41A Taxable specific income from employment-related securities: effect of remittance basis
(1) This section applies if—
(a) an amount within subsection (2) counts as employment income of an individual for a tax year in respect of an employment (“the securities income”), and
(b) any part of the relevant period (see section 41B) is within a tax year for which section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual.
(2) An amount is within this subsection if it counts as employment income under any provision of any of Chapters 2, 3 and 3C to 5 of Part 7 (employment-related securities etc) except section 446UA.
(3) The reference in subsection (2) to an amount that counts as employment income under any of the provisions mentioned there does not include an amount which counts as employment income by virtue of any provision of Chapter 3A or 3B of Part 7.
(4) An amount equal to—
SI-FSI
is an amount of “taxable specific income” from the employment for the tax year mentioned in subsection (1)(a).
(5) In subsection (4)—
(a) SI is the amount of the securities income, and
(b) FSI is the amount of the securities income that is “foreign” (see sections 41C to 41E).
(6) The full amount of any of the foreign securities income which is remitted to the United Kingdom in a tax year is an amount of “taxable specific income” from the employment for that year.
(7) Subsection (6) applies whether or not the employment is held when the 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 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 that Chapter treat the consideration (and not the relevant securities or securities option) as deriving from the foreign securities income.
(10) In this section and section 41B—
“the chargeable event” means the event giving rise to the securities income, and
“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.
(11) See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc.
(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 (restricted securities) or Chapter 3 (convertible securities), 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 446U (securities acquired for less than market value: discharge of notional loan)—
(a) if the relevant securities were acquired by virtue of the exercise 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) otherwise, the relevant period is—
(i) the tax year in which the notional loan (within the meaning of Chapter 3C) is treated as made, or
(ii) if the chargeable event occurs in that year, the period beginning at the beginning of that year and ending with the day of that event.
(4) In the case of an amount that counts as employment income by virtue of—
(a) Chapter 3D (securities disposed of for more than market value), or
(b) Chapter 4 (post-acquisition benefits from securities),
the relevant period is the tax year in which the chargeable event occurs.
(5) In the case of an amount that counts as employment income by virtue of Chapter 5 (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 day the relevant securities option vests.
(6) In this section “the acquisition” has the same meaning as in Chapters 2 to 4 or Chapter 5 (see section 421B or 471).
(7) For the purposes of this section an option “vests” when it is first capable of being exercised.
(8) References in this section to a Chapter are to a Chapter of Part 7.
(1) The extent to which the securities income is “foreign” 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) If 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 “foreign”.
This is subject to section 41D (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 individual 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 employment is with a foreign employer, and
(d) the duties of the employment are performed wholly outside the United Kingdom.
(4A) But subsection (4) does not apply to a tax year if section 24A applies in relation to the employment for the tax year.
(5) If any part of the relevant period is within a tax year to which subsection (6) applies—
(a) if the duties of the employment are performed wholly outside the United Kingdom, the securities income treated as accruing in that part of the relevant period is “foreign”, and
(b) if 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 and duties performed outside the United Kingdom, and
(ii) the income apportioned in respect of duties performed outside the United Kingdom is “foreign”.
(6) 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) the 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 employment are performed outside the United Kingdom.
(7) If the individual is not resident in the United Kingdom in a tax year, for the purposes of this section treat section 809B of ITA 2007 as applying to the individual for that year.
(8) This section is subject to section 41E (foreign securities income: just and reasonable apportionment).
(9) If subsection (4) does not apply to a tax year by virtue of subsection (4A), it is to be assumed for the purposes of section 41E that it is just and reasonable for none of the securities income treated as accruing in the tax year to be “foreign”.
41D Limit on foreign securities income where duties of associated employment performed in UK
(1) This section imposes a limit on the extent to which section 41C(3) applies in relation to a period when—
(a) the individual holds associated employments as well as the employment in relation to which section 41C(4) applies, 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 regarded as “foreign” 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 which 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) In this section “associated employments” means employments with the same employer or with associated employers.
(4) Section 24(5) and (6) (meaning of “associated employer”) apply for the purposes of this section.
41E Foreign securities income: just and reasonable apportionment
(1) This section applies if the proportion of the securities income that would otherwise be regarded as “foreign” is not, having regard to all the circumstances, one that is just and reasonable.
(2) The amount of the securities income that is “foreign” is such amount as is just and reasonable (rather than the amount calculated in accordance with section 41C).
