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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Effect of non-residence on pre-commencement and post-cessation earnings: examples

Sections 17 and 30 ITEPA 2003

This page provides examples of how the above sections apply. Please refer to the sections listed below for general guidance:

EIM40005 Earnings paid before employment has commenced or after it has ceased.
EIM40006 Effect of non-residence on pre-commencement and post-cessation earnings.

Example 1

An employee is approached by another employer. She is offered a job by the new organisation. As an inducement to change jobs she is paid £50,000 on 1 April 2013. She commenced work for the new employer on 1 May 2013. The employee is resident and domiciled in the UK so the relevant charging provision is Section 15 in Part 2 Chapter 4.

Section 17 operates to make the payment earnings of the year in which the employment commences. Even though paid in tax year 2012/2013 they are earnings “for” the year 2013/14.

The result will be the same if the employee is resident but not domiciled in the UK.

Example 2

An employee worked in Singapore for many years for a UK resident company. The employment ceased on 31 December 2012. For 10 years prior to that date the individual was not resident and not ordinarily resident although domiciled in the UK. On 6 April 2013 the employee returned to the United Kingdom. From the date of arrival he became resident.

6 months after the job ended the employer made a payment of £50,000 to the former employee in recognition of the contribution he had made to the expansion of business in the Far East.

Section 17 makes the payment earnings of the year in which the employment was last held, 2012-2013. In that year the employee was not resident in the United Kingdom and performed all of the duties in Singapore. In consequence, the payment does not fall into any of the charging provisions in Part 2 Chapters 4 and 5 and is therefore not chargeable to tax as general earnings.