On 2 February 2026, HMRC added a new page to their International Manual at INTM163155. The new guidance clarifies the correct application of the Employment Income article of a tax treaty to deferred remuneration, such as bonuses, long-term incentive plans (LTIPs) and other similar payments.
In the past there have been differing approaches taken by both HMRC and advisers who have been waiting for guidance from HMRC for some time. The interpretation of the term “derived by a resident of a contracting state” in Article 15(1) of the OECD model treaty is central to this question. In practice this boils down to whether, when determining the attribution of taxing rights over deferred remuneration between two Contracting States, it is correct to look at:
- The individual’s treaty residence position at the time of payment; or
- The individual’s treaty residence throughout the performance period of an award, which may vary.
HMRC’s new guidance confirms that it is the individual’s treaty residence position at the point of payment which drives the reading of Article 15(1) and the subsequent attribution of taxing rights. This is a welcome clarification that may provide the catalyst for resolving open enquiries on this topic.