41F Taxable specific income: internationally mobile employees etc
(1) This section applies if—
(a) an 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 relation 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) applied to the individual;
(b) that 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—
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
(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) The 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 held 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) 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 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) See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom”.
(11) In this section and section 41G—
“the chargeable event” means the event giving rise to the securities income, and
“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.
(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 securities), 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: charge on acquisition), the relevant period is the tax year in which the acquisition occurs.
(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) begins 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 of 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) In 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 exercise 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) otherwise, 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 beginning 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 market 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) In 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 day 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.
(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) if 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) The 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) If 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 associated employment performed in UK).
(4) This subsection applies to a tax year if—
(a) section 809B, 809D or 809E of ITA 2007 applied to the individual for the year,
(b) the individual did 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 was with a foreign employer, and
(d) the duties of the relevant employment were 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 subsection (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) if 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 and 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”.
This is subject to subsection (9).
(7) This subsection applies to a tax year if—
(a) section 809B, 809D or 809E of ITA 2007 applied to the individual for the year,
(b) the individual met 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 were performed outside the United Kingdom in the year.
(8) If 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 relevant 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 be 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 performed 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 wholly 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 United 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, and
(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 (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.
(12) This section is subject to—
(a) section 41K (securities income from overseas Crown employment), and
(b) section 41L (chargeable and unchargeable foreign securities income: 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) the 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 regarded 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 which 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) In 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.
(1) The 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 continental 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 section 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 this Chapter) not “foreign”.
(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) Such 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 section 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 overseas 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) This 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 securities income” and “unchargeable foreign securities income” are such amounts as are just and reasonable (rather than the amounts calculated in accordance with section 41H).
41M Foreign employment election for qualifying new residents
(1) This Chapter applies if an individual is a qualifying new resident for a tax year (the “qualifying year”).
(2) An individual is a qualifying new resident for a tax year for the purposes of this Chapter if the individual is a qualifying new resident for the tax year for the purposes of Chapter 5 of Part 8 of ITTOIA 2005 (see section 845B of that Act).
(3) The individual may make an election for the qualifying year under this section (“a foreign employment election”).
(4) Section 41P makes provision about a claim for relief—
(a) which an individual can make for the qualifying year or any subsequent tax year, where the individual has made a foreign employment election, and
(b) which entitles the individual to relief in that year calculated by reference to employment income that is in respect of the qualifying year.
(5) Sections 41Q (amount of relief available) and 41R (limit on relief) set out how to determine the amount of relief to which the individual is entitled.
(6) See also—
(a) sections 845C to 845E of ITTOIA 2005, which set out some income tax consequences of a foreign employment election, and
(b) section 1K of TCGA 1992, which provides for the loss of the individual’s annual exempt amount for capital gains tax where a foreign employment election is made.
(7) A foreign employment election must be made in a return.
(8) A foreign employment election for the qualifying year must be made before the end of the period of 12 months beginning with 31 January after the end of the qualifying year.
(9) A foreign employment election may not be made as a consequential claim (within the meaning of section 43C(5) of TMA 1970) if the circumstances which give rise to the consequential claim result from a loss of tax brought about carelessly or deliberately by the individual or a person acting on the individual’s behalf.
(10) For the purposes of this Chapter—
(a) “return” means a return under section 8 of TMA 1970 (personal return),
(b) references to a claim or election being included in a return include a claim or election being so included as a result of an amendment of the return, and
(c) subsections (5) to (7) of section 118 of TMA 1970 (loss of tax brought about carelessly or deliberately) apply as they apply for the purposes of that Act.
(1) This section sets out some definitions that apply for the purposes of this Chapter.
(2) “Qualifying employment income” means—
(a) qualifying general earnings,
(b) qualifying third party income, and
(c) qualifying securities income.
(3) “Qualifying foreign employment income” means—
(a) qualifying foreign general earnings,
(b) qualifying foreign third party income, and
(c) qualifying foreign securities income.
(4) Section 41T defines what it means—
(a) for general earnings to be “qualifying general earnings”, and
(b) for qualifying general earnings to be “qualifying foreign general earnings”.
(5) Section 41U defines what it means—
(a) for third party income to be “qualifying third party income”, and
(b) for qualifying third party income to be “qualifying foreign third party income”.
(6) Section 41V defines what it means—
(a) for securities income to be “qualifying securities income”, and
(b) for qualifying securities income to be “qualifying foreign securities income”.
