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Section 49

SCHEDULE 7 Employment-related securities etc

Part 1 Internationally mobile employees

5ITEPA 2003

1 ITEPA 2003 is amended as follows.

2 Part 2 (employment income: charge to tax) is amended as follows.

3 In section 6 (nature of charge to tax on employment income), in subsection
(3A), for “Chapter 5A” substitute “Chapter 5B”.

4 10In section 10 (meaning of “taxable earnings” and “taxable specific income”),
in subsection (4), for the words from “Chapter 5A” to the end substitute
“Chapter 5B (taxable specific income from employment-related securities
etc: internationally mobile employees)”.

5 For Chapter 5A (taxable specific income: effect of remittance basis)
15substitute—

CHAPTER 5B Taxable specific income from employment-related securities etc:
internationally mobile employees
41F Taxable specific income: internationally mobile employees etc

(1) This section applies if—

(a) 20an amount counts under Chapters 2 to 5 of Part 7
(employment-related securities etc) as employment income
of an individual for a tax year (“the securities income”) in
respect of an employment (“the relevant employment”), and

(b) one or more of the international mobility conditions is met in
25relation to the individual (see subsection (2)).

(2) The “international mobility conditions” are—

(a) that any part of the relevant period (see section 41G) is within
a tax year for which section 809B, 809D or 809E of ITA 2007
(remittance basis) applies to the individual;

(b) 30that any part of the relevant period is within a tax year for
which the individual is not UK resident;

(c) that any part of the relevant period is within the overseas part
of a tax year that is a split year with respect to the individual.

(3) An amount equal to—


35

SI − FSI

is an amount of “taxable specific income” from the relevant
employment for the tax year mentioned in subsection (1)(a).

(4) In subsection (3)

(a) SI is the amount of the securities income, and

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(b) FSI is the amount of the securities income that is “foreign”.

(5) The amount of the securities income that is “foreign” is the sum of
any chargeable foreign securities income and any unchargeable
foreign securities income (see sections 41H to 41L).

(6) 5The full amount of any chargeable foreign securities income which is
remitted to the United Kingdom in a tax year is an amount of
“taxable specific income” from the relevant employment for that
year.

(7) Subsection (6) applies whether or not the relevant employment is
10held when the chargeable foreign securities income is remitted.

(8) For the purposes of Chapter A1 of Part 14 of ITA 2007 (remittance
basis), treat the relevant securities or relevant securities option as
deriving from the chargeable foreign securities income.

(9) But where—

(a) 15the 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
20market value of the relevant securities or relevant securities
option,

for the purposes of that Chapter treat the consideration (and not the
relevant securities or relevant securities option) as deriving from the
chargeable foreign securities income.

(10) 25See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted
to the United Kingdom”.

(11) In this section and section 41G—

41G 35Section 41F: the relevant period

(1) “The relevant period” is to be determined as follows.

(2) In the case of an amount that counts as employment income by virtue
of Chapter 2 of Part 7 (restricted securities) (other than where
subsection (4) applies) or Chapter 3 of that Part (convertible
40securities), the relevant period—

(a) begins with the day of the acquisition, and

(b) ends with the day of the chargeable event.

(3) In the case of an amount that counts as employment income by virtue
of section 446B (securities with artificially depressed market value:
45charge on acquisition), the relevant period is the tax year in which
the acquisition occurs.

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(4) In a case within subsection (1)(aa) or (b) of section 446E (securities
with artificially depressed market value: charge on restricted
securities) where an amount counts as employment income by virtue
of that section, the relevant period—

(a) 5begins at the beginning of the tax year in which the
chargeable event is treated as occurring, and

(b) ends with the day on which the chargeable event is treated as
occurring.

(5) In the case of an amount that counts as employment income by virtue
10of section 446L (securities with artificially enhanced market value),
the relevant period—

(a) begins at the beginning of the tax year in which the valuation
date (within the meaning of that section) falls, and

(b) ends with the valuation date.

