Who does section 21 of ITEPA 2003 apply to?

Section 21 applies to employees who are both resident and ordinarily resident in the United Kingdom but are not domiciled here. Domicile is a distinct legal concept from residence, broadly referring to the country a person considers their permanent home. An employee may live and work in the UK for years while retaining a foreign domicile.

How are general earnings taxed under section 21 of ITEPA 2003?

Under section 21, the full amount of qualifying general earnings received in a tax year is treated as taxable earnings for that year on a receipts basis. It does not matter whether the earnings relate to work done in that tax year or a different one, nor whether the employee still holds the employment when earnings are received.

How does section 21 treat chargeable overseas earnings?

Section 21 specifically excludes any earnings qualifying as chargeable overseas earnings. These are calculated under section 23 and taxed separately under section 22. For a non-domiciled employee performing some duties overseas, the overseas element may be treated as chargeable overseas earnings, while the remainder falls within section 21 and is taxed in full on receipt.

Are bonuses from a previous tax year taxable under section 21 of ITEPA 2003?

Yes. Section 21 taxes earnings based on when they are received, not when they were earned. A bonus received in the current tax year relating to work performed in a previous tax year is taxable under section 21 in the year of receipt, provided it does not separately qualify as chargeable overseas earnings under section 23.

Income Tax (Earnings and Pensions) Act 2003 section 21

Earnings for year when employee resident and ordinarily resident, but not domiciled, in UK, except chargeable overseas earnings

Section 21 deals with how general earnings are taxed for employees who are resident and ordinarily resident in the UK but not domiciled here, excluding any portion that qualifies as chargeable overseas earnings.

Applies to general earnings of employees who are UK resident and ordinarily resident but not UK domiciled, excluding chargeable overseas earnings
The full amount of qualifying general earnings received in a tax year counts as taxable earnings for that year
Earnings are taxable on receipt regardless of which tax year they relate to or whether the employment is still held at the time of receipt
Section 23 provides the calculation for determining how much of an employee's general earnings qualify as chargeable overseas earnings, which are dealt with separately under section 22

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