(1) Where an individual has made a foreign employment election, the individual may make a claim for relief for the qualifying year or any subsequent tax year (“a foreign employment relief claim”).
(2) Where an individual makes a foreign employment relief claim for a tax year, the individual is entitled to relief that is equal to so much of the net taxable employment income for that year as—
(a) reflects qualifying foreign employment income (see section 41Q), and
(b) is identified as such in the claim.
(3) But subsection (2) only applies to the extent the total amount of the relief given does not exceed the limit (see section 41R).
(4) The relief is given by deducting the amount of the relief in calculating the individual's net income for the tax year for which the claim is made (see Step 2 of the calculation in section 23 of ITA 2007).
(4A) But a deduction for that purpose is to be made only from qualifying foreign employment income.
(5) A foreign employment relief claim must be made in a return.
(6) A foreign employment relief claim for a tax year must be made before the end of the period of 12 months beginning with 31 January after the end of that tax year.
(7) A foreign employment relief claim may not be made as a consequential claim (within the meaning of section 43C(5) of TMA 1970) if the circumstances which give rise to the consequential claim result from a loss of tax brought about carelessly or deliberately by the individual or a person acting on the individual’s behalf.
(8) For the purposes of this Chapter “net taxable employment income”, in relation to a tax year, means the employment income on which the individual is charged to tax for the tax year (see section 9(1)).
(1) For the purposes of section 41P(2), the amount of net taxable employment income for a tax year that “reflects” qualifying foreign employment income is the total of—
(a) the total of the amount of the net taxable earnings from each employment in the tax year that reflects qualifying foreign general earnings (see subsections (2) to (5)), and
(b) the total of the amount of the net taxable specific income from each employment for the tax year that reflects qualifying foreign third party income or qualifying foreign securities income (see subsection (6)).
(2) The amount of the net taxable earnings from an employment in a tax year that “reflects” qualifying foreign general earnings is—
(a) the amount of the taxable earnings from the employment in the tax year that are qualifying foreign general earnings, minus
(b) the amount of the qualifying deductions.
(3) If the amount calculated under subsection (2) is nil or a negative amount, then none of the net taxable earnings from the employment in the tax year reflect qualifying foreign general earnings.
(4) If the foreign employment relief claim is for the qualifying year, the amount of the qualifying deductions is the proportion of the total deductions that is the same as the proportion of the claim year taxable earnings that are qualifying foreign general earnings.
(5) If the foreign employment relief claim is for a subsequent tax year, the amount of the qualifying deductions is the amount resulting from the following steps—
Step 1
Deduct the claim year taxable earnings from the total deductions.
If the result is nil or a negative amount, there are no qualifying deductions.
Step 2
Deduct any other taxable earnings that are not qualifying foreign general earnings.
If the result is nil or a negative amount, there are no qualifying deductions.
(6) The proportion of the net taxable specific income from an employment for a tax year that “reflects” qualifying foreign third party income or qualifying foreign securities income is the same as the proportion of the taxable specific income for the employment in that year that is qualifying foreign third party income or qualifying foreign securities income.
(7) In this section—
“claim year taxable earnings” means the taxable earnings from the employment in the tax year that are “for” the year for which the claim is made determined in accordance with section 16 and 17;
“total deductions” means the total amount of any deductions allowed from the taxable earnings from the employment in the tax year under provisions listed in section 327(3) to (5) (see section 11(1)).
(1) This section sets out how to determine the limit on the amount of relief the individual is entitled to when making a foreign employment relief claim for a year for the purposes of section 41P(3).
(2) The limit is the lesser of—
(a) 30% of the relevant qualifying employment income, and
(b) £300,000.
(3) For the purposes of this section “relevant qualifying employment income” means—
(a) so much of the net taxable employment income for the tax year for which the claim is made as reflects qualifying employment income, and
(b) if the foreign employment relief claim is for a tax year that is subsequent to the qualifying year, so much of any net taxable employment income for any earlier tax year (but not any tax year before the qualifying year) as would reflect qualifying employment income if that earlier year was the year for which the claim was made.
(4) If the foreign employment relief claim is for a tax year that is subsequent to the qualifying year, the limit is reduced by the total of any amounts reflecting qualifying foreign employment income that have previously been relieved under section 41P.
