HMRC have clarified

the application of extra-statutory concession (ESC) A11

to tax on employment-related securities and securities options. ESC A11 allows a taxpayer to split a tax year in which they change UK residence into two separate periods. As a result, income arising in the period when the taxpayer is not resident is taxed (if at all) on a non-resident basis, even though strictly it arises in a tax year of UK residence.

HMRC have confirmed that ESC A11 generally will apply for employment-related securities and options charges under Part 7 of ITEPA 2003 (other than notional loan charges in a year of departure). But, the ESC may not be available if HMRC think it is being used for tax avoidance.

HMRC had suggested that ESC A11 would not apply to Part 7 charges following the Finance Bill 2008 changes to Part 7 charges for resident but not ordinarily resident (R/NOR) employees (see Practice note, "Non-dom" tax reforms will change share incentive taxation from 6 April 2008

). This caused alarm among share scheme tax advisers, so the latest HMRC statement is welcome.

As R/NOR employees will be subject to Part 7 charges largely on the same basis as R/OR employees from 6 April 2008, ESC A11 is likely to be useful and relevant. In some cases, it may mean that shares or options are not subject to a Part 7 charge if received during the "non-UK part" of a year. However, ESC A11 will not always be available to an R/NOR taxpayer arriving in the UK, as it requires a new resident to be coming here for at least two years.