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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Employee resident but not ordinarily resident in the United Kingdom: interaction of Sections 15 and 26: Statement of Practice 5/1984

Statement of Practice 5/84 - for years up to and including 2008/09

If an employee is resident but not ordinarily resident in the United Kingdom and some of the employment duties are carried out in the United Kingdom, a proportion of the general earnings will be UK-based earnings charged on receipt under Section 15 (or Section 25 before 6 April 2008)(see EIM40201). Rules are needed to determine whether general earnings remitted to the United Kingdom relate to duties performed here or to duties performed abroad.

For years up to and including 2008/09 the relevant rules were in Statement of Practice 5/1984. They are set out below.

SP5/84 was withdrawn with effect from 6 April 2009. It was replaced by SP1/09. See EIM40305 onwards for information concerning SP1/09.

Employee remunerated wholly abroad

An employee who is:

  • resident but not ordinarily resident in the United Kingdom and
  • performs the duties of an office or employment both inside and outside the United Kingdom and
  • is remunerated wholly abroad

is permitted, by a broad interpretation of the decision in the case of Sterling Trust v CIR (12TC868), to say that any remittances made to the United Kingdom are made primarily out of general earnings for that year in respect of duties performed in the United Kingdom chargeable under Section 25. The charge under Section 26 is therefore restricted to the excess of the general earnings remitted to the United Kingdom over the amount charged under Section 25.

Employee remunerated partly in the United Kingdom and partly abroad

This rule applies to an employee who:

  • is resident but not ordinarily resident in the United Kingdom and
  • performs duties of a single employment both inside and outside the United Kingdom, so that the general earnings from that employment are potentially chargeable under both Sections 15 (or Section 25 before 6 April 2008) and 26, and
  • receives part of the general earnings in the United Kingdom and part abroad.

In these circumstances, provided the general earnings chargeable under Section 15 (or Section 25 before 6 April 2008) are arrived at in a reasonable manner, HMRC is prepared to accept that a charge under Section 26 will arise only where the aggregate of general earnings remitted to the United Kingdom exceeds the amount chargeable under Section 15 (or Section 25 before 6 April 2008) for that year. The charge under Section 26 is the excess of the aggregate over the charge under Section 15 (or Section 25 before 6 April 2008).

“Arrived at in a reasonable manner” means, in the absence of special facts, the proportion of the general earnings, including benefits in kind, relating to United Kingdom duties is arrived at on a time basis by reference to working days.

The aggregate of general earnings includes; sums paid in, cash equivalents of benefits enjoyed in, and earnings transmitted or brought to the United Kingdom in any manner or form.