The following Employment Tax guidance note Produced by Tolley in association with Caroline Harwood of Burges Salmon LLP provides comprehensive and up to date tax information covering:
IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant tax changes associated with Brexit began to take effect. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit ― personal and employment tax implications guidance note.
Where a UK resident employee acquires or is granted the right to acquire employment-related securities (ERS), he is subject to certain UK tax and regulatory requirements which apply no matter where the issuer of those ERS or his employer is located.
For tax, the basic principle is that the employee is charged to income tax on the value he receives. The situation becomes more complex where that employee is internationally mobile and the relevant rules are outlined below.
Where an event occurs in connection with the acquisition, holding or disposal of ERS, and is chargeable to UK income tax, there is a requirement to report details to HMRC. HMRC can require any ‘responsible person’ (as defined in ITEPA 2003, s 421L(3)) to report. Broadly a responsible person may be the employer, the host employer, or the issuer of the securities (special provisions apply to continental shelf workers). In practice, typically the employer or issuer of the securities (eg the holding company of a group) will make the report. For details of the new online ERS reporting requirements, see the Annual returns guidance note.
Chargeable events in relation to ERS may also give rise to a liability to National Insurance contributions (NIC). Although the NIC rules are quite different to the income tax rules (see the ‘National Insurance’ section below), both kinds of liability should always be considered.
The income tax treatment of shares and similar securities acquired by reason of employment (ERS) where the employee in question is not UK resident
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