ERSM161250 - Remittance of foreign securities income and the interaction with capital gains - up to 5 April 2015: example

Doreen is R/NOR (from 6 April 2013, is UK-resident and meets the requirements of ITEPA03/S26A) and is not UK domiciled. 45% of her employment duties are in the UK, the other 55% are overseas. She elects to use the remittance basis.

Year 1: On 1 May, Doreen acquires forfeitable shares in the US parent of her employer worth £50 for nil cost. There is no income tax charge because of ITEPA03/S425(2).

Year 3: On 1 October the forfeiture condition lifts when the shares are worth £100.

The full £100 counts as employment income under ITEPA03/S426. But the remittance basis applies so only £45 of the £100 is immediately chargeable. The remaining £55 is foreign securities income, chargeable to income tax if it is remitted.

Year 4: On 1 November Doreen sells the shares for £200 in the US. On 1 December she remits £50.

On the basis of the above, and other (unstated) facts, of the £50 remitted, the first £45 is employment income that is not relevant foreign earnings, foreign specific employment income or employment income that has been subject to foreign tax (ITA07/S809Q(4)(a). There is an income tax charge on the remaining £5 under the remittance basis (by virtue of ITEPA03/S41A(6)).

The CGT position is as follows:

  • Consideration: £200
  • Less s426 charge Year 3: (£45) - by virtue of TCGA92/S119A(3)(a) and S119B
  • Less s426 charge Year 4: (£5) - remitted in the year, even though after the date of disposal
  • Foreign chargeable gain: £150

Year 10: On 1 June, Doreen remits a further £80, £50 of which is subject to income tax under the remittance basis, being the outstanding amount of foreign securities income from the £55 arising in Year 3.

The revised CGT position is now as follows:

  • Foreign chargeable gain as Year 4 above: £150
  • Less Year 10 remittance: (£50) - if a claim is made under s119B(4) TCGA
  • Revised foreign chargeable gain Year 4: £100

For the treatment of foreign chargeable gains, see CG25313.