While The Schmidt Tax Report is very definitely aimed at the layman, rather than the tax specialist, that doesn't mean everyone is still at the level of learning their alphabet. Certain areas of tax planning are well worth a non-specialist's knowing, but which are rather above the basic level. One example of this is the ability to work under a 'split employment contract'.

This is planning for individuals who are resident in the UK but not domiciled here. Another condition for split employment contracts to work is that you work partly inside and partly outside the UK for a non-UK employer.

The reason why split employment contracts are used is quite simple, really. It lies in the wording of a relieving tax rule. Where a person who is UK-resident but non-domiciled works abroad under a contract of employment whose duties are exclusively carried out abroad, those earnings are tax-free, subject to the usual conditions (as Catholics say about indulgences).

This rule is quite stringently worded, and the reality of most real-life situations is that non-domiciled UK-resident individuals tend to work both in and out of the UK. Any significant amount of work done here excludes you from the relief, if it is done as part of a single employment contract with your overseas employer.

Therefore, what is done in practice is to set up a contract with the employer whose duties are all performed outside the UK. Anything that you do in this country is done under a second contract, normally drawn up between you and the same employer. So the income from the first contract meets the conditions of being income from a contract covering duties that are all carried on outside the UK.