sheperforms part of her duties in Liverpool and part in Dublin. Her total earnings are£40,000 and she works 60 days in Liverpool and 180 days in Dublin. She meets expenses of£2,500 that pass the tests for a deduction under Section 336 ITEPA 2003. She is paid thewhole of her earnings in Dublin and then pays £22,000 of these earnings into a bankaccount in Liverpool.

Of the expenses

  • £1,000 is spent in Dublin and
  • £1,500 is spent out of her bank account in Liverpool, consisting of

 

 

  • £800 relating to her duties in Liverpool,
  • £700 relating to her duties in Dublin.

Her net taxable earnings are computed as follows:

Earnings charged on receipt under Section 25 £40,000 x 60/240 = £10,000
       
Expenses deductible under Section 354, see EIM31750     £800
Net earnings charged on receipt under Section 25     £9,200
       
Earnings charged on remittance under Section 26, see EIM40304 £22,000 - £10,000   £12,000
Expenses deductible under Section 353, see EIM31755   = £700
Net earnings charged on remittance under Section 26     £11,300
       
Net taxable earnings £9,200 + £11,300 = £20,500

No relief is permitted for the £1,000 spent in Dublin.