INLAND
REVENUE
Statement of Practice
INLAND REVENUE,SOMERSET HOUSE,LONDON
SP 18/ 91
Date
6 December 1991
FURTHER COPIES OF THIS STATEMENT MAY BE OBTAINED BY WRITING TO (PLEASE ENCLOSE A STAMPED ADDRESSED ENVELOPE) OR BY CALLING PERSONALLY AT THE PUBLIC ENQUIRY ROOM,WEST WING SOMERSET HOUSE, STRAND, LONDON WC2R 1LB
FOREIGN EARNINGS DEDUCTION
1. A person who is resident and ordinarily resident in the United Kingdom may be liable to United Kingdom tax on earnings for any work done abroad as well as for work done in the United Kingdom. However, Section 193 Income and Corporation Taxes Act 1988 provides that, where individuals who are resident and ordinarily resident in the United Kingdom perform the duties of their employment wholly or partly abroad, they are entitled to a 100 per cent foreign earnings deduction for tax purposes, provided they are absent from the United Kingdom for a "qualifying period" of at least 365 days. This relief is given by allowing a deduction equal to the individual's earnings so that in fact, no tax is due on those earnings.
2.
The term "qualifying period" is defined in Paragraph 3 Schedule 12 Income and Corporation Taxes Act 1988. This provides that return visits to the United Kingdom may count as part of. the qualifying period on condition that:
3.
no single visit lasts for more than 62 consecutive days; and
the total number of days spent on visits to the United Kingdom during the "qualifying period" do not exceed one-sixth of the total number of days in the "qualifying period".
Inland Revenue practice has been to allow people who have previously been resident in the United Kingdom and return after an absence abroad during which time they have been not resident for tax purposes - to count the absence abroad during which they were non-resident as part of a "qualifying period" for the purposes of the 100 per cent foreign earnings deduction. However, the Board of Inland Revenue are advised that for the 100 per cent foreign earnings deduction to apply, the law requires the
1
THIS STATEMENT HAS NO BINDING FORCE AND DOES NOT AFFECT A TAXPAYER'S RIGHTS
OF APPEAL ON POINTS CONCERNING HIS LIABILITY TO TAX
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