(1) Chapter 2 does not apply by reason of a relevant step within section 554B if the sum of money or asset which is the subject of the step arises or derives (whether wholly or partly or directly or indirectly) from an excluded pension contribution paid by A on or after 6 April 2011.
(2) If the sum of money or asset arises or derives from the excluded pension contribution only partly, the relevant step is to be treated for the purposes of this Part as being two separate relevant steps—
(a) one in relation to the sum of money or asset so far as it arises or derives from the excluded pension contribution, and
(b) one in relation to the sum of money or asset so far as it does not arise or derive from the excluded pension contribution,
with subsection (1) applying only in relation to the separate relevant step mentioned in paragraph (a).
(3) Chapter 2 does not apply by reason of a relevant step within section 554C or 554D if the sum of money or asset which is the subject of the step—
(a) represents relevant benefits, and
(b) arises or derives (whether wholly or partly or directly or indirectly) from an excluded pension contribution paid by A.
(4) If the sum of money or asset arises or derives from the excluded pension contribution only partly, the relevant step is to be treated for the purposes of this Part as being two separate relevant steps—
(a) one in relation to the sum of money or asset so far as it arises or derives from the excluded pension contribution, and
(b) one in relation to the sum of money or asset so far as it does not arise or derive from the excluded pension contribution,
with subsection (3) applying only in relation to the separate relevant step mentioned in paragraph (a).
(5) In order to give effect to subsection (2) or (4), the sum of money or asset which is the subject of the relevant step is to be apportioned between the two separate relevant steps on a just and reasonable basis.
(6) For the purposes of this section an excluded pension contribution is a contribution—
(a) which is made to an arrangement by A by way of a payment of a sum of money,
(b) by virtue of which A acquires rights to receive relevant benefits under the arrangement (and nothing else),
(c) which is neither a relievable pension contribution nor a tax-relieved contribution, and
(d) which is not a repayment of any loan and otherwise has nothing to do with any loan and has nothing to do with a sum of money or asset which has been the subject of a relevant step within section 554C(1)(d).
(7) In this section—
“relevant benefits” has the same meaning as in Chapter 2 of Part 6, but ignoring section 393B(2)(a),
“relievable pension contribution” means a contribution in respect of which an individual is entitled to relief under section 188 of FA 2004, and
“tax-relieved contribution” has the meaning given by paragraph 3(3) of Schedule 34 to FA 2004.
554U Exclusions: pre-6 April 2006 contributions to employer-financed retirement benefit schemes
(1) This section applies if the subject of a relevant step is a sum of money or asset which has (wholly or partly) arisen or derived (directly or indirectly) from a sum of money (“the taxed sum”)—
(a) which was paid by B in accordance with an employer-financed retirement benefits scheme (within the meaning of Chapter 2 of Part 6) with a view to the provision of benefits under the scheme, and
(b) in respect of which A is taxed.
(2) For the purpose of determining whether A is taxed in respect of a sum of money, paragraph 53(3) of Schedule 36 to FA 2004 applies as it applies for the purpose of determining whether an employee is taxed for the purposes of paragraph 53(1)(b) of that Schedule.
(3) Chapter 2 does not apply by reason of the relevant step.
(4) Subsection (5) applies if the sum of money or asset which is the subject of the relevant step only partly arises or derives from the taxed sum.
(5) The relevant step is to be treated for the purposes of this Part as being two separate relevant steps—
(a) one in relation to the sum of money or asset so far as it arises or derives from the taxed sum, and
(b) one in relation to the sum of money or asset so far as it does not arise or derive from the taxed sum,
with subsection (3) applying only in relation to the separate relevant step mentioned in paragraph (a).
(6) In order to give effect to subsection (5), the sum of money or asset which is the subject of the relevant step is to be apportioned between the two separate relevant steps on a just and reasonable basis.
(7) If B is a company and is a member of a group of companies at any time (“the relevant time”), in subsection (1)(a), in relation to any sum of money paid at the relevant time, the reference to B is to be read as including a reference to any other company which is a member of that group at the relevant time.
554V Exclusions: purchases of annuities out of pension scheme rights
(1) This section applies if—
(a) an annuity contract is purchased from an insurance company wholly out of rights which A has under a pension scheme, and
(b) A's rights out of which the annuity contract is purchased are, wholly or partly, pre-6 April 2011 annuity rights.
