Employment Related Securities Manual

ERSM165239 - International from 6 April 2025: ascertaining chargeable and unchargeable foreign securities income - from 6 April 2025: Examples: Example 4 - Employee met s41H(4) prior to 25/26 & is ineligible for OWR in 25/26 - Hybrid employment arrangements

Freda is employed by a German bank in London. In the 2023/24, 2024/25 and 2025/26 tax years she devotes 60%, 70% and 50% respectively of her total working time to this employment. She has a separate employment with an affiliate of the bank which requires her to spend the remainder (40%, 30% & 50%) of her working time at that bank’s offices in Berlin. The two employers are associated, applying the rules in s24(5) & (6) ITEPA. She does work of comparable value in both employments. s24A ITEPA does not apply.

Freda is UK-resident and does not meet the requirement of s26A ITEPA in 2023/24 or 2024/25 and claims the remittance basis of taxation under s809B ITA07 for both years. In 2025/26 Freda remains UK-resident but is not eligible for the new OWR regime. On 6 April 2023 she is granted a share option by her Berlin employer. She exercises the option when it vests on 5 April 2026 realising a gain of £3,000, which counts as employment income for the 2025/26 tax year under Chapter 5 of Part 7 ITEPA.

All the conditions in s41H(4) ITEPA are met for 23/24 & 24/25. However, for the 25/26 tax year s41H(4) ITEPA can no longer be met, so any income apportioned to this tax year is not treated as Foreign Securities Income.

The relevant period for the share option falls wholly within the 23/24, 24/25 & 25/26 tax years.

As Freda has an associated employment as well as her UK employment section 41I ITEPA applies in each year. For the purposes of ascertaining chargeable Foreign Securities Income (FSI), s41H(2) ITEPA treats £1000 of the gain as accruing over each tax year.

As a result, £400 (40%) plus £300 (30%) so a total of £700, is chargeable Foreign Securities Income in relation to 23/24 and 24/25 and will be taxed only if remitted to the UK. The £500 (50%) attributable to 2025/26 is a tax year in which s41H(4) ITEPA can no longer be met, so is not treated as FSI, and instead is “Securities Income”.

The balance of £2,300 is treated as Securities Income in 2025/26 and is therefore treated as an amount of Taxable Specific Income for the tax year.

Any chargeable FSI treated as accruing before 6 April 2025 that is later remitted to the UK will still be taxable in the UK and may be subject to Temporary Repatriation Facility (TRF) in the 25/26, 26/27 & 27/28 tax years. Please see RDRM71000 onwards.