Though Mr Cahill's position is unusual, it sheds light on the ability of UK executives to minimise their tax bills via careful structuring of their contracts and division of duties between the UK and overseas.
The 63-year-old BAe chairman previously ran BTR's North American operations and has his main home in Florida, where his wife lives permanently. He will probably retire there eventually. This has helped him to qualify as non-UK 'domiciled ' for UK tax purposes. Since he is also paid by BAe Inc, the group's US offshoot, he is free of UK tax on earnings for his overseas duties - if he keeps the money abroad.
Marks & Spencer recently revealed that Keith Oates, its joint managing director, who previously worked in Europe, is regarded by the Inland Revenue as domiciled in Monaco, where he has a home. Despite being resident in the UK for tax purposes, Mr Oates, a BBC governor highly critical of John Birt's tax affairs, is able to get a tax break on the 20 per cent of his salary that relates to his work overseas.
Such tax breaks on overseas duties can be highly valuable. Mr Cahill faces a top rate of tax in Florida of 31 per cent, and the US also offers much more scope for tax benefits, including unlimited deductions for mortgage interest payments. The BAe chairman also holds options on pounds 2m-worth of BAe shares. If he sells them when he is non-resident, any capital gain will be free of UK tax.
Many top British executives can legitimately dodge UK tax on pay for overseas work even when they are domiciled in the UK. Many simply spend less than half a year, or 183 days, here - something that is easy to arrange in multinational companies.
These 'tax absentees' can sometimes establish non-residency even if their wives and children remain living in the UK. They may even be able to take advantage of double taxation agreements with overseas governments and escape UK tax on work in the UK if the money is paid to them by an offshore subsidiary and is kept abroad.
Even the many more top executives who are both domiciled and who live in the UK more than 183 days a year can escape tax on overseas earnings. British executives who have previously worked overseas and returned to take top jobs in the UK can simply tell the Revenue that they plan to stay here for less than three years, and receive pay for overseas work free of UK tax. And they can change their minds later yet not be subject to back tax on overseas pay already lodged in a foreign bank.Reuse content