(2) If the purchaser—
(a) takes a relevant step for the sole purpose of purchasing the annuity contract or transferring the beneficiary's rights under the annuity contract to A or a person linked with A, or
(b) on the purchase of the annuity contract, otherwise takes a relevant step within section 554B the subject of which is the beneficiary's rights under the annuity contract,
Chapter 2 does not apply by reason of the relevant step.
(3) If the insurance company—
(a) takes a relevant step for the sole purpose of selling the annuity contract, or
(b) on the sale of the annuity contract, otherwise takes a relevant step within section 554B the subject of which is a sum of money or asset representing the purchase price received for the annuity contract,
Chapter 2 does not apply by reason of the relevant step.
(4) If A's rights out of which the annuity contract is purchased are only partly pre-6 April 2011 annuity rights, any relevant step mentioned in subsection (2)(a) or (b) or (3)(a) or (b) is to be treated for the purposes of this Part as being two separate relevant steps—
(a) one in relation to the annuity contract so far as it is purchased out of rights which are pre-6 April 2011 annuity rights, and
(b) one in relation to the annuity contract so far as it is purchased out of rights which are not pre-6 April 2011 annuity rights,
with subsection (2) or (3) (as the case may be) applying only in relation to the separate relevant step mentioned in paragraph (a) of this subsection.
(5) In order to give effect to subsection (4), the sum of money or asset which is the subject of the relevant step mentioned in subsection (2)(a) or (b) or (3)(a) or (b) is to be apportioned between the two separate relevant steps on a just and reasonable basis.
(6) In this section—
“annuity contract” means a contract for the provision of an annuity—
granted for consideration in money or money's worth in the ordinary course of a business of granting annuities on human life, and
payable for a term ending at a time ascertainable only by reference to the end of a human life,
although for this purpose it does not matter that the annuity may in some circumstances end before or after the life,
“insurance company” means—
a person or EEA firm within section 275(1)(a) or (b) of FA 2004, or
a person resident in a territory outside the European Economic Area—
whose normal business includes the provision of annuities, and
who is regulated in the conduct of that business by the government of that territory or by a body established under the law of that territory for the purpose of regulating such business, and
“pre-6 April 2011 annuity rights” means rights, which accrued before 6 April 2011, specifically to receive an annuity.
(1) This section applies if—
(a) a relevant benefit is provided under a relevant scheme by way of a payment of a lump sum wholly out of rights which A has under the scheme,
(b) A's rights out of which the lump sum is paid are, wholly or partly, pre-6 April 2011 lump sum rights, and
(c) the payment of the lump sum is a relevant step within section 554C.
(2) Chapter 2 does not apply by reason of the relevant step.
(3) If A's rights out of which the lump sum is paid are only partly pre-6 April 2011 lump sum rights, the relevant step is to be treated for the purposes of this Part as being two separate relevant steps—
(a) one in relation to the lump sum so far as it is paid out of rights which are pre-6 April 2011 lump sum rights, and
(b) one in relation to the lump sum so far as it is paid out of rights which are not pre-6 April 2011 lump sum rights,
with subsection (2) applying only in relation to the separate relevant step mentioned in paragraph (a).
(4) In order to give effect to subsection (3), the lump sum is to be apportioned between the two separate relevant steps on a just and reasonable basis.
(5) In this section—
“pre-6 April 2011 lump sum rights” means rights, which accrued before 6 April 2011, specifically to receive relevant benefits by way of lump sum payments,
“relevant benefit” has the same meaning as in Chapter 2 of Part 6, and
“relevant scheme” means an employer-financed retirement benefits scheme (within the meaning of that Chapter) or a superannuation fund to which section 615(3) of ICTA applies.
554X Exclusions: transfers between certain foreign pension schemes
(1) This section applies if rights which A has under a section 390 scheme are transferred to another section 390 scheme or to an overseas pension scheme.
(2) This section also applies if—
(a) rights which A has under an overseas pension scheme are transferred to another overseas pension scheme, and
(b) some or all of the rights transferred are section 390 scheme rights.
(3) Chapter 2 does not apply by reason of—
(a) a relevant step within section 554C taken for the sole purpose of transferring the rights, or
(b) a relevant step within section 554B taken by the transferee in relation to the transferred rights on their transfer.