(5) To determine the amounts mentioned in subsection (3)(a) and (b), apply section 41Q, but as if—
(a) the references in that section to qualifying foreign employment income were to qualifying employment income,
(b) the references in that section to qualifying foreign general earnings were to qualifying general earnings, and
(c) the references in that section to qualifying foreign third party income and qualifying foreign securities income were references to qualifying third party income and qualifying securities income.
41S Effect of claim on relief for contributions to registered pension schemes
(1) This section applies where an individual who is an active member of a registered pension scheme for the purposes of section 188 of FA 2004 (relief for contributions) makes a foreign employment relief claim for a tax year.
(2) For the purposes of sections 189(1)(a) and 190 of that Act, references to the amount of the individual’s relevant UK earnings chargeable to income tax for that year are to be read as references to that amount minus the relieved amount.
(3) The “relieved amount” is the amount of the relief to which the individual is entitled under section 41P(2) of this Act as a result of making the foreign employment relief claim.
41T Foreign employment relief ignored for purposes of determining adjusted net income
(1) Subsection (2) applies for the purpose of determining the adjusted net income under section 58 of ITA 2007 of an individual for a tax year for which the individual is entitled to relief under section 41P.
(2) The adjusted net income is to be determined as if the relief had not been deducted in calculating the individual’s net income for the tax year.
(1) General earnings are “qualifying general earnings” if they are—
(a) “for” the qualifying year determined in accordance with sections 16 and 17,
(b) if the qualifying year is a split year as respects the individual, attributable to the UK part of the year, and
(c) from an employment the duties of which are performed wholly or partly outside the UK during the qualifying year.
(2) Any attribution required for the purposes of subsection (1)(b) is to be done on a just and reasonable basis.
(3) Qualifying general earnings are “qualifying foreign general earnings” if they are neither—
(a) in respect of duties performed in the United Kingdom, nor
(b) from overseas Crown employment subject to United Kingdom tax (see section 41W).
(4) For the purposes of subsection (3), the extent to which qualifying general earnings are in respect of duties performed in the United Kingdom is to be determined on a just and reasonable basis.
(1) For the purposes of this Chapter, “third party income” is an amount that counts under Chapter 2 of Part 7A (treatment of relevant step for income tax purposes) as employment income in respect of an employment.
(2) Third party income is “qualifying third party income”—
(a) if it is in respect of an employment the duties of which are performed wholly or partly outside the UK during the qualifying year, and
(b) to the extent that the value of the relevant step that counts as employment income (see section 554Z3) is—
(i) “for” the qualifying year determined in accordance with section 554Z4(2), and
(ii) if the qualifying year is a split year as respects the individual, attributable to the UK part of the year.
(3) Any attribution required for the purposes of subsection (2)(b)(ii) is to be done on a just and reasonable basis.
(4) Qualifying third party income is “qualifying foreign third party income” to the extent that it is not in respect of duties performed in the United Kingdom.
(5) The extent to which qualifying third party income is not in respect of duties performed in the United Kingdom is to be determined on a just and reasonable basis.
(1) For the purpose of this Chapter, “securities income” is an amount that counts under Chapters 2 to 5 of Part 7 (employment-related securities etc) as employment income in respect of an employment (the “relevant employment”).
(2) Securities income is “qualifying securities income”—
(a) if the duties of the relevant employment are performed wholly or partly outside the UK during the qualifying year, and
(b) to the extent that it—
(i) accrues during the qualifying year, or
(ii) if the qualifying year is a split year as respects the individual, accrues during the UK part of the year.
(3) To determine when securities income accrues treat an equal amount of the securities income as accruing on each day of the relevant period determined in accordance with section 41G.
(4) But if the proportion of the securities income that would be regarded as qualifying securities income by virtue of subsection (3) is not, having regard to all the circumstances, just and reasonable, the amount of the securities income that is qualifying securities income is such amount as is just and reasonable.
(5) Qualifying securities income is wholly “qualifying foreign securities income” if the duties of the relevant employment are performed wholly outside the United Kingdom.
(6) If some, but not all, of the duties of the relevant employment are performed outside the United Kingdom—
(a) the qualifying securities income is to be apportioned (on a just and reasonable basis) between duties performed in the United Kingdom and duties performed outside the United Kingdom, and
(b) the income apportioned in respect of duties performed outside the United Kingdom is qualifying foreign securities income.
(7) But qualifying securities income from overseas Crown employment subject to United Kingdom tax is not qualifying foreign securities income.
