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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Employee chargeable under section 26 or not resident: calculation of general earnings in respect of duties performed in the United Kingdom: example

Sections 15, 26, 26A and 27 ITEPA 2003

A US employer assigns a US citizen to the United Kingdom for a period of 2 to 3 years. Residence status is self-determined as meeting the conditions of section 26A and therefore chargeable under section 26.

The employee is Head of European Operations, a post that requires a proportion of the duties to be performed outside the United Kingdom. In consequence general earnings are likely to be split between Section 15 (UK-based earnings) and Section 26 (foreign earnings). The earnings for duties performed outside the United Kingdom are charged under Section 26 if they are remitted to the United Kingdom as defined in Section 809L ITA2007 (see EIM40302).

Remuneration for year 1 is reported as below. In the year, 80/240 workdays were spent in the United Kingdom.

Salary £100,000
Bonus £100,000
Car provided by the employer £5,000
House provided by the employer £10,000
School fees paid in the US £10,000
Total £225,000
Section 15 = £225,000 x 80/240 £75,000
Section 26 = 225,000 - 75,000 £150,000*
  • chargeable if remitted to the United Kingdom.

Note: if in year 1 the employee was not resident in the United Kingdom, £75,000 would be chargeable under Section 27 and the balance (general earnings of £150,000) would not be chargeable to United Kingdom income tax.

Appendix 2 at EIM77020 contains further examples of how to calculate general earnings in respect of duties performed in the UK.