Fred is awarded free forfeitable shares on 1 September 2008.
ITEPA03/S425 provides that there is no income tax liability at the
time of the award as the shares cease to be forfeitable within 5
years of acquisition.
The forfeiture condition lifts on 30 September 2008 when the
shares are worth £50,000, so £50,000 counts as employment
income under ITEPA03/S426.
However, Fred is not ordinarily resident in the UK
throughout this period and has made a claim under ITA07/S809B for
the remittance basis to apply. His duties for the period from 1
September to 30 September were performed entirely outside the UK.
Under ITEPA03/S41B(2), the ‘relevant period’ for
forfeitable shares begins with the day of the acquisition and ends
with the day of the chargeable event. Therefore the relevant period
is 1 September to 30 September 2008. As Fred’s duties were
entirely foreign during the period, all of the securities income is
foreign and will only be taxed in the UK if it is remitted here.
On examination of the facts, it is clear that the shares
were awarded to Fred in recognition of his duties over the twelve
months prior to 1 September 2008. In that period, all of
Fred’s duties were performed in the UK. The just and
reasonable override would take effect to treat none of the
£50,000 securities income as foreign.
The whole £50,000 would therefore be taxable specific
income for 2008/09 under ITEPA03/S41A(4).
