Income Tax (Earnings and Pensions) Act 2003 section 24A

Restrictions on remittance basis

Section 24A restricts the use of the remittance basis for certain overseas employment income where the employee also holds a related UK employment with the same or an associated employer, and where the effective rate of foreign tax relief would be below a specified threshold.

• The section applies where an employee holds both a UK employment and an overseas employment that are related, and the employers are the same or associated — meaning the overseas income cannot simply be sheltered from UK tax on the remittance basis
• Two employments are treated as related if, broadly, one depends on the other, they involve similar duties, serve the same clients, or the employee is a director, senior employee, or highly paid individual within the employer group
• The restriction is triggered where the rate of foreign tax credit relief on the overseas income would be less than 65% of the UK additional rate of income tax (for example, less than 29.25% when the additional rate is 45%) — this is known as Condition 4, the "65% test"
• An exception applies (Condition 5) where regulatory requirements in the overseas territory or in the UK legally prevent the duties of one employment from being performed in the other's location — if both limbs of this regulatory test are met, the restriction does not apply