Employment related securities and the remittance basis

By Tolley in association with Karen Speight
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The following Employment Tax guidance note by Tolley in association with Karen Speight provides comprehensive and up to date tax information covering:

  • Employment related securities and the remittance basis
  • Introduction
  • UK tax liability in connection with employment related securities
  • Remitting chargeable foreign securities income to the UK
  • Simplified rules for special mixed funds
  • PAYE implications
  • NIC implications
  • Impact on capital gains
  • Some practical points to consider

Introduction

The current rules relating to the UK tax treatment of employment related securities where internationally mobile employees are involved came into force on 5 April 2015. Previously, tax liability had depended on where the employee was situated when the option / shares were awarded. Under the current rules, tax liability is calculated by reference to where the employee is resident and working during the vesting period. This effectively aligns UK tax treatment with international practice as well as equalising the position for UK employees and internationally mobile employees working in the UK.

This guidance note looks at how the rules on taxation of employment related securities, the remittance basis and using mixed funds all interact.

UK tax liability in connection with employment related securities

The Employment-related securities ― overview guidance note sets out details on what constitutes employment related securities and the circumstances in which a tax charge may arise in connection with them.

Where there is a chargeable event, the starting point in ascertaining liability is straightforward ― an individual will be subject to UK tax unless and to the extent that ITEPA 2003, Part 2, Chapter 5B applies.

ITEPA 2003, ss 41F–41L

Chapter 5B applies if any part of the relevant period:

  • falls within a tax year when the employee is subject to the remittance basis
  • is in a tax year for which the individual is not UK resident for tax purposes, or
  • is within the overseas part of a tax year that is split between UK and non-UK residency

In other words, if for part of the relevant period, the employee is non-resident or is resident but the remittance basis applies, then Chapter 5B applies. In these circumstances, any ‘foreign

More on Non-UK Share schemes: