Employment-Related Securities for Internationally Mobile Executives

For internationally mobile executives, equity compensation — share options, restricted stock units (RSUs), performance share awards, and similar arrangements — is one of the most complex areas of UK tax. The rules governing when these awards are taxable in the UK, how the taxable amount is calculated when a person has moved between countries during the vesting period, and how to claim relief for overseas tax paid can make the difference between managing equity awards efficiently and facing a large unexpected tax bill.

This guide explains how UK tax applies to employment-related securities (ERS) for executives who are or have been internationally mobile, focusing on the apportionment of awards between UK and non-UK periods of employment.

What Are Employment-Related Securities?

Employment-related securities is a broad category covering equity and equity-linked awards received in connection with employment. The most common types are:

Share options: The right to buy shares in the employing company (or a parent company) at a specified price (the exercise price) on or after a specified date. Value arises when the share price exceeds the exercise price.

• HMRC-approved options (EMI, CSOP, SAYE): Benefit from concessionary tax treatment, but only available to UK-resident employees of qualifying UK companies. Most internationally mobile executives will not have UK-approved options.
• Non-tax-advantaged (unapproved) options: No concessionary treatment. The gain at exercise is treated as employment income.

Restricted Stock Units (RSUs): A right to receive shares or cash equivalent on vesting, subject to the satisfaction of conditions (typically continued employment and/or performance conditions). There is no exercise price — the employee receives the full value of shares at vesting.

Performance shares: Similar to RSUs but typically with performance conditions in addition to service conditions.

Growth shares and flowering shares: Typically used in private company contexts, where employees receive shares that only acquire value if the company's value exceeds a hurdle.

The Basic UK Tax Treatment

For non-tax-advantaged awards (which covers most internationally mobile executives):

At grant: Generally no UK income tax charge at the point of grant.

At vesting (for RSUs) or exercise (for options): The "employment income" element arises. This is:

• For RSUs: the market value of shares received at vesting
• For options: the difference between the market value at exercise and the exercise price

This employment income is subject to:

• UK income tax (at rates up to 45% for additional-rate taxpayers in 2026)
• National Insurance contributions (employee and employer NIC) if the employee is subject to UK NIC at the time of vesting/exercise

The NIC charge is a significant addition to the income tax charge. Employer (secondary) NIC on share awards has historically been borne by the employer, but many awards include arrangements to transfer the employer NIC liability to the employee — done through a separate NIC joint election or agreement (under the Social Security Contributions and Benefits Act 1992), not the Section 431 income-tax election. The executive must check their award documents. (Note that employer NIC rose to 15% from 6 April 2025, increasing the cost of any transferred liability.)

At disposal of shares: Any further gain between the vesting/exercise value and the eventual sale price is a capital gain, taxed at CGT rates (subject to any available reliefs).

The Core Challenge: International Mobility and Apportionment

The critical question for internationally mobile executives is: how much of a vesting or exercise gain is attributable to UK employment?

If an RSU vests while you are UK-resident, and you were UK-resident throughout the vesting period, the full gain is UK employment income. Simple.

But if you were non-resident for part of the vesting period — working in Singapore for two years before moving to the UK and being awarded an RSU that vests over four years — only part of the gain relates to UK employment.

HMRC's approach (and the internationally recognised approach under OECD guidance) is to apportion the gain based on the number of days (or months) worked in the UK relative to the total vesting period.

The apportionment formula:

UK-taxable proportion = (UK workdays during vesting period) / (Total workdays during vesting period)

Example: You are granted 10,000 RSUs on 1 January 2022 when you are employed in Hong Kong. The RSUs vest on 1 January 2025 (three-year vest). On 1 July 2023, you move from Hong Kong to the UK for work. At vesting, the shares are worth £50 each, so the total gain is £500,000.

Vesting period: 3 years = approximately 1,096 days UK period: July 2023 to January 2025 = approximately 550 days UK proportion: 550/1,096 ≈ 50.2% UK taxable gain: £500,000 × 50.2% = £251,000

UK income tax and NIC apply to £251,000. The remaining £249,000 is not subject to UK income tax (subject to the tax treatment in Hong Kong for the Hong Kong period).

HMRC Guidance and Practice

HMRC's approach to international mobility and ERS is set out in the Employment Related Securities Manual (ERSM) and the Employment Income Manual (EIM). HMRC has issued detailed guidance on:

• Counting workdays during the vesting period
• Treating periods of leave, sabbatical, and secondment
• The different approach for options versus RSUs
• Anti-avoidance: where an award is manipulated to shift the UK portion artificially

Important distinction: options vs RSUs

For RSUs and performance shares, the standard approach is to apportion the gain based on the number of workdays in each country during the vesting period, as described above.