(6) 15In the case of an amount that counts as employment income by virtue
of section 446U (securities acquired for less than market value:
discharge of notional loan) or 446UA (avoidance cases in respect of
such securities)—

(a) if the relevant securities were acquired by virtue of the
20exercise of a securities option (“the option”), the relevant
period—

(i) begins with the day of the acquisition of the option,
and

(ii) ends with the day the option vests, and

(b) 25otherwise, the relevant period is—

(i) the tax year in which the notional loan (within the
meaning of Chapter 3C of Part 7) is treated as made,
or

(ii) if the chargeable event occurs in that year, the period
30beginning at the beginning of that year and ending
with the day of that event.

(7) In the case of an amount that counts as employment income by virtue
of—

(a) Chapter 3D of Part 7 (securities disposed of for more than
35market value), or

(b) Chapter 4 of that Part (post-acquisition benefits from
securities),

the relevant period is the tax year in which the chargeable event
occurs.

(8) 40In the case of an amount that counts as employment income by virtue
of Chapter 5 of Part 7 (employment-related securities options), the
relevant period—

(a) begins with the day of the acquisition, and

(b) ends with the day of the chargeable event or, if earlier, the
45day the relevant securities option vests.

(9) If the relevant period determined in accordance with subsections (2)
to (8) would not, in all the circumstances, be just and reasonable, the
relevant period is to be such period as is just and reasonable.

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(10) In this section “the acquisition” has the same meaning as in Chapters
2 to 4 or Chapter 5 of Part 7 (see section 421B or 471).

(11) For the purposes of this section an option “vests”—

(a) when it becomes exercisable, or

(b) 5if earlier, when it becomes exercisable subject only to a period
of time expiring.

(12) See section 41F(11) for the definitions of “the chargeable event”, “the
relevant securities” and “the relevant securities option”.

41H Section 41F: chargeable and unchargeable foreign securities income

(1) 10The extent to which the securities income is “chargeable foreign
securities income” or “unchargeable foreign securities income” is to
be determined as follows.

(2) Treat an equal amount of the securities income as accruing on each
day of the relevant period.

(3) 15If any part of the relevant period is within a tax year to which
subsection (4) applies, the securities income treated as accruing in
that part of the relevant period is “chargeable foreign securities
income”.

This is subject to subsection (9) and section 41I (limit where duties of
20associated employment performed in UK).

This is subject to subsection (9) and section 41I (limit where duties of
associated employment performed in UK).

(4) This subsection applies to a tax year if—

(a) section 809B, 809D or 809E of ITA 2007 applies to the
25individual for the year,

(b) the individual does not meet the requirement of section 26A
for the year (reading references there to the employee as
references to the individual),

(c) the relevant employment is with a foreign employer, and

(d) 30the duties of the relevant employment are performed wholly
outside the United Kingdom in the year.

(5) But subsection (4) does not apply to a tax year if section 24A applies
in relation to the relevant employment for the tax year.

(6) If any part of the relevant period is within a tax year to which
35subsection (7) applies—

(a) if the duties of the relevant employment are performed
wholly outside the United Kingdom, the securities income
treated as accruing in that part of the relevant period is
“chargeable foreign securities income”, and

(b) 40if some, but not all, of those duties are performed outside the
United Kingdom—

(i) the securities income mentioned in paragraph (a) is to
be apportioned (on a just and reasonable basis)
between duties performed in the United Kingdom
45and duties performed outside the United Kingdom,
and

(ii) the income apportioned in respect of duties
performed outside the United Kingdom is
“chargeable foreign securities income”.

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This is subject to subsection (9).

(7) This subsection applies to a tax year if—

(a) section 809B, 809D or 809E of ITA 2007 applies to the
individual for the year,

(b) 5the individual meets the requirement of section 26A for the
year (reading references there to the employee as references
to the individual), and

(c) some or all of the duties of the relevant employment are
performed outside the United Kingdom in the year.

