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HMRC internal manual

Employment Related Securities Manual

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Ascertaining Foreign Securities Income (FSI) - up to 5 April 2015: examples: example 7 - award during a short period of UK residence

Leon arrives in the UK from France to start work on 1 May 2008 and is R/NOR in the UK for 2008/09. He is awarded forfeitable securities in the French parent company of his UK employer on 1 September 2008. Leon will forfeit the shares if he leaves his employment with the group within 2 years of the award. On 31 January 2009 Leon returns to France and is still there and employed within the same group on 31 August 2010, when the forfeiture condition lifts. His employment income from the securities is £73,000 under ITEPA03/S426.

Leon claims the remittance basis for 2008/09.

The relevant period in accordance with ITEPA03/S41B(2) runs from 1 September 2008 to 31 August 2010. For part of that period, ITA07/S809B applies to Leon.

ITEPA03/S41C(6) applies to 2008/09. Also, within the relevant period, Leon is not resident in the UK from 6 April 2009 to the end of the relevant period on 31 August 2010. In accordance with ITEPA03/S41C(7), that period is treated as if ITA07/S809B applies.

In accordance with ITEPA03/S41C(2), the securities income is treated as accruing evenly over the relevant period: that is £100 per calendar day.

In the part of the relevant period that runs from 1 September 2008 to the date that he leaves the UK on 31 January 2009, all Leon’s duties have been performed in the UK, so, of the securities income treated as accruing over that period (153 x £100 = £15,300), none is foreign.

In the part of 2008/09 following Leon’s departure from the UK (that is 1 February to 5 April 2009) all of Leon’s duties are performed overseas, so, of the securities income treated as accruing over that period (64 x £100 = £6,400), all of it is foreign.

In 2009/10 and in the remaining part of the relevant period from 6 April 2010 to 31 August 2010, when Leon is non-resident, all of Leon’s duties are performed outside the UK and so, of the securities income treated as accruing over that period (513 x £100 = £51,300), all of it is foreign.

So, of the total securities income of £73,000, £57,700 is foreign and £15,300 is charged as taxable specific income in the UK in 2010/11. The foreign securities income will only be taxable in the UK if it is remitted here.

(While this example uses calendar days, HMRC would expect that a split based on overseas and UK workdays will be the most commonly used method of arriving at a just and reasonable apportionment. However, other methods, including calendar days, will be acceptable if they achieve a just and reasonable result.)

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