(4) Subsection (5) applies in relation to a transfer within subsection (2) if not all the transferred rights are section 390 scheme rights.
(5) Any relevant step mentioned in subsection (3) is to be treated for the purposes of this Part as being two separate relevant steps—
(a) one in relation to the section 390 scheme rights, and
(b) one in relation to the rest of the transferred rights,
with subsection (3) applying only in relation to the separate relevant step mentioned in paragraph (a) of this subsection.
(6) In order to give effect to subsection (5), the sum of money or asset which is the subject of the relevant step mentioned in subsection (3) is to be apportioned between the two separate relevant steps on a just and reasonable basis.
(7) Subsection (8) applies if any of the transferred rights arise or derive (directly or indirectly) from contributions to any scheme which—
(a) are paid by B on or after 6 April 2006, and
(b) are neither tax-relieved contributions nor tax-exempt provision.
(8) Any relevant step mentioned in subsection (3) is to be treated for the purposes of this Part as being two separate relevant steps—
(a) one in relation to the rights mentioned in subsection (7), and
(b) one in relation to the rest of the transferred rights,
with subsection (3) applying only in relation to the separate relevant step mentioned in paragraph (b) of this subsection.
(9) In order to give effect to subsection (8), the sum of money or asset which is the subject of the relevant step mentioned in subsection (3) is to be apportioned between the two separate relevant steps on a just and reasonable basis.
(10) If subsection (5) applies in relation to a transfer—
(a) in subsection (7) the reference to the transferred rights is to be read as a reference to the transferred section 390 scheme rights only, and
(b) in subsections (8) and (9) references to any relevant step mentioned in subsection (3) are to be read as references to the separate relevant step mentioned in subsection (5)(a).
(11) If B is a company and is a member of a group of companies at any time (“the relevant time”), in subsection (7)(a), in relation to any contribution paid at the relevant time, the reference to B is to be read as including a reference to any other company which is a member of that group at the relevant time.
(12) In this section—
“overseas pension scheme” has the same meaning as in Part 4 of FA 2004 (see section 150(7) of that Act),
“section 390 scheme” means a scheme in relation to which a claim was accepted under section 390,
“section 390 scheme rights” means rights which A has under an overseas pension scheme and which—
have been transferred to the scheme (directly or indirectly) from a section 390 scheme, or
have arisen or derived (directly or indirectly) from rights that have been so transferred, and
“tax-exempt provision” and “tax-relieved contribution” have the meaning given by paragraph 3(3) and (4) of Schedule 34 to FA 2004.
554XA Exclusions: payments in respect of a tax liability
(1) Chapter 2 does not apply by reason of a relevant step which is the payment of a sum of money if—
(a) the payment is a relevant tax payment, or
(b) where the payment is not a relevant tax payment—
(i) the payment is made to a person for the purpose of the person making a relevant tax payment,
(ii) the person makes a relevant tax payment of an amount equal to the amount of the first payment, and
(iii) the relevant tax payment is made before the end of the period of 60 days beginning with the day on which the first payment is made.
(2) “Relevant tax payment” means a payment made to Her Majesty's Revenue and Customs in respect of a relevant liability for—
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) inheritance tax, or
(d) corporation tax.
(3) But a provisional payment of tax (see section 554Z11D) is not a relevant tax payment.
(4) A liability is a “relevant liability” if—
(a) under the terms of an agreement for the discharge of the liability, or
(b) by way of a decision on an application under this section,
an officer of Revenue and Customs agrees that the liability is to be treated as arising in respect of the relevant arrangement concerned.
(5) A person may make an application to Her Majesty's Revenue and Customs for a liability to be treated, for the purposes of this section, as arising in respect of the relevant arrangement concerned.
(6) An application under this section must be made in such form and manner, and contain such information, as may be specified by, or on behalf of, the Commissioners for Her Majesty's Revenue and Customs.
(7) An officer of Revenue and Customs must notify the applicant of the decision on an application under this section.
(1) The Commissioners for Her Majesty's Revenue and Customs may by regulations provide for Chapter 2 not to apply—
(a) by reason of a relevant step falling within a specified description, or
(b) in the cases otherwise specified in the regulations.
