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HMRC internal manual

Employment Income Manual

Taxable Earnings - Overseas Chargeable Earnings - Dual contracts arrangements - example

Section 22 ITEPA 2003

A US citizen is employed by ABC Inc, a company resident in the US. The employee is assigned to work in London for a subsidiary company DEF Ltd for a period of 5 years. It is estimated that 40% of duties will be performed outside of the United Kingdom, in Europe and the US.

The employee relocates to London. In consequence of his intention to remain in the United Kingdom for 5 years he is resident and ordinarily resident from the date of arrival but not domiciled.

The employee is invited to structure the employments as described below:

ABC Inc.

This employment continues from before and throughout the period of the assignment. The letter of assignment specifies a list of clients and duties to be serviced and dealt with outside of the United Kingdom.

DEF Ltd.

The new employment commences with the employee’s arrival from the US. Duties specified in the contract include a portfolio of clients and line management responsibilities in the United Kingdom.

The contract with ABC Inc is remunerated at a rate approximately 50% higher than that with DEF Ltd.


The employee is not domiciled in the United Kingdom. ABC Inc is not resident here but resident in the US. If the duties of this employment are performed wholly abroad then the earnings will be chargeable overseas earnings within Section 22 and will only be taxable if they are remitted to the United Kingdom.

Emoluments from DEF Ltd fall into Section 15 (or Section 21 if before 6 April 2008) and the taxable amount will be the full amount of Section 15 earnings received in the tax year.

If the employee was assigned to carry out one employment, but at a later date that was sub- divided to exploit Section 22, you may challenge and seek evidence that there are two employments in reality.

ABC Inc and DEF Ltd are “associated” with each other. See Rule C in Section 24(5) and Section 24(6) that imports the definition of control from Section 416 ICTA 1988. The disparity in levels of remuneration may require use of Section 24.

Appendix 3 at EIM77030 provides greater detail about the HMRC approach to dual contract arrangements.

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