ERSM165238 | International from 6 April 2025: ascertaining chargeable and unchargeable foreign securities income - from 6 April 2025: Examples: Example 3 – Grant before 6 April 25 and employee met s41H(4)

In 2023/24 John is UK-resident and claims the remittance basis for all available years, but does not meet the requirement of s26A ITEPA. On 6 April 2023 he begins work for an employer in California whilst remaining resident in the UK for tax purposes. From that date he works solely in California and performs no duties in the UK. He is awarded a long-term share incentive plan on 6 April 2023 which vests on 5 April 2028, realising a gain of £1,000. Upon vesting, a proportion of the gain will be liable to tax. s41H(2) ITEPA treats an equal amount of the Securities Income as being earned over each day of the relevant period.

The relevant period (6/4/23 to 5/4/28) falls wholly within the 2023/24, 24/25, 25/26, 26/27 & 27/28 tax years. For the first 2 years being 23/24 & 24/25, these are years in which John is UK resident and is claiming the remittance basis, but does not meet the requirement of s26A ITEPA.

The 23/24 & 24/25 tax years are years in which the old s41H legislation applies and as John meets the requirement of s41H(4) ITEPA, any income treated as accruing during this part of the relevant period is Foreign Securities Income (FSI). For the remaining years, being 25/26, 26/27 & 27/28, the remittance basis no longer applies so John cannot meet the requirements of s41H(4) ITEPA. So, any income treated as accruing during this part of the relevant period is not deducted as FSI.

As a result, the whole of the Securities Income which vests on 5 April 2028 is treated as Securities Income (SI), being £1,000.

FSI includes the sum of FSI in any period before 6 April 2025, being the 23/24 & 24/25 years, and will not be subject to UK tax and is instead deducted in the SI-FSI calculation in s41F(3). Here FSI is £400 (being £200 in 23/24 & 24/25). Therefore, the amount of Taxable Specific Income for 27/28 is £600 (£1,000 - £400).

As John does not meet the eligibility requirements for OWR from 6 April 2025, he cannot claim relief under Chapter 5C ITEPA.

Any chargeable FSI treated as accruing before 6 April 2025 that is later remitted to the UK will still be taxable in the UK and may be subject to Temporary Repatriation Facility (TRF) in the 25/26, 26/27 & 27/28 tax years tax years. Please see RDRM71000 onwards.