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HMRC internal manual

Employment Related Securities Manual

HM Revenue & Customs
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International from 6 April 2015: PAYE and NICs - from 6 April 2015: example 2

Martina is employed by a UK plc and is UK-resident but not ordinarily resident here in 2012/13 when, on 1 September 2012, she receives an award of restricted securities which are subject to a 3-year sale restriction and forfeiture if she leaves the employment within the same period, after which there are no remaining restrictions on the securities. On the lifting of the restrictions, £10,000 counts as employment income by virtue of ITEPA03/S426. (See ERSM162625 regarding residence before 6 April 2013.)

Martina’s job involves wholly UK duties except for one month every year which she spends working at the offices of the German subsidiary in Frankfurt. In 2013/14 she UK resident and meets the requirement of ITEPA03/S26A but for 2014/15 and 2015/16 she no longer meets that requirement. She claims the remittance basis for 2012/13 and 2013/14.

In accordance with ITEPA03/S41G(2), the relevant period for Chapter 5B is from 01/09/12 to 31/08/15. ITEPA03/S41H(6)(b) will apply to treat as chargeable foreign securities income one twelfth of the gain that is treated as accruing over that part of the relevant period during which Martina firstly is NOR and then subsequently meets the requirement of ITEPA03/S26A.

When the chargeable event under ITEPA03/S427 occurs (see ERSM30390), in accordance with ITEPA03/S700A, the employer may use its best estimate to operate PAYE only on the amount of employment income that is not foreign securities income.

As the securities are shares in a UK plc, they are UK assets and the related chargeable foreign securities income is treated as remitted to the UK in the year of the chargeable event (2015/16) and, while not subject to PAYE, is therefore taxable specific income for that year, to be included in Martina’s Self Assessment for the year. See ERSM162900.