Annex 1: Minor changes in the law made by the Act: Change 127: Interest under employees’ share schemes: foreign source interest: section 752
This change extends the exemption from tax to foreign interest.
Section 688 of ICTA exempts trustees from income tax under Schedule D Case III. If a UK resident company advanced money to UK resident trustees for the purposes of an employees’ share scheme, the trustees might receive interest from non-UK resident employees. In such circumstances the foreign interest would be charged under Schedule D Case V. Accordingly, the trustees would not benefit from the exemption in section 688 of ICTA.
Section 752 provides that no liability to income tax arises under Chapter 2 of Part 4 of this Act in respect of the interest. The income charged by that Chapter includes foreign income that was formerly charged under Schedule D Case V.
This change is in taxpayers’ favour in principle and may benefit some in practice. But the numbers affected and the amounts involved are likely to be small.