HMRC has long disliked the practice whereby UK resident, non-domiciled individuals who perform employment duties for related companies both in and outside of the UK have operated under UK and non-UK employment contracts, with the consequential ability to claim the remittance basis in relation to remuneration derived from non-UK employment.

After a previous announcement warning that they would crack down on the effectiveness of such arrangements, the detail of the legislation that has been introduced with effect from 6 April this year (set out in the draft Finance Bill 2014) has been confirmed under the guise of ‘restrictions on the remittance basis’. Therefore, where a UK resident, non-domiciled individual:

  • has both a UK employment and one or more foreign employments;
  • the UK employer and the foreign employer are ‘associated’ with each other;
  • the UK and foreign employments are related (for example, where it is ‘reasonable to suppose’ that the individual’s UK employment would cease if their foreign employment ended or where the individual undertakes similar or related roles under both employments); and
  • the foreign tax rate that applies to the foreign employment income is less than 65% of the UK’s additional income tax rate (ie less than 29.25% in the current tax year),

it will not be possible for the individual to claim the remittance basis of taxation in relation to their foreign employment income (or indeed, any income relating to employment-related securities and securities options)and they will instead to be subject to UK income tax on this income on an arising basis.

The only exemption which will be available is where the relevant employments could not be carried out in the UK or abroad from a regulatory perspective.

It is therefore vital that all dual contracts arrangements be reviewed in the context of this new legislation as a matter of urgency.