EIM40222 - 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 UK 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 on foreign earnings.
The employee is Head of European Operations, a post that requires a proportion of the duties to be performed outside the UK. 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 taxable 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 UK.
| Salary | 拢100,000 |
|---|---|
| Bonus | 拢100,000 |
| Car provided by the employer | 拢5,000 |
| House provided by the employer | 拢10,000 |
| School fees paid in the US | 拢10,000 |
| Total | 拢225,000 |
| 听 | 听 |
| Section 15 = 拢225,000 x 80/240 | 拢75,000 |
| Section 26 = 225,000 - 75,000 | 拢150,000* |
* taxable if remitted to the UK.
Note: if in year 1 the employee was not resident in the United Kingdom, 拢75,000 would be chargeable under Section 27 and the balance (general earnings of 拢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.