ERSM161120 - Remittance: Examples of ‘brought to, or received or used in, the United Kingdom’

1. Where foreign employment-related shares are sold by the employee and the cash paid into the employee’s UK bank account, that cash derives from the shares and has been ‘brought to the United Kingdom by and for the benefit of the employee’ – a relevant person (as defined by ITA07/S809M).
   
   
2. Where the employee acquires shares in a UK company, the shares are UK assets and therefore they are ‘used in the United Kingdom by and for the benefit of the employee’.
   
   

And those shares, share options etc, or any cash derived from them, must either be the foreign securities income, or must derive (wholly or in part, directly or indirectly) from the foreign securities income.

For employment-related securities, 41A helps to determine whether or not money or property is derived from the foreign securities income.

ITEPA03/S41A says:

(8) For the purposes of sections 809L to 809R of ITA 2007 (meaning of “remitted to the United Kingdom” etc) treat the relevant securities or securities option as deriving from the foreign securities income.

(9) But where—

(a) the chargeable event is the disposal of the relevant securities or the assignment or release of the relevant securities option, and

(b) the individual receives consideration for the disposal, assignment or release of an amount equal to or exceeding the market value of the relevant securities or securities option,

for the purposes of those sections treat the consideration (and not the relevant securities or securities option) as deriving from the foreign securities income.’.

(10) “the relevant securities” or “the relevant securities option” means the employment- related securities or employment-related securities option by virtue of which the amount mentioned in subsection 1(a) counts as employment income.

These three subsections combined provide that, where an amount counts as employment income by virtue of Chapters 2, 3, 3C – 5 of Part 7 ITEPA 2003 (except section 446UA), then

• the employment-related securities, or employment-related securities option, by virtue of which that amount counts as employment income, are to be treated as deriving from any foreign securities income which arises under ITEPA03/S41C, unless
• the chargeable event giving rise to the foreign securities income is the disposal of the securities, or the assignment or release of the option, and the individual receives consideration for that disposal, assignment or release of an amount equal to or exceeding the market value of the securities or option. In which case, the consideration is treated as derived from the foreign securities income. The securities/option are not treated as derived from the securities income.

The reason for this is to create a statutory link between the property (shares/option etc) and the foreign securities income determined by virtue of that property, where that property is still in the hands of the employee. However, where the property is no longer in the hands of the employee as a result of a disposal, assignment or release at arm’s length (ie consideration of market value or more), then the foreign securities income is not linked to the property itself, only to the consideration.