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HMRC note that there appears to be some uncertainty over the current HMRC view on Extra-Statutory Concession A11 (split year treatment) and its application to ITEPA 2003, Part 7.
All concessions are under review, and the Government has said it is willing to consider a statutory residency test.
However, HMRC have published the following information which is intended to give certainty in the context of Part 7 pending the outcome of these deliberations.
The split year treatment applied by the concession to other (non-employment-related securities) earnings means that, for example, an employee who comes to the UK for a secondment beginning on 1 June would be regarded as not UK-resident and therefore not taxable in the UK on his or her general earnings from the same employment for the period from 6 April to 31 May of that tax year.
There is some uncertainty over whether HMRC have historically regarded the concession as applying to Part 7.
This issue has recently become more significant, since the remittance basis legislation introduced by FB 2008 has potentially extended the range of circumstances in which the concession might be applied.
While HMRC's view has always been that the concession does not apply to income falling within Part 7 in the year of arrival, it appears that some employers, taxpayers and their advisers may not have been aware of this.
So for open years, and until further notice, HMRC will accept that ESC A11 applies to such income in the year of arrival. Earlier years which are settled will not be reopened, whether ESC A11 has been applied to employment-related security gains or not.
HMRC reserves the right to depart from this position in cases of avoidance.It has been set out in guidance that the concession does not apply in the year of departure where a charge under chapter 3C applies. It may have been less clear that the concession was not available where charges arise under other parts of the legislation Part 7.
Therefore, as for the year of arrival, for open years and until further notice, HMRC will accept that ESC A11 applies in the year of departure except in the case of a charge under Chapter 3C in the year of departure where the position will continue to be that the concession is not available.
As before, earlier years which are settled will not be reopened.
It should also be noted that, where a right to acquire securities has been obtained prior to 6 April 2008 in the non-resident part of the year of arrival in the UK and that right is not money's worth, there will be a charge to tax when securities are acquired pursuant to that right.
Both pre- and post-2008 the charge to tax on acquisition will arise by virtue of ITEPA 2003, s 62.
Alternatively, if the right does constitute money's worth on grant, a charge to tax may arise under chapter 3C to the extent that the original right is in respect of UK duties.