41X Meaning of “overseas Crown employment subject to UK tax”
(1) This section explains what is meant by —
(a) qualifying general earnings “from overseas Crown employment subject to United Kingdom tax” for the purposes of section 41T(3)(b), and
(b) qualifying securities income “from overseas Crown employment subject to United Kingdom tax” for the purposes of section 41V(7).
(2) Qualifying general earnings and qualifying securities income are “from overseas Crown employment” if the earnings or income is from Crown employment (within the meaning of section 28(2)) in respect of duties performed outside the United Kingdom.
(3) Such earnings or income are to be taken as being “subject to United Kingdom tax” unless they fall within any exception contained in an order made under section 28(5) for the purposes of section 27(2).
(4) An order made under section 28(5) may also—
(a) provide for any exceptions mentioned in subsection (3) to not apply for the purposes of this section, and
(b) make exceptions for the purposes of this section.
(5) For the purposes of this section, if securities income is partly from overseas 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.
(1) Section 38 (period of absence from employment) and section 38A (earnings in respect of duties not performed) apply for the purposes of this Chapter as if references to general earnings were to general earnings or third party income.
(2) Section 40(1) and (2) (place of performance of duties on board vessel or aircraft) applies for the purposes of this Chapter.
(3) Duties of an employment performed in the UK sector of the continental shelf in connection with exploration of exploitation activities are to be treated for the purposes of this Chapter as being performed in the United Kingdom.
(4) In subsection (3) “the UK sector of the continental shelf” and “exploration or exploitation activities” have the same meaning as in section 41 (treatment of general earnings from employment in the UK sector of the continental shelf).
(1) Any arrangements falling within subsection (2) are to be disregarded for the purposes of determining the extent to which—
(a) general earnings are qualifying general earnings;
(b) third party income is qualifying third party income;
(c) securities income is qualifying securities income;
(2) Arrangements fall within this subsection if the main purpose, or one of the main purposes of the arrangements is to enable an individual to obtain—
(a) relief under this Chapter to which they would not otherwise be entitled, or
(b) relief under this Chapter of a greater amount than that to which they would otherwise be entitled.
(3) In this section “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
41Z1 Limit on qualifying foreign employment income from associated employments
(1) This section applies if—
(a) the individual has associated employments from or in respect of which there is qualifying employment income, and
(b) the duties of the associated employments are not performed wholly outside the United Kingdom.
(2) There is a limit on how much of the qualifying employment income from or in respect of the associated employments is qualifying foreign employment income.
(3) The limit is the proportion of the qualifying employment income that is reasonable having regard to—
(a) the nature of, and time devoted to, the duties performed outside the United Kingdom, and those performed in the United Kingdom, and
(b) all other relevant circumstances.
(4) In this section “associated employments” means employments with the same employer or with associated employers; and section 24(5) and (6) applies for the purposes of this section.
(1) This section applies if—
(a) an individual (“the worker”) personally provides services (which are not excluded services) to another person (“the client”),
(b) there is a contract between—
(i) the client or a person connected with the client, and
(ii) a person other than the worker, the client or a person connected with the client (“the agency”), and
(c) under or in consequence of that contract—
(i) the services are provided, or
(ii) the client or any person connected with the client pays, or otherwise provides consideration, for the services.
(2) But this section does not apply if—
(a) it is shown that the manner in which the worker provides the services is not subject to (or to the right of) supervision, direction or control by any person, or
(b) remuneration receivable by the worker in consequence of providing the services constitutes employment income of the worker apart from this Chapter.
(3) If this section applies—
(a) the worker is to be treated for income tax purposes as holding an employment with the agency, the duties of which consist of the services the worker provides to the client, and
(b) all remuneration receivable by the worker (from any person) in consequence of providing the services is to be treated for income tax purposes as earnings from that employment,
but this is subject to subsections (4) to (6).
(4) Subsection (5) applies if (whether before or after the worker begins to provide the services)—
(a) the client provides the agency with a fraudulent document which is intended to constitute evidence that, by virtue of subsection (2)(a), this section does not or will not apply, ...
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) In relation to services the worker provides to the client after the fraudulent document is provided—
(a) subsection (3) does not apply,
(b) the worker is to be treated for income tax purposes as holding an employment with the client ..., the duties of which consist of the services, and
(c) all remuneration receivable by the worker (from any person) in consequence of providing the services is to be treated for income tax purposes as earnings from that employment.
