Dual Employment Contracts After the Remittance Basis Ended
Dual employment contracts split one executive role into a UK contract for UK duties and an overseas contract for duties performed abroad, and for fifteen years they were the standard London package for internationally mobile bankers and fund principals. However, the remittance basis that made them valuable ended on 5 April 2025. Consequently, most structures still sitting in employment files today deliver no UK tax saving at all.
That does not make the paperwork harmless. Furthermore, for an American the question was never only about HM Revenue and Customs, because the United States taxes its citizens on worldwide pay regardless of how many contracts the employer issues. Therefore, dual employment contracts now matter for different reasons: which treasury taxes first, how the foreign tax credit works, and whether earlier years were filed correctly.
At TaxYork we review these arrangements for US executives who arrived in London years ago and still carry a split contract nobody has revisited. This guide explains what died in 2025, what survived, and what the Internal Revenue Service sees on the same payslips.
How Dual Employment Contracts Worked Before April 2025
The classic structure paired a UK employer contract covering London duties with a separate contract from an overseas group company covering work performed outside Britain. Specifically, a non-domiciled employee claiming the remittance basis could leave the overseas earnings offshore and pay no UK tax on them at all.
The overseas salary counted as chargeable overseas earnings under sections 22 and 23 of the Income Tax (Earnings and Pensions) Act 2003. Accordingly, UK tax arose only when that money reached Britain. For a senior executive spending a third of the year abroad, dual employment contracts could remove six figures from the annual UK bill.
Why HMRC Targeted Them in 2014
HMRC regarded many arrangements as artificial divisions of a single job. As a result, Finance Act 2014 inserted section 24A ITEPA, explained in the HMRC technical note on dual contracts, which denied the remittance basis where the two employers were associated and the roles were related.
The decisive condition was a rate test. Notably, if the foreign tax on the overseas earnings fell below 65 per cent of the UK additional rate, which is 29.25 per cent, the overseas pay became taxable on the arising basis. HMRC still publishes the five conditions at EIM40109, and they remain relevant to every open year before 2025.
What Changed on 6 April 2025
Schedule 9 to Finance Act 2025 rewrote the chargeable overseas earnings provisions in the past tense. Consequently, the remittance basis now applies only to earnings for tax years ending on or before 5 April 2025, and dual employment contracts lost the mechanism that made them work.
Why a Second Contract No Longer Shelters UK Tax
A UK resident is now taxed on worldwide employment income under section 15 ITEPA, whichever group company signs the contract. Therefore, splitting pay across dual employment contracts with a London entity and a New York entity changes nothing about the amount HMRC charges.
Keeping the overseas salary from dual employment contracts offshore achieves nothing either. Instead, the only statutory relief for overseas duties is the reformed overseas workday relief, and it attaches to where you work, not to which employer pays you.
The Reformed Overseas Workday Relief
The new relief, described in HMRC guidance on overseas workday relief, is available to qualifying new residents who were not UK resident in any of the previous ten tax years. It runs for up to four tax years and is claimed by election on the self assessment return.
Two limits bite on senior pay. First, relief is capped at the lower of 30 per cent of qualifying employment income or 300,000 pounds. Second, making the election forfeits the personal allowance and the capital gains annual exempt amount, although above 125,140 pounds the allowance has already tapered to nothing. Importantly, one contract earns exactly the same relief as dual employment contracts would.
Old Offshore Pay Brought to Britain Now
Earnings left offshore under the old rules are still taxable when remitted, even after April 2025. However, the Temporary Repatriation Facility lets former remittance basis users designate that money at 12 per cent for 2025-26 and 2026-27, rising to 15 per cent in 2027-28.
For an American this is not the end of the calculation. Specifically, UK tax paid years after the earnings were taxed by the IRS raises a foreign tax credit timing problem, which we cover below.
Why Dual Employment Contracts Still Matter to the IRS
The United States never recognised the remittance basis. Accordingly, a US citizen holding dual employment contracts was always taxable in America on the full salary from both employers, whether or not any of it reached London.
Sourcing Pay by Workdays
American rules source compensation by where the work is performed. Under Treasury Regulation 1.861-4, pay is normally apportioned on a time basis, so US workdays produce US-source income and London workdays produce foreign-source income.
