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Posted Thu, 09 Jan 2025 19:10:43 GMT by kd01
For 23/24 I was resident in the UK and in another jurisdiction for tax purposes - effectively commuting between the two countries though my entire employment was in the overseas jurisdiction. My foreign employer applied a £30k tax exemption against the termination payment element of the total compensation payment and income tax was deducted at source for the whole compensation payment minus the £30k tax exemption by my employer. If I was only resident in the UK and a compensation payment was made by a UK employer the £30k tax exemption would apply. However, the online self assessment process does not allow me to utilise the relevant lump sum/compensation boxes on the additional information pages because it is not UK income. Although I can claim foreign tax credit relief, the SA process effectively forces me to pay income tax on the £30k that has been exempted in the overseas jurisdiction. This seems rather unfair but is it correct? There is seemingly no way for me to apply the £30k tax exemption against the foreign termination payment which had it occurred in the UK I would be able to do.
Posted Thu, 23 Jan 2025 18:39:57 GMT by HMRC Admin 20 Response
Hi,
If you meet the condtions at EIM13700 - Termination payments and benefits: section 401 ITEPA 2003: foreign service: reduction of charge, this can still be claimed.
The foreign employment, whether the relief is due or not, should still be included on a UK employment page in order for the income to be included on your calculation.
You do not show any tax deducted on this page as it is claimed as foreign tax credit relief where appliable.
This then allows the claim for the 30k exemption to be applied, if applicable.
Thank you.

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