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Tax equalised

30 March 2006
Issue: 4051 / Categories: Forum & Feedback

Employees who are not domiciled in the UK can have their UK income tax liability on UK earnings met by their employer under the tax equalisation arrangements, which are given in HMRC's Employment Procedures Manual at EPAPP6.
Our client's employee makes gift aid payments. Could readers advise whether the annual grossing-up calculation should take these into account? If it should not, presumably the tax refund arising from higher rate relief should be paid to the employee and not to the employer as it does not directly relate to the earnings?

Employees who are not domiciled in the UK can have their UK income tax liability on UK earnings met by their employer under the tax equalisation arrangements which are given in HMRC's Employment Procedures Manual at EPAPP6.
Our client's employee makes gift aid payments. Could readers advise whether the annual grossing-up calculation should take these into account? If it should not presumably the tax refund arising from higher rate relief should be paid to the employee and not to the employer as it does not directly relate to the earnings?
Query T16 780 – Grossed up.


Reply by Kalonymous:

Tax equalisation is the name given to a non-statutory practice which has evolved in relation to employees (often working for financial institutions) seconded to or from overseas offices typically on medium-term contracts. Although the allure of working overseas is often very attractive in itself most...

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