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HMRC internal manual

Employment Related Securities Manual

Interaction of UK law and treaties - up to 5 April 2015: remittance basis and time apportionment - example 3

Bill is UK-resident but not ordinarily resident in the UK when an option is granted, on 1 June 2009, and is on the remittance basis in 2009/10. The option vests on 31 May 2011 and is exercised 31 May 2012, producing specific employment income of £10,000. The relevant period is from 1 June 2009 to 31 May 2011.

Bill has performed 25% of his duties in France every month during the relevant period. He is still resident, and is treaty resident, in the UK when he exercises his option.

So, ITEPA03/S41A(4) will produce the following result:

Total securities income 10,000
The amount of the securities income relating to Bill’s duties performed outside the UK 2,500
Taxable specific income under S41A(4) 7,500

If none of the foreign securities income of £2,500 is remitted to the UK, then it will not be subject to UK income tax.

Under the UK/France Double Taxation Treaty, France is entitled to tax the French workday proportion of the gain - this will be based on the workdays between grant and vest in accordance with OECD guidelines.

France taxes gain 120/480 x 10,000 2,500

Foreign Tax Credit Relief is available for the French tax on doubly taxed income. UK has not subjected to tax £2,500 in respect of French duties but will do so if the foreign securities income is remitted to the UK. In that case, Bill would be entitled to FTCR in respect of the French tax on the gain of £2,500.

For the application of this and the other examples to periods from 6 April 2013, see ERSM161335.