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
If—
(a) an individual (“the worker”), with a view to personally providing services (which are not excluded services) to another person (“the client”), enters into arrangements with a third person ..., and
(b) the arrangements are such that the services (if and when they are provided) will be treated for income tax purposes under section 44 as duties of an employment held by the worker ...,
any remuneration receivable under or in consequence of the arrangements is to be treated for income tax purposes as earnings from that employment.
(1) Section 44 also applies—
(a) if the worker personally provides... the services in question as a partner in a firm or a member of an unincorporated body;
(b) if the agency in question is an unincorporated body of which the worker is a member.
(2) In a case within subsection (1)(a), remuneration receivable in consequence of the worker providing the services is to be treated for income tax purposes as income of the worker and not as income of the firm or body.
(1) This section applies if—
(a) an individual (“W”) personally provides services (which are not excluded services) to another person (“C”),
(b) a third person (“A”) enters into arrangements the main purpose, or one of the main purposes, of which is to secure that the services are not treated for income tax purposes under section 44 as duties of an employment held by W with A, and
(c) but for this section, section 44 would not apply in relation to the services.
(2) In subsection (1)(b) “arrangements” includes any scheme, transaction or series of transactions, agreement or understanding, whether or not legally enforceable, and any associated operations.
(3) Subject to subsection (2) of section 44, that section applies in relation to the services.
(4) For the purposes of subsection (3)—
(a) W is to be treated as being the worker,
(b) C is to be treated as being the client,
(c) A is to be treated as being the agency, and
(d) section 44 has effect as if subsections (4) to (6) of that section were omitted.
(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) In this Chapter “excluded services” means—
(a) services as an actor, singer, musician or other entertainer or as a fashion, photographic or artist’s model, or
(b) services provided wholly—
(i) in the worker’s own home, or
(ii) at other premises which are neither controlled or managed by the client nor prescribed by the nature of the services.
(3) For the purposes of this Chapter “remuneration”—
(a) does not include anything that would not have constituted employment income of the worker if it had been receivable in connection with an employment apart from this Chapter, but
(b) subject to paragraph (a), includes every form of payment, gratuity, profit and benefit.
(1) This Chapter has effect with respect to the provision of services through an intermediary in a case where the services are provided to a person who is not a public authority and who either—
(a) qualifies as small for a tax year, or
(b) does not have a UK connection for a tax year.
(2) Nothing in this Chapter—
(a) affects the operation of Chapter 7 of this Part,
(aa) applies to services provided by a managed service company (within the meaning of Chapter 9 of this Part), or
(b) applies to payments or transfers to which section 966(3) or (4) of ITA 2007 applies (visiting performers: duty to deduct and account for sums representing income tax) .
(3) In this Chapter “public authority” has the same meaning as in Chapter 10 of this Part (see section 61L).
(4) For provisions determining when a person qualifies as small for a tax year, see sections 60A to 60G.
(5) For provision determining when a person has a UK connection for a tax year, see section 60I.
(1) This Chapter applies where—
(a) an individual (“the worker”) personally performs, or is under an obligation personally to perform, services for another person (“the client”),
(aa) the client is not a public authority,
(b) the services are provided not under a contract directly between the client and the worker but under arrangements involving a third party (“the intermediary”), and
(c) the circumstances are such that—
(i) if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client or the holder of an office under the client, or
(ii) the worker is an office-holder who holds that office under the client and the services relate to the office.
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) The reference in subsection (1)(b) to a “third party” includes a partnership or unincorporated body of which the worker is a member.
(4) The circumstances referred to in subsection (1)(c) include the terms on which the services are provided, having regard to the terms of the contracts forming part of the arrangements under which the services are provided.
(4A) Holding office as statutory auditor of the client does not count as holding office under the client for the purposes of subsection (1)(c), and here “statutory auditor” means a statutory auditor within the meaning of Part 42 of the Companies Act 2006 (see section 1210 of that Act).
(5) In this Chapter “engagement to which this Chapter applies” means any such provision of services as is mentioned in subsection (1).
50 Worker treated as receiving earnings from employment
(1) If, in the case of an engagement to which this Chapter applies, in any tax year—
(za) the client qualifies as small or does not have a UK connection,
(a) the conditions specified in section 51, 52 or 53 are met in relation to the intermediary, and
(b) the worker, or an associate of the worker—
(i) receives from the intermediary, directly or indirectly, a payment or benefit that is not employment income, or
(ii) has rights which entitle, or which in any circumstances would entitle, the worker or associate to receive from the intermediary, directly or indirectly, any such payment or benefit,
the intermediary is treated as making to the worker, and the worker is treated as receiving, in that year a payment which is to be treated as earnings from an employment (“the deemed employment payment”).
