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HMRC internal manual

Employment Related Securities Manual

Ascertaining Foreign Securities Income (FSI) - up to 5 April 2015: examples: example 2 - non-domiciled employee with overseas employment and associated UK employment

Freda is employed by a German bank in London. In the tax years 2008/9, 2009/10 and 2010/11 she devotes 60%, 70% and 50% respectively of her total working time to this employment. She has a separate employment with an affiliate of the bank which requires her to spend the remainder of her working time at that bank’s offices in Berlin. The two employers are associated, applying the rules in ITEPA03/S24(5) & (6). She does work of comparable value in both employments.

Freda is R/OR but not domiciled in the UK in all three tax years and claims the remittance basis of taxation under ITA07/S809B for all three years. On 6/4/08 she is granted a share option by her Berlin employer. She exercises the option when it vests on 5/4/11 realising a gain of £3,000, which counts as employment income for 2010/11 under Chapter 5 of Part 7 of ITEPA 2003.

All the conditions in ITEPA03/S41C(4) are met for 2008/9, 2009/10 & 2010/11.

The relevant period for the share option falls wholly within these three years.

As Freda has an associated employment as well as her UK employment section 41D applies in each year. For the purposes of ascertaining foreign securities income, ITEPA03/S41C(2) treats £1000 of the gain as accruing over each year. As a result, £400 (40%) plus £300 (30%) plus £500 (50%), so a total of £1,200, is foreign securities income and will be taxed only if remitted to the UK.

The balance (£1,800) is taxed on the arising basis as UK income in 2010/11.

For the application of this and the other examples to periods from 6 April 2013, see ERSM160873.