For share options, the position is slightly different. The key period for options is typically from grant to vest (the "opportunity period"), not grant to exercise. Where there is a significant delay between vesting and exercise, HMRC's guidance distinguishes between:

• The "service" element: reflected in the gain from grant to vest (apportioned based on country of work during that period)
• The "investment" element: reflected in any further gain from vest to exercise (typically treated as entirely arising in the country of residence at exercise)

This distinction can be highly advantageous for a person who is granted options while resident in the UK, moves abroad, and then exercises the options several years later while non-resident. The post-vest gain (which could be substantial if the share price has continued to rise) may be entirely outside UK tax.

Non-Residents Who Exercise or Receive Awards in the UK

Even if you are non-resident at the time of exercise or vesting, some element of the gain will be UK-taxable if you worked in the UK during the vesting period. The apportionment rules apply regardless of your residence at the time of the taxable event.

However, if you are non-resident when the award vests or is exercised, you report the UK-taxable proportion as UK employment income on a UK self-assessment return (SA102) and pay UK income tax on that element. The UK employer will typically attempt to operate PAYE on the UK element, though this can be complex logistically for internationally mobile employees.

Overseas Workday Relief (OWR)

Overseas Workday Relief is a separate but related concept. Under OWR (which was available to short-term UK residents under the old non-dom rules, and has been retained — in modified form — under the new FIG regime), non-UK-domiciled or new-arrival individuals can potentially claim relief on employment income attributable to overseas workdays, even where the employment income is received in the UK.

OWR can interact with ERS apportionment in complex ways. For example, an executive in their first year of UK residence (within the four-year FIG window) might have RSU income that is partly UK-apportioned under the ERS rules, but the UK-apportioned element might itself qualify for FIG exemption or OWR relief.

The interaction requires case-specific analysis by a specialist in international employment taxation.

Reporting and Payment of Tax

Section 431 elections: Where an employee receives restricted shares (not free shares — shares subject to forfeiture conditions), they may want to make a "Section 431 election" to be taxed on the market value of the shares at grant rather than at vesting. This eliminates subsequent income tax charges on the shares and converts future growth into capital gains. This is most valuable where the shares are expected to grow significantly and the employee plans to remain in the UK.

ERS returns: Employers are required to file annual ERS returns with HMRC (using the ERS module on the Government Gateway) disclosing all grants, exercises, vestings, releases, and lapses of ERS in the tax year. Employees should ensure they understand what their employer has reported and reconcile this with their own return.

Pay reporting: For internationally mobile employees, the employer must identify the UK-apportioned element of any ERS income and operate PAYE (or arrange net of tax settlement) on that amount. Many large multinational employers have specialist mobility teams to manage this, but errors are common — particularly where an employee moves between countries mid-vesting.

Individual self-assessment: Internationally mobile executives should file UK self-assessment returns reporting:

• The UK-apportioned element of any ERS income arising in the year
• Any overseas tax paid on the non-UK portion
• Claims for double taxation relief

Social Security: An Additional Complication

For employees who are subject to UK National Insurance (or overseas equivalents), ERS gains can create additional social security liabilities. The rules for determining which country's social security system applies to a mobile employee depend on the nature of the employment and any applicable social security agreements.

Where employer NIC is attributable to the UK-apportioned element of an ERS gain, the employer should collect this. However, errors in the PAYE operation can result in the employee facing a large NIC liability on a subsequent assessment.

Cross-Border Mergers and Acquisitions

ERS issues are particularly acute in M&A transactions. If a company is acquired, outstanding options and unvested RSUs may be:

• Accelerated (all vest on the transaction date)
• Replaced by awards in the acquiring company's shares
• Cancelled for cash consideration

Each of these outcomes has different UK tax consequences, and the international apportionment must be calculated at the point of the transaction. For internationally mobile executives with significant unvested equity, M&A events can crystallise large UK tax liabilities at short notice.

How Global Investments Can Help

Employment-related securities are a significant component of total compensation for senior executives, and their tax treatment requires specialist international expertise. Global Investments works with internationally mobile executives to integrate equity awards into their overall wealth planning, ensuring that the tax position is properly managed, double taxation relief is claimed, and the proceeds from vested awards are invested efficiently.

We can introduce you to specialist employment tax advisers who handle ERS apportionment, cross-border mobility tax, and expatriate equity planning. Contact our team for a confidential conversation about your equity awards and international tax position.

This article is for general information only. Employment-related securities tax rules are complex, change frequently, and depend heavily on individual award terms and circumstances. Nothing here constitutes personal tax advice. Always seek independent specialist guidance tailored to your situation. Investments can fall as well as rise in value.