(2) A single payment is treated as made in respect of all engagements in relation to which the intermediary is treated as making a payment to the worker in the tax year.
(3) The deemed employment payment is treated as made at the end of the tax year, unless section 57 applies (earlier date of deemed payment in certain cases).
(4) In this Chapter “the relevant engagements”, in relation to a deemed employment payment, means the engagements mentioned in subsection (2).
(5) The condition in paragraph (za) of subsection (1) is to be ignored if—
(a) the client concerned is an individual, and
(b) the services concerned are performed otherwise than for the purposes of the client's business.
(6) For the purposes of paragraph (za) of subsection (1) the client is to be treated as not qualifying as small for the tax year concerned if the client is treated as medium or large for that tax year by reason of section 61TA(3)(a).
51 Conditions of liability where intermediary is a company
(1) Where the intermediary is a company the conditions are that the intermediary is not an associated company of the client that falls within subsection (2) and either—
(a) the worker has a material interest in the intermediary, or
(b) the payment or benefit mentioned in section 50(1)(b)—
(i) is received or receivable by the worker directly from the intermediary, and
(ii) can reasonably be taken to represent remuneration for services provided by the worker to the client.
(2) An associated company of the client falls within this subsection if it is such a company by reason of the intermediary and the client being under the control—
(a) of the worker, or
(b) of the worker and other persons.
(3) A worker is treated as having a material interest in a company if—
(a) the worker, alone or with one or more associates of the worker, or
(b) an associate of the worker, with or without other such associates,
has a material interest in the company.
(4) For this purpose a material interest means—
(a) beneficial ownership of, or the ability to control, directly or through the medium of other companies or by any other indirect means, more than 5% of the ordinary share capital of the company; or
(b) possession of, or entitlement to acquire, rights entitling the holder to receive more than 5% of any distributions that may be made by the company; or
(c) where the company is a close company, possession of, or entitlement to acquire, rights that would in the event of the winding up of the company, or in any other circumstances, entitle the holder to receive more than 5% of the assets that would then be available for distribution among the participators.
(5) In subsection (4)(c) “participator” has the meaning given by section 454 of CTA 2010.
52 Conditions of liability where intermediary is a partnership
(1) Where the intermediary is a partnership the conditions are as follows.
(2) In relation to any payment or benefit received or receivable by the worker as a member of the partnership the conditions are—
(a) that the worker, alone or with one or more relatives, is entitled to 60% or more of the profits of the partnership; or
(b) that most of the profits of the partnership concerned derive from the provision of services under engagements to which one or other of this Chapter and Chapter 10 applies—
(i) to a single client, or
(ii) to a single client together with associates of that client; or
(c) that under the profit sharing arrangements the income of any of the partners is based on the amount of income generated by that partner by the provision of services under engagements to which one or other of this Chapter and Chapter 10 applies.
In paragraph (a) “relative” means spouse or civil partner , parent or child or remoter relation in the direct line, or brother or sister.
(3) In relation to any payment or benefit received or receivable by the worker otherwise than as a member of the partnership, the conditions are that the payment or benefit—
(a) is received or receivable by the worker directly from the intermediary, and
(b) can reasonably be taken to represent remuneration for services provided by the worker to the client.
53 Conditions of liability where intermediary is an individual
Where the intermediary is an individual the conditions are that the payment or benefit—
(a) is received or receivable by the worker directly from the intermediary, and
(b) can reasonably be taken to represent remuneration for services provided by the worker to the client.
(1) The amount of the deemed employment payment for a tax year (“the year”) is the amount resulting from the following steps—
Step 1
Find (applying section 55) the total amount of all payments and benefits received by the intermediary in the year in respect of the relevant engagements, and reduce that amount by 5%.
Step 2
Add (applying that section) the amount of any payments and benefits received by the worker in the year in respect of the relevant engagements, otherwise than from the intermediary, that—
(a) are not chargeable to income tax as employment income, and
(b) would be so chargeable if the worker were employed by the client.
