Expatriate taxation - CIOT - The Chartered Institute of Taxation

CIOT RESEARCH PROJECT ON EXPATRIATE TAXATION
10 Issue 10: Incidental duties in the UK
10.1 The issue here is that there is no statutory definition of the expression
“incidental duties in the UK”, making it difficult to know when they are taxed.
This means spending one day in the UK could mean UK taxation (subject to
the possible treaty claim) and thus the operation of PAYE and NIC. This
definition also crops up in so-called “dual contracts”.
Applicable law
10.2 ITEPA section 39(1) describes an incidental duty only for the case where the
employment is “in substance one whose duties fall to be performed outside
the UK”.
10.3 In section 39(2), it deems duties of the employment performed in the UK to be
performed outside the UK if they are “merely incidental” to the performance of
the duties outside the UK.
10.4 What does “incidental” mean
Case law
10.5 The only case law we have is Robson v Dixon (48TC527), and this case
concerned an airline pilot who had 38 takeoffs and landings in the UK over a
long period. The Courts judged that each takeoff and landing was of equal
merit, and therefore none could be incidental. (HMRC have since granted an
ESC (A10) for a single takeoff and landing, presumably to cover emergency
landings).
10.6 The case did introduce the expressions of coordinate duties and subordinate
duties. In broad terms, if you are doing in the UK exactly what you would do
outside the UK the duties are coordinate, ie of equal value and thus not
incidental.
10.7 The problem with each person’s job is that it is almost impossible to
determine what is incidental. Every sales lead may be important. Every staff
counselling session could be critical. Determining the position for each
employment is effectively a question of fact and degree, ie it takes a Court to
decide whether the duties are incidental.
10.8 Booklet IR20 paragraph 5.8 confuses the position by saying that training is
not regarded as being coordinate, but can be incidental if the time spent is
less than 91 days a year. As employers regard training as a vital function, this
seems an extraordinary statement to make.
Current practice
10.9 Since the introduction of the EU and the freedom of movement of people,
there are vast numbers of people who arrive in the UK for work purposes.
They may work here for a day or longer but remain on home country
employment terms, payroll, etc. They simply come to the UK to work.
10.10 If the visit is just for a day and it is not an incidental duty, then the employer in
the UK is required to deduct PAYE and pay that over to HMRC. Who is the
employer ITEPA section 689 makes it clear that the person that the
Peter Ashby 42 6.2.07