(8) 10If any part of the relevant period is within a tax year for which the
individual is not UK resident—

(a) if the duties of the relevant employment are performed
wholly outside the United Kingdom in that year, the
securities income treated as accruing in that part of the
15relevant period is “unchargeable foreign securities income”,
or

(b) if some, but not all, of those duties are performed outside the
United Kingdom in that year—

(i) the securities income mentioned in paragraph (a) is to
20be apportioned (on a just and reasonable basis)
between duties performed in the United Kingdom
and duties performed outside the United Kingdom,
and

(ii) the income apportioned in respect of duties
25performed outside the United Kingdom is
“unchargeable foreign securities income”.

(9) If any part of the relevant period is within the overseas part of a tax
year that is a split year with respect to the individual—

(a) if the duties of the relevant employment are performed
30wholly outside the United Kingdom in that overseas part, the
securities income treated as accruing in that part of the
relevant period is “unchargeable foreign securities income”,
or

(b) if some, but not all, of those duties are performed outside the
35United Kingdom in that overseas part—

(i) the securities income mentioned in paragraph (a) is to
be apportioned (on a just and reasonable basis)
between duties performed in the United Kingdom
and duties performed outside the United Kingdom,
40and

(ii) the income apportioned in respect of duties
performed outside the United Kingdom is
“unchargeable foreign securities income”.

(10) If subsection (4) does not apply to a tax year by virtue of subsection
45(5), it is to be assumed for the purposes of section 41L that it is just
and reasonable for none of the securities income treated as accruing
in the tax year to be “chargeable foreign securities income”.

(11) See section 41J for further provision about the location of
employment duties.

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(12) This section is subject to—

(a) section 41K (securities income from overseas Crown
employment), and

(b) section 41L (chargeable and unchargeable foreign securities
5income: just and reasonable apportionment).

41I Limit on “chargeable foreign securities income” where duties of
associated employment performed in UK

(1) This section imposes a limit on the extent to which section 41H(3)
applies in relation to a period when—

(a) 10the individual holds associated employments as well as the
relevant employment, and

(b) the duties of the associated employments are not performed
wholly outside the United Kingdom.

(2) The amount of the securities income for the period that is to be
15regarded as “chargeable foreign securities income” is limited to such
amount as is just and reasonable, having regard to—

(a) the employment income for the period from all the
employments mentioned in subsection (1)(a),

(b) the proportion of that income that is general earnings to
20which section 22 applies (chargeable overseas earnings),

(c) the nature of, and time devoted to, the duties performed
outside the United Kingdom, and those performed in the
United Kingdom, in the period, and

(d) all other relevant circumstances.

(3) 25In this section “associated employments” means employments with
the same employer or with associated employers.

(4) Section 24(5) and (6) (meaning of “associated employer”) applies for
the purposes of this section.

41J Location of employment duties

(1) 30The following provisions apply for the purposes of this Chapter—

(a) section 39(1) and (2), and

(b) section 40 (but as if in subsections (3) and (4) of that section
references to section 24(1)(b) were to section 41I(1)(b)).

(2) Duties of an employment performed in the UK sector of the
35continental shelf in connection with exploration or exploitation
activities are to be treated for the purposes of this Chapter as being
performed in the United Kingdom.

(3) In subsection (2) “the UK sector of the continental shelf” and
“exploration or exploitation activities” have the same meaning as in
40section 41 (treatment of general earnings from employment in the
UK sector of the continental shelf).

41K Securities income from overseas Crown employment

(1) If securities income is from overseas Crown employment subject to
United Kingdom tax, it is (notwithstanding any other provision of
45this Chapter) not “foreign”.

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(2) “Securities income from overseas Crown employment” means
securities income from Crown employment (within the meaning
given by section 28(2)) in respect of duties performed outside the
United Kingdom.

(3) 5Such securities income is to be taken as being “subject to United
Kingdom tax” unless, by virtue of subsection (4), it falls within an
exception contained in an order under section 28(5).

(4) Subject to any provision made in an order under section 28(5) for the
purposes of this section, provisions made in an order under that
10section for the purposes of excepting general earnings from overseas
Crown employment from the operation of section 27(2) also have
effect for the purposes of excepting securities income from such
employment from the operation of subsection (1).