(2) Regulations under this section may, in consequence of provision within subsection (1)—
(a) provide—
(i) for a relevant step to be treated for the purposes of this Part as if it were two or more separate relevant steps,
(ii) for the provision within subsection (1) to apply only to one or some of the separate relevant steps, and
(iii) for the sum of money or asset which is the subject of the relevant step to be apportioned between the separate relevant steps on a just and reasonable basis,
(b) make provision, in relation to cases in which Chapter 2 does not apply by reason of a relevant step by virtue of the provision within subsection (1)—
(i) for a relevant step to be treated as taking place if, subsequently, specified conditions are met or not met, and
(ii) for Chapter 2 to apply by reason of the relevant step treated as taking place, and
(c) make other provision modifying the application of any provision of this Part.
(3) Regulations under this section may contain incidental, supplemental, consequential and transitional provision and savings.
(4) Regulations under this section may have retrospective effect.
(1) This section applies for the purposes of this Part.
(2) “A” and “B” are defined in section 554A(1)(a) or, as the case may be, section 554AA(1).
(3) “Arrangement” includes any agreement, scheme, settlement, transaction, trust or understanding (whether or not it is legally enforceable).
(4) “Market value” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act.
(5) Section 170(2) to (11) of TCGA 1992 applies for the purpose of determining whether a company is a member of a group of companies.
(6) And for that purpose, section 170(2) to (11) is to be read as if for “75 per cent” (wherever occurring) there were substituted “ 51 per cent ” (with section 1154(2) of CTA 2010 applying accordingly).
(7) References to the payment of a sum of money include (in particular) references to the payment of a sum of money by way of a loan.
(8) “Pension scheme” has the same meaning as in Part 4 of FA 2004 (see section 150(1) of that Act).
(9) “Relevant step” is defined in section 554A(2) , but see also Schedule 11 to F(No. 2)A 2017.
(10) References to a relevant step which involves a sum of money are references to—
(a) a step within section 554B where the subject of the relevant step is a sum of money,
(b) a step within section 554C(1)(a) to (ab) , ...
(c) a step within section 554C(1)(d) where the subject of the relevant step is a sum of money, or
(d) a step within paragraph 1 or 1A of Schedule 11 to F(No. 2)A 2017.
(11) References to the asset which is the subject of a relevant step are, in the case of a step within section 554C(1)(e), references to the lease granted.
(12) For this purpose, the lease granted is to be treated as including any extensions of the lease, or any later lease, which by virtue of section 554C(7) or (8) is taken into account in determining the likely effective duration of the lease for the purposes of section 554C(1)(e).
(13) “Tax avoidance arrangement” means an arrangement which has a tax avoidance purpose.
(14) For the purposes of subsection (13) an arrangement has a tax avoidance purpose if subsection (15) applies to a person who is a party to the arrangement.
(15) This subsection applies to a person if the main purpose, or one of the main purposes, of the person in entering into the arrangement is the avoidance of tax or national insurance contributions.
(16) The following paragraphs apply for the purpose of determining whether any relevant step or any other step is connected with a tax avoidance arrangement—
(a) the step is connected with a tax avoidance arrangement if (for example) the step is taken (wholly or partly) in pursuance of—
(i) the tax avoidance arrangement, or
(ii) an arrangement at one end of a series of arrangements with the tax avoidance arrangement being at the other end, and
(b) it does not matter if the person taking the step is unaware of the tax avoidance arrangement.
(1) In this Part references to any person linked with A are references to—
(a) any person who is or has been connected with A,
(b) a close company in which A or a person within any other paragraph of this subsection is or has been a participator,
(c) a company in which A or a person within any other paragraph of this subsection is or has been a participator and which would be a close company if it were a UK resident company, or
(d) a company which is a 51% subsidiary of a company within paragraph (b) or (c).
(2) In applying section 993 of ITA 2007 for the purposes of subsection (1), two people living together as if they were a married couple or civil partners are treated as if they were spouses or civil partners of each other.
(3) In subsection (1) “participator”—
(a) in relation to a close company, means a person who is a participator in relation to the company for the purposes of section 455 of CTA 2010 (see sections 454 and 455(5) of that Act), and
(b) in relation to a company which would be a close company if it were a UK resident company, means a person who would be such a participator if the company were a close company.
