Income Tax (Earnings and Pensions) Act 2003 section 421E

Exclusions: residence etc.

Section 421E excludes certain employment-related securities from the charge to tax under Chapters 2 to 4A of Part 7 where the employee is not UK resident or the securities are not connected with UK duties.

• Employment-related securities acquired by employees who are not UK tax resident in the relevant tax year are excluded from the securities income tax charges in Chapters 2 to 4A.
• Even where the employee is UK resident, securities are excluded if the employment is with a foreign employer and the duties are performed wholly outside the United Kingdom.
• The exclusion based on foreign duties does not apply if the employee is ordinarily UK resident or if the securities are provided as part of a tax avoidance arrangement.
• Following amendments made by Finance Act 2014, the residence test aligns with the statutory residence test, and the rules were updated to reflect the removal of ordinary residence as a tax concept for most purposes.

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