(5) For the purposes of this section, if securities income is partly from
15overseas Crown employment subject to United Kingdom tax, a just
and reasonable proportion of the securities income is to be taken to
be from such employment.

41L Chargeable and unchargeable foreign securities income: just and
reasonable apportionment

(1) 20This section applies if the proportion of the securities income that
would otherwise be regarded as “chargeable foreign securities
income” or “unchargeable foreign securities income” is not, having
regard to all the circumstances, just and reasonable.

(2) The amounts of the securities income that are “chargeable foreign
25securities income” and “unchargeable foreign securities income” are
such amounts as are just and reasonable (rather than the amounts
calculated in accordance with section 41H).

6 Part 7 (employment income: income and exemptions relating to securities)
is amended as follows.

7 30In section 418 (other related provisions), before subsection (1) insert—

(A1) This Part needs to be read with Chapter 5B of Part 2 (taxable specific
income from employment-related securities etc: internationally
mobile employees).

8 Omit section 421E (employment-related securities: exclusions, residence
35etc).

9 In section 425 (no charge in respect of acquisition in certain cases), after
subsection (5) insert—

(6) No election may be made under subsection (3) unless, at the time of
the acquisition, the earnings from the employment are (or would be
40if there were any) general earnings to which any of the charging
provisions of Chapters 4 and 5 of Part 2 applies.

10 In section 430 (election for outstanding restrictions to be ignored), after
subsection (3) insert—

(4) No election may be made under this section unless, at the time of the
45chargeable event, the earnings from the employment are (or would

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be if there were any) general earnings to which any of the charging
provisions of Chapters 4 and 5 of Part 2 applies.

11 In section 431 (election for full or partial disapplication of Chapter 2 of Part
7 of ITEPA 2003), after subsection (5) insert—

(6) 5No election may be made under this section unless, at the time of the
acquisition, the earnings from the employment are (or would be if
there were any) general earnings to which any of the charging
provisions of Chapters 4 and 5 of Part 2 applies.

12 Omit section 474 (cases where Chapter 5 of Part 7 of ITEPA 2003
10(employment-related securities options) does not apply).

13 (1) Section 540 (no charge on acquisition of shares as taxable benefit) is
amended as follows.

(2) In subsection (1), omit “In its application in relation to a UK resident
employee,”.

(3) 15Omit subsection (2).

14 Part 7A (employment income provided through third parties) is amended as
follows.

15 In section 554L (exclusions: earmarking for employee share schemes (3)), in
subsection (10)(c)(i), for “section 474” substitute “Chapter 5B of Part 2”.

16 (1) 20Section 554M (exclusions: earmarking for employee share schemes (4)) is
amended as follows.

(2) In subsection (9)(b)(i), for “section 474” substitute “Chapter 5B of Part 2”.

(3) In subsection (10)(b)(i), for “section 474” substitute “Chapter 5B of Part 2”.

17 (1) Section 554N (exclusions: other cases involving employment-related
25securities etc) is amended as follows.

(2) In subsection (1)(b), omit “, or would apply apart from section 421E(1),”.

(3) In subsection (2)(b), omit “, or would apply apart from section 474(1),”.

(4) In subsection (6)—

(a) omit “421E(1),”, and

(b) 30omit “, 474(1)”.

(5) In subsection (10)—

(a) in paragraph (b), omit “, but ignoring section 474(1)”, and

(b) in paragraph (c), omit “or would be a chargeable event apart from
section 474(1)”.

(6) 35In subsection (13)(c)(i), for “section 474” substitute “Chapter 5B of Part 2”.

18 In Chapter 4 of Part 11 (PAYE: special types of income), in section 700A
(employment-related securities etc: remittance basis), in subsection (3), for
“41A” substitute “41F”.

Consequential amendments to other Acts

19 40TCGA 1992 is amended as follows.

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20 In section 119A (increase in expenditure by reference to tax charged in
relation to employment-related securities), in subsection (5A), for
“unremitted foreign securities income” substitute “unchargeable, and
unremitted chargeable, foreign securities income”.