This matters for dual employment contracts because the foreign tax credit only offsets US tax on foreign-source income. Consequently, UK tax charged on salary for days worked in New York is generally not creditable in America unless the treaty re-sources it.
Who Pays You Decides Who Taxes First
Here lies the part of dual employment contracts that survived 2025. Article 14(2) of the US-UK income tax treaty leaves US-day pay taxable only in Britain where you spend no more than 183 days in the United States, the remuneration is paid by an employer that is not US resident, and no US permanent establishment bears the cost.
Pay the US-day salary through a US employer contract and the second condition fails. Therefore, America gains the primary right to tax those days, and Britain must credit the US tax. Conversely, pay everything through the London contract and Britain taxes first, with the United States relieving the double charge through the treaty re-sourcing rule in Article 24.
What the FEIE Can and Cannot Do
The foreign earned income exclusion shelters foreign-source earnings up to 132,900 dollars for 2026. Nevertheless, it never reaches pay for days worked in the United States, whichever contract carries it.
For most London executives the exclusion is the weaker choice anyway. Instead, the foreign tax credit usually wins, because UK rates exceed American ones on salary and excess credits carry forward for ten years.
Overseas Workday Relief and the American Credit Trap
The reformed relief looks like a pure saving. However, for a US citizen it can move tax from one treasury to another rather than removing it, and dual employment contracts do not change that outcome.
When the Relieved Days Are Spent in America
If your overseas days are in the United States, the IRS taxes that slice of salary as US-source income in every scenario. Without overseas workday relief, Britain would also have taxed the same pay, and the treaty would have relieved the overlap between the two charges.
Accordingly, relief on US days saves only the gap between the UK rate and the combined federal and state rate on that slice, not the full 45 per cent. With a 37 per cent top federal rate plus New York tax, that gap can be small, so the headline saving overstates the real one.
When the Relieved Days Are Spent Elsewhere
Days in Frankfurt, Dubai or Singapore behave differently. Overseas workday relief removes the UK charge, yet America still taxes that foreign-source pay, and there is no UK tax left to credit against it.
Consequently, the relief can create a US liability where none existed before. The foreign earned income exclusion or excess credits from other income may absorb it, and we model that before any election is made.
State Tax Follows the Workday
New York, California and several other states tax non-residents on salary earned while working inside their borders. The New York nonresident rules apply whether a US or UK entity pays you.
Therefore, a separate US contract does not create a state liability, but it does put the payroll records in front of the state. Clean workday diaries protect you on both sides.
Social Security, PAYE and Payroll Mechanics
Tax is only part of the payroll picture. Moreover, dual employment contracts often exist for payroll and social security reasons that outlive any income tax advantage.
The Totalisation Agreement
The United States and United Kingdom totalisation agreement generally applies social security in the country where the work is performed. However, an employee sent by a US employer to Britain for five years or less can remain in the US system under the detached worker rule, supported by a certificate of coverage.
Without that certificate, both countries can claim contributions on the same salary, and dual employment contracts make that overlap more likely rather than less. Importantly, National Insurance is never a creditable foreign tax, so a duplicated charge is a pure cost.
PAYE on a Split Payroll
HMRC expects PAYE on UK-duty earnings from the first day, even where a US entity pays part of the package. Where a single employer pays salary for duties inside and outside Britain, a section 690 direction can let the employer withhold only on the expected UK proportion.
Section 690 is available without dual employment contracts. Therefore, for many groups a single UK contract with a direction and accurate workday tracking now delivers everything the old split structure did.
Equity Awards Across Two Employers
Restricted stock units and options granted to a mobile executive are apportioned across the vesting period by workdays in both countries. Dual employment contracts complicate that exercise, because each employer may report a different share of the same award.
Consequently, we reconcile HMRC and IRS equity sourcing line by line. Where the numbers differ, the foreign tax credit fails on precisely the income executives care about most.
Unwinding Old Dual Employment Contracts Safely
Many executives still hold contracts drafted before 2014 or updated only cosmetically since. Accordingly, the first task is to find out whether earlier years were filed on a basis HMRC would accept.
Years Exposed Before April 2025
If the section 24A conditions applied, overseas earnings should have been taxed on the arising basis. Consequently, any year in which dual employment contracts were treated as protected but the foreign tax rate fell below 29.25 per cent may contain unpaid UK tax.
