RDRM31120 - Remittance Basis: Introduction to the Remittance Basis: Foreign Income and Gains: Employment income - relevant foreign earnings

The meaning of relevant foreign earnings depends on the individual’s residence and domicile status. For years up to 2012-2013 ‘relevant foreign earnings’ had two possible meanings (ITA07/s809Z7(3)).

  1. Resident/ordinarily resident (R/OR) but non-UK domiciled: Chargeable overseas earnings - ITEPA03/s22

These are the relevant foreign earnings of individuals who are:

  • resident and ordinarily resident in the UK (R/OR) but
  • not domiciled in the UK

and that arose from an employment that was:

  • with a foreign employer, an employer who is not resident in the UK
  • for duties performed wholly outside of the UK

Refer to Employment Income Manual EIM40102 for further details

  1. Resident/not ordinarily resident (R/NOR): General earnings (non-UK earnings) - ITEPA03/s26

These are the relevant foreign earnings of individuals who were:

  • resident (R) but
  • not ordinarily resident (NOR) in the UK

Their domicile status is not relevant.

General earnings are non-UK earnings and so relevant foreign earnings for the purposes of the remittance basis rules if they are:

  • earnings for employment duties which are performed outside the UK,

and they are not

  • earnings for employment overseas by the Crown

Refer to Employment Income Manual EIM40304 for further details.

Employees who were R/NOR in the UK and who perform duties of an office or employment both inside and outside the UK could choose not to apply the mixed fund rules (refer to RDRM35000) in respect of transfers from an account if, broadly, that account only contains employment income from that employment, gains from employees share scheme related transactions and interest arising on that account in respect of these.

From 6 April 2013 (2013-2014 tax year), with the introduction of the statutory residence test (SRT), the concept of ordinarily resident became obsolete.

This means that an individual’s relevant foreign earnings for a tax year are:

1 - the general earnings within ITEPA03s26(1) for that year - non UK earnings

2 - the chargeable overseas earnings for that year. If the individual does not meet the transitional provisions as set out in ITEPA03s26A.

See RDRM35810 onwardsfor details regarding Special Mixed Funds and the withdrawal of Statement of Practice SP1/09, also from 6 April 2013.