Income Tax (Earnings and Pensions) Act 2003 section 413

Exception in certain cases of foreign service

Section 413 provides an exemption from the tax charge on termination payments and benefits where the employee or former employee has undertaken a sufficient proportion of their service overseas — referred to as "foreign service".

• The exemption applies where foreign service makes up at least three-quarters of total service, or the whole of the last 10 years (if service exceeds 10 years), or at least half of total service including any 10 of the last 20 years (if service exceeds 20 years)
• For service from 2013–14 onwards, foreign service means duties performed outside the UK where earnings would not be taxable UK earnings, or where the seafarers' earnings deduction covers the full amount
• Different definitions of foreign service apply for earlier periods — from 2003–04 to 2012–13, from 1974–75 to 2003–04, and before 1974–75 — reflecting changes in the tax rules over time
• From 2025–26, the definition of "relevant earnings" is updated to reflect the new qualifying new resident regime, replacing the former remittance basis rules

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