Section 23 — Income Tax (Earnings and Pensions) Act 2003: Calculation of “chargeable overseas earnings”

Calculation of “chargeable overseas earnings” 23 1 This section applies for calculating how much of an employee’s general earnings for a tax year are “ chargeable overseas earnings ” for the purposes of section 22. 1A But none of an employee's general earnings from an employment for a tax year are to be “chargeable overseas earnings” if section 24A applies in relation to the employment for the tax year.

2 General earnings for a tax year are “overseas earnings” for that year if—

a section 809B, 809D or 809E of ITA 2007 (remittance basis) applied to the employee for that year, aa the employee did not meet the requirement of section 26A for that year, b the employment was with a foreign employer, and c the duties of the employment were performed wholly outside the United Kingdom.

3 To calculate the amount of “chargeable overseas earnings” for a tax year— Step 1 Identify—

a in the case of a tax year that is not a split year, the full amount of the overseas earnings for that year, and b in the case of a split year, so much of the full amount of the overseas earnings for that year as is attributable to the UK part of the year. Step 2 Subtract any amounts that would (assuming they were taxable earnings) be allowed to be deducted from the earnings identified under step 1 under—

a section 232 or Part 5 (deductions allowed from earnings),

b sections 188 to 194 of FA 2004 (contributions to registered pension schemes), or d section 262 of CAA 2001 (capital allowances to be given effect by treating them as deductions from earnings). Step 3 Apply any limit imposed by section 24 (limit where duties of associated employment performed in UK). The result is the chargeable overseas earnings for the tax year.

4 Any attribution required for the purposes of step 1 or step 2 in subsection (3) is to be done on a just and reasonable basis.