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HMRC internal manual

Employment Income Manual

Taxable Earnings - Overseas Chargeable Earnings - Dual Contract Arrangements

Sections 22 to 24A ITEPA 2003

Non-domiciled individuals sometimes come to work for United Kingdom resident employers. Depending on the length of their visit they may be resident and ordinarily resident from the date of arrival. They may locate in London but the job may have European or global dimensions, which requires foreign travel and the performance of duties outside of the United Kingdom.

The full amount of general earnings from a single employment with duties performed inside and outside of the United Kingdom will be taxable under Section 15 (or Section 21 if before 6 April 2008).

In the circumstances described above the employee may be offered two employments instead of one:

  • employment 1 covering the performance of duties in the United Kingdom and
  • employment 2, usually with an associated company resident offshore, covering duties performed in the rest of the world, excluding the United Kingdom.

The two, or more, employments may require very similar duties to be performed. The only significant difference is the geographical areas in which those duties are carried out.

The advantage to the taxpayer is that the earnings from employment 2 will be chargeable overseas earnings and will only be taxable under Section 22 if remitted to the United Kingdom. For this reason, dual contract arrangements are popular among non-domiciled employees assigned to work in the United Kingdom.


Taxpayers should complete a separate copy of the employment pages in the SA Return for each employment held during the relevant year. This includes the two or more employments held under a dual contract arrangement. Employment pages returning the second ‘offshore’ employment may only carry a statement of total earnings paid or provided. If there have been no remittances in the year there will be a matching deduction.

Action in HMRC offices

You may seek to establish that:

  • there are two (or more) employments in reality and not one employment that has been artificially divided to exploit Section 22
  • no duties under the ‘offshore contract’ have been performed in the United Kingdom.

If earnings paid under the two (or more) contracts appear to be disproportionate you may consider invoking Step 3 of the three steps set out in Section 23 in order to calculate the amount of chargeable overseas earnings. Step 3 applies any limit imposed by Section 24 thus restricting the amount of chargeable overseas earnings within Section 22. Section 24 permits a reapportionment of the remuneration on a commercial basis, to ensure that the amount paid in respect of UK duties is a fair proportion of the total remuneration from both or all associated employments. The effect of such a reapportionment is to limit the chargeable overseas earnings whilst increasing the taxable earnings within Section 15 (or Section 21 if before 6 April 2008).

If the non-UK contract or contracts are based in a country with a very low rate of tax, it may be that the provisions of section 24A need to be considered. This allows a reallocation of the entire amount of earnings arising from the non-UK contract(s) to the UK contracts if certain conditions are met. Full details are included in the restrictions on the remittance basis - dual contracts document published in January 2014 and EIM40108.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

See example EIM40104.

See also Appendix 3 at EIM77030 for an adapted version of a detailed article setting out how HMRC offices approach dual contract arrangements which was published in Tax Bulletin 76 (April 2005).

In March 2012 HMRC published a further paper setting out its

  • approach to enquiries into dual contract arrangements, particularly in relation to evidence and documents


  • interpretation of “merely incidental” duties (see EIM40203)