HMRC can reach back up to twelve years where offshore matters are involved. Therefore, a structured disclosure is usually far cheaper than an enquiry, and our offshore disclosure and FBAR reporting team coordinates the UK correction with the US position.
The Foreign Tax Credit Timing Problem
UK tax paid late on earlier earnings generally relates back to the year the income arose for US purposes. Accordingly, claiming the credit may require amended US returns for those years rather than a credit in the current one.
The ten-year refund window for foreign tax credit claims usually gives enough time. Nevertheless, it runs from the original due date, so the oldest years expire first and should be addressed early through US tax returns for expats that are prepared with the UK figures in hand.
Replacing the Structure Going Forward
For a qualifying new resident, a single UK contract with an overseas workday relief election and a section 690 direction usually matches the old result of dual employment contracts. For a long-term resident, the goal becomes treaty efficiency rather than UK relief.
In both cases, dual employment contracts should survive only where they serve a clear commercial or social security purpose. Otherwise, they create reporting complexity without any tax return benefit.
Case Study: A New York Banker Relocated to London
Consider Megan, an American managing director who relocated from New York to London on 6 April 2026. She had not been UK resident in the previous ten years, earns 500,000 pounds, and spends 40 per cent of her workdays in the United States.
The Proposed Split Contract
Her bank offered dual employment contracts: 300,000 pounds from the London entity for UK duties and 200,000 pounds from the New York entity for US duties. Under the pre-2025 rules, that would have kept the New York salary outside UK tax while it stayed offshore.
Under current law, dual employment contracts change nothing in Britain. Without relief, her UK income tax on 500,000 pounds is about 211,200 pounds, because her personal allowance has fully tapered away above 125,140 pounds.
Applying Overseas Workday Relief
Megan elects overseas workday relief. Her overseas-duty earnings of 200,000 pounds exceed the cap, which is the lower of 30 per cent of 500,000 pounds and 300,000 pounds, so relief is limited to 150,000 pounds.
Her UK income tax falls to about 143,700 pounds, a reduction of 67,500 pounds. She would reach the same figure with a single London contract, because the relief depends on where she works rather than who pays her.
The American Side of the Same Numbers
Because the New York entity pays her US-day salary, Article 14(2) gives the United States the first right to tax it. Consequently, federal and New York tax fall due on that slice in America, while London salary carries UK tax that the IRS credits.
The relief therefore saves far less than 67,500 pounds in real terms, because it mostly replaces a UK credit for federal and New York tax she pays anyway. Her genuine saving is only the margin by which the UK rate exceeds her combined American rate on those days, and we recommended keeping the US contract solely for commercial reasons, because it kept her on the New York payroll and benefits plans for the days she works there.
How TaxYork Can Help With Dual Employment Contracts
We act for American executives, fund principals and founders whose pay crosses the Atlantic. Specifically, we review existing dual employment contracts, test the section 24A conditions for every open year, and model overseas workday relief against the US credit position before any election is made.
Our team prepares both sides of the compliance: the UK self assessment return with the relief claim, and the US return with the workday sourcing that makes the foreign tax credit work. Furthermore, our tax treaty optimisation work settles which country taxes first under Article 14, rather than leaving it to payroll accident.
Where earlier years need correcting, we sequence the HMRC disclosure and any amended US returns so that credits are claimed before their windows close.
Conclusion
The remittance basis ended on 5 April 2025, and with it the UK tax case for dual employment contracts. Overseas workday relief now does the work, it follows your workdays rather than your employer, and one well-drafted contract earns exactly the same relief.
For Americans, the structure still decides which treasury taxes first, how the foreign tax credit operates, and whether old years hide unpaid UK tax. Ultimately, the right move is to review the contracts you hold now, before HMRC or the IRS asks the question for you.
Contact Us
If you hold split contracts or are negotiating a London package, speak to a specialist first. To review your position, book a consultation with our cross-border team today.
Email hello@taxyork.com or call 020 3488 8606.
Disclaimer
This article provides general information about the UK and United States tax treatment of employment contracts and does not constitute tax advice. Tax rules change and individual circumstances differ significantly. You should obtain professional advice tailored to your own position before acting. Further guidance is available from HM Revenue and Customs, the Internal Revenue Service, the Chartered Institute of Taxation, the ICAEW and the current UK income tax rates.