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HMRC internal manual

Employment Income Manual

Effect of non-residence on pre-commencement and post-cessation earnings

Sections 15, 17, 27 and 30 ITEPA 2003

Where the special rules in EIM40005 apply, instead of being taxable when they are received, general earnings will be taxable in the last or first year the taxpayer held the job if the provisions in sections 15 or 27 apply.

For all years up to and including 2012/13, Extra-Statutory Concession A11 (ESC A11) (see EIM42850) provided for split year treatment of earnings where an employee altered their residence status part way through a tax year. For years from 2013/14 onwards, this provision was incorporated into section 15 ITEPA 2003. This has the effect that any earnings relating to the UK part of the year will be charged under section 15 but any earnings which relate to the non-UK part will be excluded from any charge under section15.

Split year treatment however cannot be used to take out of charge earnings which in substance relate to service in the United Kingdom. Section 17 or section 30 will apply to treat such earnings as for the first or last years in which the employment was held.

In some cases however the taxpayer may leave the job after ceasing to be resident in the United Kingdom. Equally the job might start before the taxpayer arrives in this country. In these circumstances it may be reasonable to split the post-cessation or pre-commencement payment between the part of the year when the taxpayer falls within the relevant charging provision and the rest of the year. But this split should not necessarily be made on a time basis. For example, the post-cessation receipt may be primarily attributable to the taxpayer’s service in the United Kingdom. If it is, a split that reflects the facts should be agreed.

See example EIM40007 for illustrations of sections 17 and 30.