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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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The scope of the charge to tax on general earnings: introduction

Part 2 Chapters 4 and 5 ITEPA 2003

It is not sufficient merely to establish that an individual holds an office or employment in order to be able to tax the income from it. The income tax law in any country has to define the scope of the charge it creates. Chapters 4 and 5 of Part 2 ITEPA 2003 set out how to determine the amount of general earnings from an employment that are taxable earnings. The circumstances under which such earnings arise will dictate the charge to tax.

Most individuals who have a permanent home and live and work in the UK are within the charge to tax provided by UK legislation. They have no income arising from abroad and any earnings are taxable only in the UK.

Where an individual comes to the UK from abroad, they may perform duties wholly in the UK or they may have a mix of UK and non-UK duties. They may be in the UK for short, medium or long term engagements. They may have an employment which is performed in the UK as well as having one or more employments with a foreign employer(s) where the duties are performed entirely outside the UK. They may have income which arises abroad, be it from the non-UK duties of the employment or from investments they have made in their home country or a third party country. Such income may be kept abroad or it may be brought into the UK for the taxpayer’s use. Where such income is brought to the UK for the taxpayer’s use it is described as being remitted to the UK.

There are unlikely to be two non-UK taxpayers whose circumstances are identical. The legislation needs to be flexible to account for different circumstances and to set clear requirements as to what parts of an individual’s income are caught by the UK charge to tax on a year by year basis.

The residence and domicile status of the individual will need to be considered. Since the residence status of an individual is not an issue which is restricted to employees, full technical guidance on residence and domicile is not contained in this Manual. These issues are covered in the Residence, Domicile and Remittance Basis Manual (RDRM). For years prior to April 2013, it may be necessary to consider whether an employee was ordinarily resident in the UK. This is again covered in the RDRM. It may also be necessary to consider whether the individual is working for a UK employer or a non-UK employer.

The following paragraphs describe the charging provisions for individual’s resident in the UK and for those coming to the UK from abroad. Section 5 ITEPA 2003 provides that any references to employees apply equally to office holders. Any reference in the following paragraphs to employees should be read as equally applying to office holders. See the Employment Status Manual at ESM2501 for further details.