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HMRC internal manual

Employment Income Manual

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Employment income provided through third parties: remittance basis: A meets Section 26A requirement - tax years 2013-14 and later

Sections 554Z10 and 554Z17(3) ITEPA 2003

Section 554Z10 links the Part 7A rules in with the remittance basis in cases in which A meets the requirement of Section 26A ITEPA 2003. It is similar to Section 26 ITEPA 2003 (general earnings: remittance basis applies and employee meets Section 26A requirement). See EIM40301.

Section 554Z10 does not apply to steps within Section 554Z18 or 554Z19.

On Sections 554Z18 and 554Z19 (undertakings given by employers etc in relation to retirement benefits etc: earmarking etc and provision of security), see EIM45150 and EIM45155 respectively.

This page tells you about Section 554Z10 as it applies for 2013-14 and later tax years. For earlier tax years, see EIM45811.

Conditions

Three conditions need to be met. These conditions are bulleted below.

  • The value of the relevant step, or a part of it, is ‘for’ a tax year (‘the relevant tax year’) as determined under Section 554Z4 see EIM45720.
  • Section 809B, 809D or 809E ITA 2007 (remittance basis) applies to A for that tax year, see RDRM30000 onwards.
  • A meets the requirement of Section 26A for the relevant tax year. In Section 26A, you read references to the employee as references to A.

‘Taxable specific income’

If these three conditions are met, you take three steps to calculate ‘taxable specific income’.

  • Step 1: Calculate A’s employment income under the Part 7A rules (see EIM45705) or the relevant part of it.
  • Step 2: Calculate how much of this income, or of the relevant part of it, is not in respect of duties performed in the United Kingdom (‘UK duties’). This is ‘the overseas portion’.
  • Step 3: Calculate how much of the overseas portion is remitted to the United Kingdom in the relevant tax year. This is ‘taxable specific income’.

‘Remitted to the United Kingdom’ has a wide meaning. Money and property can be ‘remitted’ to the United Kingdom without being physically brought into this country. See RDRM33020.

Such ‘taxable specific income’ is included in A’s ‘foreign specific employment income’ for the relevant tax year under Section 809Z7(4A) and (4B) ITA 2007. On ‘foreign specific employment income’, see RDRM31120.

If any income is remitted before A’s employment with B starts, you treat it as being remitted in the tax year in which the employment starts.

UK duties

You determine on a just and reasonable basis:

  • how far the employment income is not in respect of UK duties, or
  • how far the relevant part of the employment income is not in respect of UK duties

Similar apportionment rules apply if the relevant tax year is a split year as respects A.

To the extent that the employment income is attributable to the UK part of the relevant tax year, you determine on a just and reasonable basis how far it is not in respect of UK duties.

Or, to the extent that the relevant part of the employment income is attributable to the UK part of the relevant tax year, you determine on a just and reasonable basis how far it is not in respect of UK duties.