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HMRC internal manual

Employment Related Securities Manual

International from 6 April 2015: ascertaining chargeable and unchargeable foreign securities income - from 6 April 2015: not s26A employees - conditions to be met

An employee who is not domiciled in the UK can have chargeable foreign securities income in a tax year if all the following conditions (in ITEPA03/S41H(4)) are met:

  • section 809B, 809D or 809E of ITA 2007 applies to the individual for the year (that is, they are taxed on the remittance basis);
  • the individual does not meet the requirements of section 26A;
  • the employment is with a foreign employer; and
  • the duties of the employment are performed wholly outside the UK in the year.

What this means in practice is that we establish the relevant period applicable to the securities income (see ERSM162500) and then examine the position for each tax year in which the relevant period falls (whether wholly or in part). For each tax year in which the four conditions set out above are met (subject to ITEPA03/S41I - see ERSM162630) the securities income treated as accruing in that year is chargeable foreign securities income, (ERSM162610) and is therefore taxable only if remitted to the UK. (It should be noted that shares in UK companies are, by definition, remitted to the UK. See ERSM162900 and ERSM162930 in particular for a discussion of the remittance of chargeable foreign securities income.)

ITEPA03/S26A and years before 2013/14

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”

Where relevant periods (ERSM162500) include years prior to 6 April 2013, references in the provisions of ITEPA03/S41H(4)(b) and (7)(b) to meeting or not meeting the requirements of s.26A should be read as being, respectively, not ordinarily UK resident or ordinarily UK resident for those years.