554Z2 Value of relevant step to count as employment income
(1) If this Chapter applies by reason of a relevant step, the value of the relevant step (see section 554Z3) counts as employment income of A in respect of A's employment with B—
(a) if the relevant step is taken before A's employment with B starts, for the tax year in which the employment starts, or
(b) otherwise, for the tax year in which the relevant step is taken.
(1AA) But subsection (1) is subject to section 554Z2A (close companies).
(1A) Where the value of a relevant step would (apart from this subsection) count as employment income of more than one person—
(a) the value of the relevant step is to be apportioned between each of those persons on a just and reasonable basis, and
(b) subsection (1) applies as if the reference to the value of the relevant step in relation to A were a reference to so much of the value of the relevant step that is apportioned to A.
(2) If the relevant step gives rise to—
(a) an amount which (apart from this subsection) would be treated as earnings of A under a provision of the benefits code, or
(b) any income of A which (apart from this subsection) would be dealt with under Chapter 3 of Part 4 of ITTOIA 2005,
subsection (1) applies instead of that provision of the benefits code or Chapter 3 of Part 4 of ITTOIA 2005 (as the case may be).
(3) In particular, in a case in which the relevant step is the making of an employment-related loan (within the meaning of Chapter 7 of Part 3), the effect of subsection (2)(a) is that the loan is not to be treated for any tax year as a taxable cheap loan for the purposes of that Chapter.
(4) See paragraph 37 of Schedule 11 to F(No. 2)A 2017 for provision about the effect of subsection (2)(a) in a case in which the relevant step is within paragraph 1 of that Schedule.
554Z2A Exception to section 554Z2(1): close companies
(1) Section 554Z2(1) does not apply in the case of a relevant step if—
(a) this Chapter applies in the case of the relevant step only by reason of section 554AA (close companies),
(b) the relevant step is a step within section 554B, 554C or 554D,
(c) the relevant step gives rise to a charge to tax under either—
(i) section 455 of CTA 2010 by virtue of section 459 of that Act (loans treated as made to participator), or
(ii) section 415 of ITTOIA 2005 (release of loan to participator in a close company), and
(d) in a case within paragraph (c)(i), either the payment condition or the consent condition is met in relation to the charge under section 455 of CTA 2010.
(2) The payment condition is met in relation to a charge to tax under section 455 of CTA 2010 if—
(a) the net section 455 charge is paid in full on or before the due date, or
(b) the net section 455 charge is nil.
(3) The “net section 455 charge” means the amount of the charge to tax under section 455 of CTA 2010 less the amount of section 458 relief from that charge.
(4) In subsection (3) “section 458 relief” means relief given under section 458 of that Act—
(a) in respect of a repayment made, or a release or writing-off occurring, on or before the due date, and
(b) on a claim made on or before the due date.
(5) The consent condition is met in relation to a charge to tax under section 455 of CTA 2010 if—
(a) the charge to tax is reported, in a company tax return of B's, as required under Schedule 18 to FA 1998 (company tax returns etc),
(b) the payment condition is not met in relation to that charge, and
(c) an officer of Revenue and Customs considers that section 554Z2(1) should not apply in the case of the relevant step concerned.
(6) In this section, references to the “due date” in relation to a charge to tax under section 455 of CTA 2010 are references to the day on which the tax is due and payable (see section 455(3) of CTA 2010).
(1) If the relevant step involves a sum of money, its value is the amount of the sum.
(2) In any other case, the value of the relevant step is—
(a) the market value when the relevant step is taken of the asset which is the subject of the step, or
(b) if higher, the cost of the relevant step.
(3) Subsection (2)(a) is subject to sections 437 and 452.
(4) Subsection (2)(b) is to be ignored if—
(a) the relevant step is within section 554C(1)(c), and
(b) any of Chapters 2 to 4A of Part 7 apply by virtue of the acquisition.
(5) Subsection (2)(b) is also to be ignored if section 554Z7 applies.
(6) In subsection (2)(b) the reference to the cost of the relevant step is to the expense incurred in connection with the relevant step (including a proper proportion of any expense relating partly to the relevant step and partly to other matters) by the person or persons at whose cost the relevant step is taken.
