New tax provisions appear to advantage non-UK companies over UK companies in recruiting and retaining resident but not ordinarily resident (R/NOR) taxpayers (if they offer share incentives and the employment involves overseas duties). This may be important for multinational companies and certain sectors of the economy, including the City.

Under the proposed new remittance basis rules for R/NOR taxpayers, tax on shares and share incentives granted to R/NOR employees with overseas duties will often arise only if the relevant shares or options are remitted to the UK (see Practice note, "Non-dom" tax reforms will change share incentive taxation from 6 April 2008: Potentially taxable amounts may be apportioned between UK and non-UK duties of NOR employees).

HMRC state that in their view shares in companies incorporated in the UK will be remitted here when received by an employee. They do not have plans to amend Finance Bill 2008 to prevent this. Although the automatic remittance of UK shares is not expressly set out in the Bill, there is arguably a legal basis for HMRC's view. Employee options over UK shares would also be remitted here if granted by a UK company, although the position is less clear for share options granted by a non-UK person.

The other side of the coin is that shares in non-UK companies cannot be remitted to the UK and it will be easy to ensure that options over such shares also cannot be remitted. As a result, UK income tax will only arise on the proportion of an R/NOR employee's gains from non-UK shares and options relating to overseas duties if certain additional conditions apply.

Clearly, this will be welcome to non-UK companies with R/NOR employees. However, similar UK companies may wonder why the government made such efforts to draft and consult on a new piece of UK tax law which favours non-UK companies.