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HMRC internal manual

Employment Related Securities Manual

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HM Revenue & Customs
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International from 6 April 2015: ascertaining chargeable and unchargeable foreign securities income - from 6 April 2015: daily accrual

The securities income is to be treated as accruing equally on each day of the relevant period (ITEPA03/S41H (2)).

This should not be read as a requirement to compute the apportionment of securities income between what is foreign and what is not on the basis of the circumstances of every day during the relevant period. Rather, because the apportionment rules of section 41H treat each tax year within the relevant period separately, the concept of daily accrual means that securities income is regarded as relating in equal proportions to each year or part of a year within the relevant period.

The statute at ITEPA03/S41H to S41L requires that for all categories of employees who meet the international mobility requirements for any part of the relevant period (ERSM162400); those not domiciled in the UK who meet the requirements of section 26A, those not domiciled in the UK who do not meet the requirements of section 26A and those not resident in the UK - the securities income will be apportioned between what is chargeable and what is unchargeable foreign securities income.

For employees not domiciled in the UK who do not meet the requirements of section 26A (see below) the apportionment will be made in accordance with ITEPA03/S41H (3), (4) and (5) and S41I. See the guidance at ERSM162620 et seq. For employees not domiciled in the UK who meet the requirements of section 26A the apportionment is governed by ITEPA03/41H(6) and (7). See the guidance at ERSM162640 et seq. For non-resident employees the apportionment is made in accordance with ITEPA03/S41H(8) and (9). See the guidance at ERSM162660.

For all categories of employees, the way that the apportionment is made is not set down in statute in any more detail than is contained in sections 41H and 41I. 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, but other methods will be acceptable if they achieve a just and reasonable result. Most of the examples that follow use the workdays method, assuming 48 5-day weeks in a year, allowing for 4 weeks’ holiday. If workdays are being used, and the facts of any particular case require it, a different number of workdays may be used, as appropriate.

ITEPA03/S26A

Finance Act 2013 made changes to the residence rules, with effect from 6 April 2013, removing the concept of “ordinary residence” from the Taxes Acts. For ITEPA03/S22, the condition of the employee being ordinarily UK resident was replaced by the condition of not meeting “the requirement of section 26A” and for ITEPA03/S26, the condition of the employee being not ordinarily UK resident was replaced by the condition of meeting “the requirement of section 26A”. References in this guidance to “s26A employees” and “not s26A employees” are references to employees who respectively do and do not meet the requirements of section 26A. Guidance on this new test is in the Employment Income Manual, starting at EIM40001 and in particular at EIM40103.