HMRC published guidance on 21 July 2014 on the revised dual contracts rules which apply  from 6 April 2014. The revised legislation is contained in section 24A Income Tax (Earnings and Pensions) Act 2003. It imposes the arising basis of taxation in respect of foreign earnings for

UK resident but non-domiciled individuals, who work in the UK (for a UK employer) and abroad (for a foreign employer) if certain conditions are met.

In brief summary, the legislation applies if, in the relevant year:

  1. The employee holds, at the same time, one or more UK employments and a “relevant” overseas employment
  2. The two (or more) employers are the same or associated entities
  3. The two (or more) employments are related to each other
  4. The employee has not paid tax abroad on overseas income which would have been allowable by way of Foreign Tax Credit Relief against UK tax on the foreign income if it was taxable in the UK on the arising basis and the amount of that credit would be 65% or more of the UK additional rate of income tax
  5. The employee is not obliged to be employed in each territory in order to satisfy regulatory requirements

The guidance provides details and examples on the conditions as well as HMRC’s interpretation of terminology contained in the legislation.

To read the new guidance click here.