ERSM70430 - Securities Acquired for less than Market Value

Residence: employee resident and ordinarily resident, but not domiciled in UK: multiple employments

An option may be granted in respect of an overseas employment, the earnings from which are "overseas earnings" as defined in ITEPA03/S23 (2). There may also be an associated employment performed in the UK. Where this is genuinely the case, we will accept that any gain on the exercise of an option granted in respect of the overseas employment is outside the Chapter 3C charge, unless the gain is remitted to the UK.

This does not apply where ITEPA03/S24 imposes a limit on the amount of chargeable overseas earnings in the tax year when the option is granted. Where there is an associated UK employment, section 24 limits the amount of earnings from the overseas employment chargeable on remittance under ITEPA03/S22 by way of an equitable apportionment to counteract any imbalance of remuneration in favour of the overseas contract intended to take advantage of the remittance basis. (See EIM40103).

The effect of a section 24 adjustment is that some of the earnings from the overseas employment will be taxed under ITEPA03/S21. This removes the protection from a Chapter 5 charge provided by section 474(1). As a result, where there is income from the employment which constitutes general earnings under section 21 in the year that the options are granted, then Chapter 5 applies to impose a charge on exercise of the option (or any other chargeable event).