(7) Subsections (1) and (2) are subject to sections 554Z4, 554Z5, 554Z6, 554Z7 and 554Z8, which, so far as applicable, are to be applied in that order.
(1) After the value of the relevant step is determined under section 554Z3, the particular tax year or years which the value of the relevant step is “for” are to be determined.
(2) For this purpose, apply sections 16(1) to (4) and 17(1) to (3) as if the value of the relevant step were general earnings.
(3) Subsection (4) applies if the value of the relevant step, or a part of it, is “for”—
(a) a tax year for which A is non-UK resident, or
(b) a tax year that is a split year as respects A.
(4) The value, or the part of it, is to be reduced—
(a) in a case within subsection (3)(a), by so much of the value, or the part of it, as is not in respect of UK duties, and
(b) in a case within subsection (3)(b), by so much of the value, or the part of it, as is both—
(i) attributable to the overseas part of the tax year, and
(ii) not in respect of UK duties.
(5) The extent to which—
(a) the value, or the part of it, is not in respect of UK duties, or
(b) so much of the value, or the part of it, as is attributable to the overseas part of the tax year is not in respect of UK duties,
is to be determined on a just and reasonable basis.
(5A) Any attribution required for the purposes of subsection (4)(b)(i) is to be done on a just and reasonable basis.
(5B) “UK duties” means duties performed in the United Kingdom.
(6) This section does not change the tax year for which the value of the relevant step counts as employment income under section 554Z2(1).
(7) Subsections (8) and (9) apply if—
(a) the relevant step is the payment of a lump sum,
(b) the payment of the lump sum is the provision of a relevant benefit under an employer-financed retirement benefits scheme, and
(c) the person by whom the lump sum is received is resident in the United Kingdom in the tax year in which the lump sum is received.
(8) If the lump sum is wholly in respect of rights which have accrued on or after 6 April 2017, there is no reduction under subsection (4).
(9) If the lump sum is wholly or partly in respect of rights which accrued before 6 April 2017, the amount of any reduction under subsection (4) is given by—
R × A LS
where—
A is so much of the lump sum as is in respect of rights which accrued before 6 April 2017,
LS is the amount of the lump sum, and
R is the amount which (ignoring this subsection) is given by subsection (4) as the amount of the reduction.
(10) In subsection (7)—
“employer-financed retirement benefits scheme” has the same meaning as in Chapter 2 of Part 6 (see section 393A), and
“relevant benefit” has the same meaning as in that Chapter (see section 393B).
(1) This section applies if A is temporarily non-resident.
(2) Any relevant step within subsection (3) is to be treated for the purposes of section 554Z2 as if it were taken in the period of return.
(3) A relevant step is within this subsection if—
(a) it is the payment of a lump sum to a relevant person (see section 554C(2)),
(b) the lump sum is a relevant benefit provided under a relevant scheme,
(c) the step is taken in the temporary period of non-residence, and
(d) ignoring this section—
(i) no charge to tax arises by virtue of section 554Z2 by reason of the step, but
(ii) such a charge would arise if the existence of any double taxation relief arrangements were disregarded.
(4) Subsection (3)(d)(i) includes a case where the charge could be prevented by making a DTR claim, even if no claim is in fact made.
(5) Nothing in any double taxation relief arrangements is to be read as preventing A from being chargeable to income tax in respect of any relevant step treated by virtue of this section as taken in the period of return (or as preventing a charge to that tax from arising as a result).
(6) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains—
(a) when an individual is to be regarded as “temporarily non-resident”, and
(b) what “the temporary period of non-residence” and “the period of return” mean.
(7) In this section—
“double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010;
“DTR claim” means a claim for relief under section 6 of that Act;
“relevant benefit” has the same meaning as in Chapter 2 of Part 6;
“relevant scheme” means an employer-financed retirement benefits scheme (within the meaning of that Chapter) or a superannuation fund to which section 615(3) of ICTA applies.
554Z5 Overlap with money or asset subject to earlier tax liability
(1) This section applies if there is overlap between—
(a) the sum of money or asset (“sum or asset P”) which is the subject of the relevant step, and
(b) a sum of money or asset (“sum or asset Q”) by reference to which, on an occasion that occurred before the relevant step is taken, A became subject to a liability for income tax (“the earlier tax liability”).
