The First-tier Tribunal (FTT) determined that Mr Fryett, an airline pilot resident in the UK, but paying tax in Hong Kong, was subject to PAYE.
Mr Fryett was an airline pilot who flew on international routes for Cathay Pacific Airways who are based in Hong Kong; however he lived in Devon and is a UK resident. My Fryett dealt with the Hong Kong office in connection with all of his duties and reported back to his Hong Kong based director.
The pilot was paid in sterling to his UK bank account, but declared his salary in Hong Kong dollars and paid tax in Hong Kong. Mr Fryett argued his UK PAYE code should be “NT” (nil tax) on the basis that because of the double taxation agreement between the UK and Hong Kong, the UK does not have taxing rights over his remuneration.
HM Revenue and Customs (HMRC) said the taxpayer was due to pay tax on his worldwide income because he was a resident in the UK, regardless of the fact that his duties were for an employer in Hong Kong. The double taxation agreement did not prevent the UK from taxing Mr Fryett’s employment income as the same income could be taxed by both countries. However, it provides for relief against the double taxation by allowing the foreign tax to be credited against the UK’s tax.
The Judge in the FTT agreed with HMRC and stated under ITEPA 2003, s15, the taxable earnings are the UK resident’s general earnings. The FTT concluded that because the taxpayer is resident in the UK he was chargeable to UK tax on his worldwide earnings.
To read the full case of
Russell Fryett and The Commissioners for Her Majesty’s Revenue and Customs [2014] UKFTT 220 (TC) TC03360 click
here.