In a Chapter 3C case not involving a securities option, the
relevant period is the tax year in which the notional loan (within
the meaning of Chapter 3C) is treated as made or, if the notional
loan is discharged in the same year, such that the amount
discharged counts as employment income by virtue of
ITEPA03/S446U(2) (see
ERSM70140), then the relevant period
starts with the beginning of the year and ends on the day of the
discharge.
In general, this means that the relevant period will be the
tax year in which the securities are acquired or, if shorter, the
period from 6 April preceding (or simultaneous with) the
acquisition of the securities to the date of their disposal or of
release of the outstanding liability to pay for them.
Stephen is awarded shares worth £1 each, but is only
required to pay 10p per share initially. He is R/NOR in the year of
award (year 1) and claims the remittance basis under ITA07/S809B in
that year. At the end of the year he leaves the UK and has no
further connection with the UK from that point. 2 years later (year
3) he sells the shares with the 90p call on each share still
outstanding.
The relevant period is year 1, i.e. the tax year in which
Stephen acquired the partly-paid shares. This is so even though the
charge under section 446U on the deemed discharge of the notional
loan arises in year 3.
The reason for this approach is that the amount of the
future section 446U charge is fixed at the time of acquisition,
even though the charge itself may not arise until much later. The
section 446U income is therefore most closely related to the year
of the acquisition.
There may be circumstances in which the employment income that arises from the discharge of a notional loan under Chapter 3C could be said to be earned over a different period. For example, an employer might decide to release an employee from a genuine, deferred obligation to pay for shares because of exceptional performance in a particular year. In such circumstances, as long as the remittance basis applied for the year of acquisition, a just and reasonable override could be used to establish the fair amount of foreign securities income, given that the income might reasonably be regarded as having been earned in the year of the exceptional performance rather than the year in which the employee originally acquired the shares on deferred purchase terms. See ERSM160900 for the operation of the just and reasonable override.
