TPP Your Q answered

Where shares are gifted for no consideration, the transfer is generally treated as taking place at market value for CGT purposes under s.17 TCGA 1992.

However, if the shares qualify for gift hold-over relief under s.165 TCGA 1992, it may not be necessary to obtain or agree a formal valuation at the time of the gift.

Under HMRC Statement of Practice SP8/92, HMRC can admit a hold-over relief claim without requiring the held-over gain to be formally computed, provided the relevant conditions are met. Broadly, this requires a joint application by the transferor and transferee, details of the asset and its history (or a calculation using reasonable estimated values where necessary).

Any estimated values used are not binding on either HMRC or the parties. The actual market value would only need to be formally agreed later if it becomes relevant, for example on a subsequent disposal of the shares.

The first point would therefore be to establish whether the shares qualify for s.165 hold-over relief. If they do, you should refer to HS295 and the accompanying claim form, particularly the section dealing with deferral of agreement of values under SP8/92.

There are specific rules dealing with earnings received during a period of absence from employment.

Section 38 ITEPA 2003 broadly provides that, where an individual ordinarily performs some or all of their employment duties in the UK, earnings relating to a period of absence are treated as relating to UK duties, except to the extent that the duties would have been performed outside the UK had the absence not occurred.

HMRC's guidance at EIM40202 considers this specifically in the context of illness. HMRC gives an example of a non-UK resident employee who normally works in the UK one day a week and misses three UK working days due to illness. The earnings relating to those three days remain attributable to UK duties, notwithstanding that the individual did not physically work in the UK.

For your client, we therefore think the key question is where he would have been working during the period of sickness had he not been absent.

If, for example, he had already been scheduled to work in the UK during part of October to December 2025 but was unable to do so because of his illness, the sick pay attributable to those days could potentially be regarded as UK employment income.

On the other hand, if he would have been working outside the UK during that period, the corresponding sick pay should generally be treated as relating to overseas duties. If there were no scheduled assignments and he was simply on call to work in any jurisdiction, the position is less clear-cut and would need to be considered based on the particular facts and working arrangements. 

It would therefore be helpful to establish whether the employer can identify where the client was due, or expected, to work during October, November and December 2025 had he not been ill. If there were no planned assignments, we would suggest retaining evidence of this together with details of how assignments are ordinarily allocated, to support the treatment adopted.

The double tax treaty provides that employment income of a Spanish resident is generally taxable only in Spain unless the employment is exercised in the UK. Therefore, even if an element of the sick pay were regarded as relating to UK duties under the domestic legislation, the treaty position should also be considered before concluding the amount taxable in the UK.

 

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