21 (1) 5Section 119B (section 119A: unremitted foreign securities income) is
amended as follows.

(2) In the heading, for “unremitted foreign securities income” substitute
“unchargeable, and unremitted chargeable, foreign securities income”.

(3) In subsection (1), for the words from “unremitted” to the end substitute

(a) 10unchargeable foreign securities income, or

(b) unremitted chargeable foreign securities income.

(4) After subsection (1) insert—

(1A) In this section “unchargeable foreign securities income” means
unchargeable foreign securities income for the purposes of section
1541F of ITEPA 2003 (taxable specific income: internationally mobile
employees etc) (see sections 41H to 41L of that Act).

(5) In subsection (2)—

(a) after “unremitted” insert “chargeable”, and

(b) for paragraph (a) substitute—

(a) 20is chargeable foreign securities income for the
purposes of section 41F of ITEPA 2003, and.

(6) In subsection (3), after “unremitted” insert “chargeable”.

22 In section 144ZB (exception to rule in section 144ZA), in subsection (2)(a),
omit “or would, apart from section 474 of that Act, apply”.

23 25In section 149A (employment-related securities options), in subsection
(1)(b), omit “or would, apart from section 474 of that Act, apply”.

24 In section 288 (interpretation), in subsection (1A), omit “or would, apart
from section 474 of that Act, apply”.

25 In section 809K of ITA 2007 (remittance of income and gains: introduction),
30in subsection (1), for paragraph (c) substitute—

(c) Chapter 5B of Part 2 of that Act (taxable specific income from
employment-related securities etc: internationally mobile
employees),.

26 CTA 2009 is amended as follows.

27 35In section 1017 (condition relating to employee’s income tax position for CT
relief following acquisition of shares pursuant to option), omit subsections
(2) to (4).

28 In section 1025 (additional CT relief available if shares are restricted shares),
omit subsections (3) to (5).

29 40In section 1032 (meaning of “chargeable event” for the purposes of
additional CT relief in cases involving convertible securities), omit
subsections (3) to (5).

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Part 2 Restricted securities and securities acquired for less than market value:
replacement and additional securities and rollover relief etc

30 ITEPA 2003 is amended as follows.

31 (1) 5In Chapter 1 of Part 7 (income and exemptions relating to securities:
general), section 421D (replacement and additional securities and changes in
interests) is amended as follows.

(2) In subsection (3), insert at the end “and for the purposes of Chapter 3C as a
payment made for their acquisition at or before the time of the acquisition”.

(3) 10In subsection (4), insert at the end “or a payment was made for their
acquisition at or before the time of the acquisition”.

32 In Chapter 2 of Part 7 (restricted securities), before section 431 (election for
full or partial disapplication of Chapter 2) but after the heading before that
section (supplementary) insert—

430A 15 Application of this Chapter where securities exchanged for further
securities

(1) This section applies if—

(a) an associated person disposes of the employment-related
securities (the “old securities”) for consideration, otherwise
20than to another associated person,

(b) the whole or part of the consideration consists of, or includes,
other securities which are restricted securities (the “new
securities”) being acquired by an associated person,

(c) the value of the consideration determined in accordance with
25subsection (2) is no more than what would have been the
market value of the old securities immediately before the
disposal but for any restrictions, and

(d) the avoidance of tax or national insurance contributions is not
the main purpose (or one of the main purposes) of the
30disposal.

(2) The value of the consideration is the sum of—

(a) what would have been the market value of the new securities
immediately before the disposal but for any restrictions, and

(b) the value of the rest of the consideration (if any).

(3) 35If the consideration consists partly of the new securities and partly of
other consideration, the disposal is to be treated for the purposes of
this Chapter as being two separate disposals as follows—

(a) a disposal, that is a chargeable event within section 427(3)(c),
of the appropriate amount of the old securities (see
40subsection (4)) for such of the consideration as does not
consist of the new securities, and

(b) a disposal, to which this section applies, of the remaining old
securities for consideration consisting wholly of the new
securities.

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