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HMRC internal manual

Employment Related Securities Manual

HM Revenue & Customs
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International from 6 April 2015: ascertaining chargeable and unchargeable foreign securities income - from 6 April 2015: examples: example 1 - not s26A employee with overseas employment

In 2015/16 John is UK-resident and does not meet the requirement of ITEPA03/S26A. On 1 January 2016 he begins work for a French employer in Calais whilst remaining resident in the UK for tax purposes. From that date he works solely in France and performs no duties in the UK. He is awarded a share option on 1 January 2016 which vests on 31 March 2016. He exercises his option in 2016/17, when he is working for the same employer, but now with some UK duties involved, realising a gain. He claims the remittance basis of taxation under section ITA07/S809B for 2015/16.

All the conditions in ITEPA03/S41H(4) are met for 2015/16.

The relevant period for the share option (1/1/16 to 31/3/16) falls wholly within 2015/16.

As a result, the whole of the share option gain which is employment income for 2016/17 is treated as chargeable foreign securities income, and will be taxed only if remitted to the UK. The fact that John’s earnings from the employment for 2016/17 would not be eligible for the remittance basis does not affect the calculation of the foreign securities income, which is made in respect of 2015/16.

For an explanation of the requirement of section 26A, see ERSM162677.