EIM36880 | Deductions from earnings: capital allowances: procedures: UK based earnings and earnings charged on remittance

Section 20(2) and (3) CAA 2001

UK based earnings

Certain employees are only taxed on their UK based earnings, see EIM40003. Such employees are entitled to capital allowances for plant and machinery that satisfies the conditions in EIM36520, but only to the extent that it is used in the performance of their UK duties. Use in the performance of duties outside the UK is treated as non-business use for the purpose of the apportionment in EIM36570.

Earnings charged on remittance

No deduction for capital allowances can be given from earnings chargeable on remittance.

From 6 April 2025, the remittance basis of taxation was abolished, and the restriction in section 20(2)-(3) CAA 2001 therefore ceases to operate for earnings arising on or after that date, as no post-5 April 2025 earnings can fall within a remittance basis charge. The restriction does, however, continue to apply to earnings arising in a tax year prior to 2025/26 which were within the remittance basis rules and are subsequently remitted to the UK after 6 April 2025.

For 2025/26 and later years, the allowances otherwise due under CAA 2001 apply in the normal way, as the legislative mechanism that previously displaced entitlement where the remittance basis applied is no longer engaged.

For guidance on the way that the deduction rules in Part 5 ITEPA 2003 apply to employees chargeable only on UK based earnings or on remittance, see EIM31750.