Step 3
Deduct (applying Chapters 1 to 5 of Part 5) the amount of any expenses met in the year by the intermediary that would have been deductible from the taxable earnings from the employment if—
(a) the worker had been employed by the client, and
(b) the expenses had been met by the worker out of those earnings.
If the result at this or any later point is nil or a negative amount, there is no deemed employment payment.
Step 4
Deduct the amount of any capital allowances in respect of expenditure incurred by the intermediary that could have been deducted from employment income under section 262 of CAA 2001 (employments and offices) if the worker had been employed by the client and had incurred the expenditure.
Step 5
Deduct any contributions made in the year for the benefit of the worker by the intermediary to a registered pension scheme that if made by an employer for the benefit of an employee would not be chargeable to income tax as income of the employee.
This does not apply to excess contributions made and later repaid.
Step 6
Deduct the amount of any employer’s national insurance contributions paid by the intermediary for the year in respect of the worker.
Step 7
Deduct the amount of any payments and benefits received in the year by the worker from the intermediary—
(a) in respect of which the worker is chargeable to income tax as employment income, and
(b) which do not represent items in respect of which a deduction was made under step 3.
Step 8
Assume that the result of step 7 represents an amount together with employer’s national insurance contributions on it, and deduct what (on that assumption) would be the amount of those contributions.
The result is the deemed employment payment.
(1A) For the purposes of step 1 of subsection (1), any payment or benefit which is employment income of the worker by virtue of section 863G(4) of ITTOIA 2005 (salaried members of limited liability partnerships: anti-avoidance) is to be ignored.
(2) If section 61 of the Finance Act 2004 applies (sub-contractors in the construction industry: payments to be made under deduction), the intermediary is treated for the purposes of step 1 of subsection (1) as receiving the amount that would have been received had no deduction been made under that section.
(3) In step 3 of subsection (1), the reference to expenses met by the intermediary includes—
(a) expenses met by the worker and reimbursed by the intermediary, and
(b) where the intermediary is a partnership and the worker is a member of the partnership, expenses met by the worker for and on behalf of the partnership.
(4) In step 3 of subsection (1), the expenses deductible include the amount of any mileage allowance relief for the year which the worker would have been entitled to in respect of the use of a vehicle falling within subsection (5) if—
(a) the worker had been employed by the client, and
(b) the vehicle had not been a company vehicle (within the meaning of Chapter 2 of Part 4).
(5) A vehicle falls within this subsection if—
(a) it is provided by the intermediary for the worker, or
(b) where the intermediary is a partnership and the worker is a member of the partnership, it is provided by the worker for the purposes of the business of the partnership.
(6) Where, on the assumptions mentioned in paragraphs (a) and (b) of step 3 of subsection (1), the deductibility of the expenses is determined under sections 337 to 342 (travel expenses), the duties performed under the relevant engagements are treated as duties of a continuous employment with the intermediary.
(7) In step 7 of subsection (1), the amounts deductible include any payments received in the year from the intermediary that—
(a) are exempt from income tax by virtue of section 229 or 233 (mileage allowance payments and passenger payments), and
(b) do not represent items in respect of which a deduction was made under step 3.
(8) For the purposes of subsection (1) any necessary apportionment is to be made on a just and reasonable basis of amounts received by the intermediary that are referable—
(a) to the services of more than one worker, or
(b) partly to the services of the worker and partly to other matters.
55 Application of rules relating to earnings from employment
(1) The following provisions apply in relation to the calculation of the deemed employment payment.
(2) A “payment or benefit” means anything that, if received by an employee for performing the duties of an employment, would be earnings from the employment.
(3) The amount of a payment or benefit is taken to be—
(a) in the case of a payment or cash benefit, the amount received, and
(b) in the case of a non-cash benefit, the cash equivalent of the benefit.
(4) The cash equivalent of a non-cash benefit is taken to be—
(a) the amount that would be earnings if the benefit were earnings from an employment, or
(b) in the case of living accommodation, whichever is the greater of that amount and the cash equivalent determined in accordance with section 398(2).
(5) A payment or benefit is treated as received—
(a) in the case of a payment or cash benefit, when payment is made of or on account of the payment or benefit;
(b) in the case of a non-cash benefit that is calculated by reference to a period within the tax year, at the end of that period;
(c) in the case of a non-cash benefit that is not so calculated, when it would have been treated as received for the purposes of Chapter 4 or 5 of this Part (see section 19 or 32) if—
(i) the worker had been an employee, and
(ii) the benefit had been provided by reason of the employment.