Nina is awarded nil cost securities options on 1 September 2008
which vest on 31 August 2013. She is R/NOR in 2008/09, 2009/10 and
2010/11.
Nina works wholly in the UK in the period from 1 September
to 5 April 2009 and then spends half of her workdays in 2009/10 in
the UK and half overseas. From 6 April 2010 to 31 August 2010, Nina
again works half in the UK and half overseas. On 31 August 2010,
Nina leaves her employment and returns home to India. She does not
lose her entitlement to exercise her securities option, but the
earliest time at which she may do this remains 31 August 2013.
On 1 September 2013, Nina exercises her option and acquires
her shares. The gain is £182,600.
Nina claims the remittance basis for her years of UK
residence, 2008/09, 2009/10 and 2010/11.
The relevant period in accordance with ITEPA03/S41B(5) runs
from 1 September 2008 to 31 August 2013. For part of that period,
ITA07/S809B applies to Nina.
ITEPA03/S41C(6) applies to her for 2008/09, 2009/10 and
2010/11. Also, within the relevant period, Nina is not resident in
the UK from 6 April 2011 to the end of the relevant period on 31
August 2013. In accordance with ITEPA03/S41C(7), 2011/12, 2012/13
and 2013/14 are treated as if ITA07/S809B applies.
In accordance with ITEPA03/S41C(2), the securities income is
treated as accruing evenly over the relevant period: that is
£100 per calendar day (five years including one leap year).
In the part of the relevant period that runs from 1
September 2008 to 5 April 2009, all of Nina’s duties are
performed in the UK, so, of the securities income treated as
accruing over that period (217 x £100 = £21,700), none is
foreign.
In 2009/10 half of Nina’s duties have been performed
in the UK, so of the securities income treated as accruing over
that period (365 x £100 = £36,500) half (£18,250) is
foreign.
For 2010/11, Nina is UK-resident and eligible for remittance
basis. In the year, half of Nina’s duties have been performed
outside the UK, so the statute at ITEPA03/S41C(5) would treat half
of the securities income treated as accruing over the year (365 x
£100 = £36,500 x ½ = 18,250) as foreign.
ESC A11 would treat the part of 2010/11 following
Nina’s return to India as a period of non-residence, but, as
there are no duties in that part of the year, this would not have
the effect of reducing Nina’s UK tax liability, since none of
the securities income treated as accruing over that period would be
foreign.
From 6 April 2011 until the end of the relevant period, Nina
performs no duties of the employment, so, of the securities income
treated as accruing over the remainder of the relevant period (879
x £100 = £87,900), none is foreign.
So, of the total securities income of £182,600,
£36,500 is foreign and £146,100 is charged as taxable
specific income in the UK in 2013/14.
This does not appear to be a fair result. Of the time from
the start of the relevant period up to the cessation of
Nina’s employment, her duties were split between UK and
foreign duties at around 64.8% to 35.2%. The just and reasonable
override would give effect to this and treat £64,275 as
foreign.
