Income Tax (Earnings and Pensions) Act 2003 section 23

Calculation of "chargeable overseas earnings"

Section 23 explains what qualifies as overseas earnings and sets out the three-step method for calculating the amount of an employee's general earnings that are treated as "chargeable overseas earnings" for the purposes of section 22.

• General earnings qualify as overseas earnings only where the employee is taxed on the remittance basis, does not meet the section 26A requirement, works for a foreign employer, and performs all duties outside the UK
• The calculation starts by identifying the full overseas earnings for the year (or, in a split year, only the portion attributable to the UK part of the year)
• Allowable deductions are then subtracted — including employment expense deductions, registered pension scheme contributions, and capital allowances treated as earnings deductions — and any limit under section 24 is applied where duties of an associated employment are performed in the UK
• If section 24A applies to the employment for the tax year, none of the employee's general earnings from that employment can be chargeable overseas earnings