Split-year treatment of share-related income
Extra-Statutory Concession A11 (ESC A11), the so-called “split year treatment” concession, makes provision for workers whose employment is partly outside the UK in a given tax year – usually employees on secondment who arrive in or leave the UK in the middle of a tax year and are not UK residents. The terms of the concession allow them to pay UK tax only on the proportion of income earned while they were actually working in the UK.
HMRC have always taken the view that the concession does not apply to share-related income earned in either the year of arrival or the year of departure. Share-related income might include share options and company share incentive plans as well as straightforward share-holdings connected with the employment. However, HMRC now concedes that this may not have been completely clear in its guidance. This grey area seems to have come to light in the course of the ongoing review of all Extra Statutory Concessions.
HMRC will therefore accept that ESC A11 applies to such income in both the year of arrival and departure for all future claims, and for all years on which enquiries are still currently open – until such time as the law can be changed. Earlier years which have been closed will not be reopened, whether ESC A11 has been applied or not, although HMRC reserves the right to depart from this position “in cases of avoidance”.
The only exception to this will be any tax charge incurred in a year of departure in respect of employment-related shares which were acquired for less than market value, where ESC A11 will not be allowed to apply. This exception is made simply because the existing guidance already makes this position clear in respect of this one type of share.