Bonus taxation for a non-UK-resident following a split year

Hi HMRC team, I'm hoping you can help me achieve clarity on the below, as the documentation on this specific (slightly complex) topic seems unclear. To summarise the background: - During the periods discussed below I was employed in a revenue generating/sales position where I received an annual bonus as a result of the revenue that I generated for the company. - During the tax year 2020/21 I emigrated from the UK part-way through the year to live and work full-time overseas, but continued to be employed by the same UK-based employer. - Split-year treatment was applied accordingly in 2020/21, with the UK part being April-November 2020, and the non-UK part being December 2020 onwards. - During the following tax year 2021/22, I continued to be non-UK resident for the full year due to living and working abroad. - In May 2022 (within the 2021/22 tax year) I was paid a discretionary annual bonus by my employer. The amount of that bonus was calculated in accordance with the revenue that I had generated for the company across the preceding tax year (2020/21). The actual payment of the bonus in May 2022 required several additional conditions to be met up to and including the time of payment - remaining employed, not serving notice, good behaviour, all generated revenue actually being received in the company bank account at the point of bonus payment etc.. Accordingly the conditions for bonus payment were not fully met until the bonus was actually paid in 2021/22. This brings me to the key questions... Question 1: How should this discretionary bonus, paid in tax year 2021/22, be handled for UK taxation purposes? Would it: (a) be fully excluded from UK income tax, as the final conditions were met and it was paid during the tax year 2021/22 (I was non-UK resident for 2021/22 in its entirety). - or - (b) be partially subject to UK tax in 2021/22, as the revenue which I generated for the company during tax year 2020/21 did feed the calculation of the annual bonus amount. If the answer to the above is (a), this completes my questions. Question 2: If the answer to the above is (b), as the amount of the annual bonus was calculated in accordance with revenue generated for the company during tax year 2020/21, should I apportion the bonus amount between the UK-part and the non-UK part of 2020/21 on a just and reasonable basis (and then within the 2021/22 tax return pay income tax on the portion of the bonus which was related to the UK-part of 2020/21)? Question 3: If the answer to question 2 is yes, as I know how much revenue I delivered for the company month-by-month throughout 2020/21 (and accordingly how much bonus was generated month-by-month), presumably it would be reasonable to apportion the bonus in correlation with those numbers? For example, with the portion of bonus which resulted from revenue in the UK-part of 2020/21 (i.e. April-November) being subject to UK income tax in 2021/22, and the portion of bonus which resulted from revenue in the non-UK-part of 2020/21 (December-April) being excluded from UK taxation? Clear responses to each of the above questions would be very much appreciated, as I'm finding this a struggle to decipher. Kindest regards

Hi,

You state the payment was made in May 2022 and this is the 2022 to 2023 tax year and not 2021 to 2022. The income is taxable on a receipts basis so is therefore taxable in 2022 to 2023 and this depends on your residence for that year.

You can find further guidance here:

Tax on your UK income if you live abroad

Thank you.

Hi HMRC team, My apologies - the date of the bonus payment was May 2021 (not May 2022) - that was a typo within the above. All other details above are correct. To re-confirm, the bonus was received during the tax year 2021/22. I have reviewed the guidance documents available however I am struggling to decipher the correct treatment in the circumstances. Accordingly it would be appreciated if you could share answers to questions 1-3 above. Your recent response seems to suggest that taxation would depend upon residence status during the year of receipt - is it the case that, as I was non-UK resident for the year of receipt (2021/22), income tax would not be due in respect of that bonus? Kind regards

Hi,

The bonus payment is taxed on a receipts basis. If the bonus payment was received by you in May 2021, then is taxable in the 2021 to 2022 tax year.  

You left the UK in November 2020, which is the 2020 to 2021 tax year. Your residence status for 2021 to 2022 will determine if this is taxable or not for that year. You can refer to the further guidance here:

Tax on your UK income if you live abroad

Thank you.