EIM40110 - Employee not resident in the United Kingdom: calculation of general earnings in respect of duties performed in the United Kingdom

Section 27 ITEPA 2003

Employees who are not resident in the United Kingdom are chargeable to income tax under section 27 on general earnings in respect of duties performed in the United Kingdom. Where all of the duties of the employment are performed here calculation is not difficult but where duties are performed partly in the United Kingdom and partly overseas, time apportionment is generally used. See EIM40304. For detailed guidance about calculating earnings in respect of UK duties, Appendix 2 at EIM77020 contains an adapted version of an article that appeared in Tax Bulletin 63 (February 2003).

The full amount of section 27 earnings received in the tax year comprise taxable earnings whether the earnings are for that year or some other year and whether or not the employment is still held at the time when the earnings are received.

To calculate the amount of the general earnings in respect of duties performed in the United Kingdom:

  • calculate total general earnings (both cash and non-cash benefits) from the relevant employment for the year
  • establish the number of workdays that the employee worked in respect of the employment in the year. This is the denominator in the apportionment fraction.
  • establish the number of workdays that the employee spent working in the United Kingdom in the year. This is the numerator in the apportionment fraction.

Where the same amount of salary is paid throughout the year, the general earnings to be attributed to United Kingdom duties can be calculated in this way. Accept computations on this basis unless it seems likely that the rate of remuneration changed during the year and the amount involved is worthwhile. If there is more than one employment deal with each one separately.
See example EIM40222.

SA Return employment pages

The employment pages of the SA Return use a different approach to produce a computation of liability under section 15 or section 27.

  • Total general earnings are reported in the cash and benefits sections.
  • Box 1.31 is a deduction box in which non-section 15 or non-section 27 earnings (and non-remitted section 26 earnings) are entered.
  • Helpsheet HS211 is available to assist people to calculate the amount to be entered in Box 1.31.

Tax equalisation

See Appendix 4 at EIM77040 for guidance on how to calculate earnings in respect of UK duties of tax equalised employees who are not resident in the UK.