UK vs non-UK employment

September 23, 2012

HMRC has updated the Employment Income Manual, with more guidance on UK vs non-UK employment and, in particular, when UK duties will be ‘merely incidental’ to non-UK employment. As ever, it takes the view that if the work done in the UK is the same kind as that done overseas it cannot be ‘merely incidental’; similarly, if the work is of equal importance to that done overseas, it cannot be ‘merely incidental’. Define ‘equal importance’ …

The position matters in that any employment duties performed in the UK are subject to tax in the UK (s27 ITEPA) unless a treaty provision overrides domestic law. Only ‘merely incidental’ UK duties can be ignored (s39 ITEPA).

Some of the examples given do show a certain disconnect – reading generic business emails that do not relate directly to the employee’s role/responsibilities is ‘merely incidental’ but reading emails that do relate directly is not. Given the evidential difficulties of demonstrating what does and does not relate directly, and evidential difficulties with showing when an email was read, this rather suggests that business visitors to the UK should ensure that they don’t switch on their smartphones here.

The changes also emphasise that a director’s attendance at a meeting in the UK cannot be merely incidental, even if the meeting is not a board meeting – as the management of the company is vested in the directors, attendance at meetings is a substantive duty of the director – a non-UK director would not attend a meeting in the UK unless participation was deemed to be necessary (perhaps a little optimistic on HMRC’s part).

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