Skip to content On 12 February 2026, the United Kingdom’s tax authority HMRC added a clarification on Article 15(1) of the OECD Model Tax Convention on Income and Capital to its international manual on deferred remuneration.
According to the latter, an individual’s residence at the point of payment determines where his taxes on deferred remuneration are due.
The OECD Model Tax Convention
The OECD Model Tax Convention on Income and Capital provides model provisions for treaties signed between two countries to avoid double taxation. The United Kingdom uses those models often when signing such treaties with other countries.
Article 15(1) of this Convention, which the UK uses, states ‘[…] wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.’
This provision thus dictates how to tax income for people who work across borders: Residency comes first, and then the place of work performance. This income includes deferred payments such as bonuses, long-term incentives, and similar rewards.
Issue
A deferred payment refers to an agreement where payment is delayed until a further date. An employee may thus receive a deferred payment when living in country B, for the work they performed while residing in country A.
Before HMRC’s clarification, there was confusion: Should taxes on deferred payments be based on where you lived when you earned them, or where you lived when you got paid?
The HMRC answered: It’s where you live when you get paid that matters.
If you live in the UK when you get your bonus, the UK can tax the whole bonus, but only if it’s taxable under UK rules. Sometimes, parts of your bonus might not be taxed at all.
If you don’t live in the UK when you get your bonus, the UK can only tax the part of your bonus that’s for days you actually worked in the UK.
This clarification nonetheless only applies to treaties with the United Kingdom which include Article 15(1) of the OECD Convention.
Impact
This clarification creates more certainty for globally mobile workers in the UK. Indeed, it is difficult to understand where an employee needs to pay taxes, especially if there is doubt about the interpretation of the relevant laws.
The UK now recognizes that an employee’s residence at the point of payment determines where his taxes on deferred remuneration are due. As mentioned above, this clarification nonetheless only applies to treaties with the United Kingdom which include Article 15(1) of the OECD Convention.
Other rules and interpretations may apply for other treaties and other countries. If you need advice on similar issues, our team is here to help explain and make sure everything is handled correctly. Check our Global Mobility page for more information.