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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: examples: example 6 - award during a short period of UK residence

Leon arrives in the UK from France to start work on 1 May 2013 and is resident but not domiciled in the UK and meets the requirement of ITEPA03/S26A for 2013/14. He is awarded forfeitable securities in the French parent company of his UK employer on 1 September 2013. Leon will forfeit the shares if he leaves his employment with the group within 2 years of the award. On 6 April 2014 Leon returns to France and is still there and employed within the same group on 31 August 2015, when the forfeiture condition lifts. His employment income from the securities is £73,000 under ITEPA03/S426.

Leon claims the remittance basis for 2013/14.

The relevant period in accordance with ITEPA03/S41G(2) runs from 1 September 2013 to 31 August 2015. For part of that period, ITA07/S809B applies to Leon.

ITEPA03/S41H(7) applies to 2013/14. Also, within the relevant period, Leon is not resident in the UK from 6 April 2014 to the end of the relevant period on 31 August 2015. ITEPA03/S41H(8) applies to that period.

In accordance with ITEPA03/S41H(2), the securities income is treated as accruing evenly over the relevant period: that is £100 per calendar day.

In the part of the relevant period that runs from 1 September 2013 to the date that he leaves the UK on 5 April 2014, all Leon’s duties have been performed in the UK, so, of the securities income treated as accruing over that period (217 x £100 = £21,700), none is foreign.

In 2014/15 and in the remaining part of the relevant period from 6 April 2015 to 31 August 2015, when Leon is non-resident, all of Leon’s duties are performed outside the UK and so, of the securities income treated as accruing over that period (513 x £100 = £51,300), all of it is unchargeable foreign securities income.

Accordingly, when the shares cease to be restricted securities on 31 August 2015, £73,000 will count as employment income for 2015/16, of which £21,700 will be taxable specific income for that year, with the remainder being unchargeable.

(While this example uses calendar days, 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. However, other methods, including calendar days, will be acceptable if they achieve a just and reasonable result.)

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