Bill is UK-resident but not ordinarily resident in the UK when
an option is granted, on 1 June 2009, and is on the remittance
basis in 2009/10. The option vests on 31 May 2011 and is exercised
31 May 2012, producing specific employment income of £10,000.
The relevant period is from 1 June 2009 to 31 May 2011.
Bill has performed 25% of his duties in France every month
during the relevant period. He is still resident, and is treaty
resident, in the UK when he exercises his option.
So, ITEPA03/S41A(4) will produce the following result:
| Total securities income | 10,000 |
| The amount of the securities income relating to Bill’s duties performed outside the UK |
|
| Taxable specific income under S41(4) | 7,500 |
If none of the foreign securities income of £2,500 is
remitted to the UK, then it will not be subject to UK income tax.
Under the UK/France Double Taxation Treaty, France is
entitled to tax the French workday proportion of the gain –
this will be based on the workdays between grant and vest in
accordance with OECD guidelines.
| France taxes gain 120/480 x 10,000 | 2,500 |
Foreign Tax Credit Relief is available for the French tax on doubly taxed income. UK has not subjected to tax £2,500 in respect of French duties but will do so if the foreign securities income is remitted to the UK. In that case, Bill would be entitled to FTCR in respect of the French tax on the gain of £2,500.
