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: chargeable overseas earnings: example
An employee who is resident in the UK but domiciled in France has an employment with aBelgian employer the duties of which are performed wholly in Belgium. In 2003/04 thegeneral earnings from the employment total £30,000, of which £25,000 is received in theUK. The employee is entitled to
- capital allowances of £500 under Section 36 CAA 2001 , see EIM36500 and
- a deduction of £2,800 for expenses under Section 336 ITEPA 2003, see EIM31630.
The chargeable overseas earnings are calculated by subtracting from the full amount ofearnings any amounts that would (assuming the earnings were taxable) be allowed asdeductions from those earnings (Step 2 Section 23 ITEPA 2003), see EIM40102.The calculation is as follows:
|Deductions from earnings, see EIM31770||£500 + £2,800||=||£3,300|
|Chargeable overseas earnings||£26,700|
The amount potentially chargeable on remittance to the UK is £26,700 but the charge isrestricted to the amount received in the UK, £25,000, see EIM40301.
The earnings that are not chargeable overseas earnings within Section 22 because of theoperation of Step 2 in Section 23 will be taxable under Section 21.:
|Earnings chargeable under Section 21||£30,000 - £26,700||=||£3,300|
|Deducted from earnings||£3,300|
|Net taxable earnings charged on receipt under Section 21||Nil|