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HMRC internal manual

Employment Related Securities Manual

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HM Revenue & Customs
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Employment-related securities and options: exclusions: residence and split year treatment (up to 5 April 2015)

From 6 April 2015 the residence exclusions in Part 7 of ITEPA03 have been removed. See ERSM160000 and in particular ERSM162000.

Therefore the rest of this page relates to the period up to 5 April 2015.

For a general discussion of split year treatment, Extra Statutory Concession A11 and its replacement by legislation in Schedule 45 of Finance Act 2013, see HMRC’s Guidance Note on the Statutory Residence Test -RDR3 (website).

Finance Act 2013 gave legislative effect to Extra-Statutory Concession A11, so that, where an individual qualifies for split-year treatment by falling within one of the Cases in Part 3 of Schedule 45, in the overseas part of that tax year, he or she is taxed as if a non-resident.

For years up to 5 April 2013, ESC A11 is applied for the purposes of the Part 7 residence rules in ITEPA03/S421E and ITEPA03/S474(1), except that ITEPA03/S421E(2) should be read in relation to the whole of the final year of residence in the UK without regard to ESC A11.

This means that, if employment-related securities are acquired in the non-resident part of a year of departure, Chapters 3A to 3D will still apply if there are general earnings subject to a UK income tax charge in any part of the year.

ITEPA03/S421E and ITEPA03/S474 were amended by FA2013 to replicate the application of ESC A11 to Part 7.

If an acquisition of employment-related securities (or employment-related securities options) occurs in the UK part of a split year, the Part 7 residence rules apply in the same way as they do in a year that is not split.

If an acquisition of employment-related securities (or employment-related securities options) occurs in the overseas part of a split year, then Chapters 2, 3, 4 and 5 do not apply to them.

However, as with ESC A11, ITEPA03/S421E(2A) ensures that, in the overseas part of a year of departure, Chapters 3A to 3D do apply if there are general earnings subject to a UK income tax charge in any part of the year.

See ERSM20360 for the interaction of split year treatment with the rules for former and prospective employments.