Non ordinarily resident employees
HMRC have confirmed that 2008-09 will be the last year in respct of which they will operate Statement of Practice 5/84. This Statement is relevant when an employee is resident but not ordinarily resident in the UK and some or all of their duties are performed abroad. In such cases a proportion of their earnings will be treated as UK-based and charged to tax by reference to when they are treated as being received here.The Statement explains HMRC’s practice when determining whether earnings relate to duties performed in the UK or abroad.
HMRC have indicated that reliance on their previous practice is concessionary and that this option is available where the taxpayer chooses this approach rather than the newer statutory provisions in the 2008 Finance Act.
This concession is intended to provide a smooth transition for employers and employees who currently rely on the Statement of Practice. The concession may be withdrawn on a case-by-case basis in cases of perceived tax avoidance.
A revised Statement of Practice will be issued next month to apply from 6 April 2010 (for the 2009-10 tax year).