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.