Entering into dual employment contracts is a practice that developed historically for high-earning UK resident but non-UK domiciled employees working partly in the United Kingdom and partly abroad. Such employees would enter into dual employment contracts:

  • one with an overseas employer covering non-UK employment duties; and

  • another with a UK employer (within the same group) covering UK employment duties.

Overseas earnings under the non-UK employment contract would be outside the scope of UK taxation unless remitted to the United Kingdom because the employee would be taxed under the more favourable "remittance basis".

Following growing scepticism and concerns about this tax advantage and the possible artificiality of dual contracts arrangements, rule changes were introduced from 6 April 2014 that restricted the availability of the remittance basis. Ever since, overseas earnings under a non-UK employment contract are subject to UK income tax as they arise if certain conditions are present, including:

  • the UK employer and foreign employer being the same or associated; and

  • the UK and foreign employments being related.

Such restrictions do not, however, remove the availability of "overseas workday relief" to protect overseas earnings from UK taxation for the first three years of UK tax residence. Dual contracts have therefore become less popular over the years, but they can still be appropriate in the right circumstances.

For further information on this topic please contact  Alfred Liu at Forsters LLP by telephone (+44 20 7863 8333) or email ([email protected]). The Forsters LLP website can be accessed at www.forsters.co.uk.