Part 3 of 4
This is the Finance Act 2017 version of this article. It is relevant for candidates sitting the Advanced Taxation – United Kingdom (ATX-UK) (P6) exam in the period 1 June 2018 to 31 March 2019. Candidates sitting ATX-UK (P6) after 31 March 2019 should refer to the Finance Act 2018 version of this article (to be published on the ACCA website in 2019).
From the September 2018 session, a new naming convention is being introduced for all of the exams in the ACCA Qualification, so from that session, the name of the exam will be Advanced Taxation – United Kingdom (ATX-UK). June 2018 is the first session of a new exam year for tax, when the exam name continues to be P6 Advanced Taxation (UK). Since this name change takes place during the validity of this article, ATX-UK (P6) has been used throughout.
So far in this article we have looked at some basic rules, the taxation of overseas investment and trading income and the remittance basis. We are now going to look at the taxation of overseas employment income.
Figure 3 sets out an individual’s liability to UK IT in respect of overseas employment income – ie income in respect of overseas duties.
Figure 3 – UK IT on overseas employment income
Figure 3 relates to the taxation of overseas employment income only and is slightly different from Figure 1 that we looked at in Part 2. A UK resident but non-UK domiciled individual can only be taxed on the remittance basis in certain particular circumstances.
The rules set out in Part 2 in respect of the remittance basis apply equally here.
Where the costs of travelling to an overseas employment are borne by the employer, they are exempt from income tax provided the employee is absent from the UK wholly and exclusively for the purpose of performing duties that can only be performed outside the UK.
Travel costs borne by the employee are deductible from taxable employment income provided they relate to the start and/or the end of the period of overseas employment.
The costs of accommodation and subsistence whilst working overseas are not subject to income tax where they are borne by the employer.
Care must be taken when dealing with the remittance basis in relation to overseas employment income; simply being resident in the UK but domiciled overseas is not sufficient to enable the remittance basis to be claimed.
Written by a member of the ATX-UK (P6) examining team
The comments in this article do not amount to advice on a particular matter and should not be taken as such. No reliance should be placed on the content of this article as the basis of any decision. The authors and ACCA expressly disclaim all liability to any person in respect of any indirect, incidental, consequential or other damages relating to the use of this article.