Condition 5: The regulatory requirement test
17.New section 24A(17) sets out condition 5. Section 24A will only apply if condition 5 is not met. Condition 5 applies if (a) the duties of the relevant employment could not be lawfully performed in the relevant territory by virtue of any regulatory requirement imposed by or under the law of that territory if the duties were duties of the UK employment instead and (b) the UK duties of the UK employment could not be lawfully performed in the UK by virtue of any regulatory requirement imposed by or under the law of any part of the UK if the duties were duties of the relevant employment instead.
18.New section 24A(18) provides the definition of “the relevant territory” and “UK duties” for the purposes of new section 24A(17).
19.Paragraph 4 amends section 41C of ITEPA and sets out the circumstances in which overseas income from employment-related securities is taken out of the scope of the remittance basis. It has effect for cases where the tax year in question is the tax year 2014-15 or any subsequent tax year.
20.Paragraph 4(3) introduces new section 41C(9), which sets out that if the remittance basis does not apply to employment-related securities income by virtue of new section 24A, then section 41E (just and reasonable apportionment) is to be treated as providing that it is just and reasonable that none of the securities income accruing in the tax year is “foreign”. This means that section 41E will not override the amount of shares income which is determined under this measure to be taxed on the arising basis.
21.Paragraph 5 sets out the circumstances in which overseas employment income provided through a third party is taken out of the scope of the remittance basis. Section 554Z9 of ITEPA makes the link between the rules on employment income provided through third parties and the remittance basis in cases in which the employee (‘A’) is non-UK domiciled but does not meet the requirement of section 26A of ITEPA (remittance basis: 3-year period of non-residence). This paragraph amends section 554Z9 to remove this link, so the provisions will apply if new section 24A applies to the relevant employment.
22.Paragraph 6 makes a minor consequential amendment to section 717 of ITEPA.
23.Paragraph 7 contains the commencement provisions for the legislative change. It applies new sections 24A and 24B to income earned on or after 6 April 2014 or, in the case of securities income, to income accrued in 2014-15 or subsequent tax years.