(2) But this section does not apply where—
(a) the earlier tax liability arose by reason of a step within section 554B taken in a tax year before 6 April 2011, and
(b) the value of the relevant step is (or if large enough would be) reduced under paragraph 59 of Schedule 2 to FA 2011.
(3) Where either the payment condition or the liability condition is met, the value of the relevant step is reduced (but not below nil) by an amount equal to so much of the sum of money, or (as the case may be) the value of so much of the asset, as is within the overlap.
(4) The payment condition is that, at the time the relevant step is taken—
(a) the earlier tax liability has become due and payable, and
(b) either—
(i) it has been paid in full, or
(ii) the person liable for the earlier tax liability has agreed terms with an officer of Revenue and Customs for the discharge of that liability.
(5) The liability condition is that, at the time the relevant step is taken, the earlier tax liability is not yet due and payable.
(6) For the purposes of this section there is overlap between sum or asset P and sum or asset Q so far as it is just and reasonable to conclude that—
(a) they are the same sum of money or asset, or
(b) sum or asset P directly, or indirectly, represents sum or asset Q.
(7) Subsection (8) applies where—
(a) the earlier tax liability arose by virtue of the application of this Chapter by reason of an earlier relevant step (the “earlier relevant step”), and
(b) reductions were made under this section to the value of the earlier relevant step.
(8) Where this subsection applies, sum or asset P is treated as overlapping with any other sum of money or asset so far as the other sum of money or asset was treated as overlapping with sum or asset Q for the purposes of this section.
(9) In subsection (1)(b)—
(a) the reference to A includes a reference to any person linked with A, and
(b) the reference to a liability for income tax does not include a reference to a liability for income tax arising by reason of section 175 (benefit of taxable cheap loan treated as earnings).
(10) In subsection (3) the reference to the value of the relevant step is a reference to that value—
(a) after any reductions made to it under section 554Z4, this section or 554Z7, but
(b) before any reductions made to it under section 554Z6 or 554Z8.
(11) For the purposes of subsection (4)(b)(i) a person is not to be regarded as having paid any tax by reason only of making—
(a) a payment on account of income tax,
(b) a payment that is treated as a payment on account under section 223(3) of FA 2014 (accelerated payments), or
(c) a payment pending determination of an appeal made in accordance with section 55 of TMA 1970.
(12) See paragraphs 4(5) and (6) and 12(4) and (5) of Schedule 11 of F(No. 2)A 2017) for provision about the effect of subsection (3) in certain cases where the relevant step is within paragraph 1 of that Schedule.
(1) This section applies if the relevant step gives rise to relevant earnings of A from A's employment with B—
(a) which are, in accordance with section 16 and (if applicable) section 17, “for” a tax year in which A is UK resident (and, in the case of a tax year that is a split year as respects A, are not “excluded” by virtue of section 15(1A)(a) and (b)(i)), or
(b) which are, in accordance with section 29 and (if applicable) section 30, “for” a tax year in which A is non-UK resident but which are in respect of duties performed in the United Kingdom for the purposes of section 27(1)(a).
(2) The value of the relevant step (after any reductions under section 554Z4 or 554Z5) is reduced (but not below nil) by the amount of the relevant earnings.
(3) For the purposes of this section the following are “relevant” earnings—
(a) earnings within Chapter 1 of Part 3,
(b) amounts treated as earnings under Chapter 12 of Part 3, and
(c) a deemed employment payment under section 50 or any part of such a payment.
(4) But anything which is exempt income, or which falls within Chapter 3 of Part 4 of ITTOIA 2005, is not “relevant”.
(1) Subsection (3) applies if—
(a) the relevant step is a step within section 554B (other than one treated as being taken by section 554L(5), (7) or (9) or 554M(4), (6) or (8)),
(b) B is a company,
(c) there is an arrangement (“B's employee share scheme”) under which, in respect of A's employment with B, a right (“a relevant share option”) may be granted to A—
(i) to acquire relevant shares, or
(ii) to receive a sum of money the amount of which is to be determined by reference to the market value of any relevant shares at the time the sum is to be paid,
(d) in order to exercise the relevant share option so as—
(i) to acquire the relevant shares, or
(ii) to receive the sum of money,
A would, under the terms of the option, have to pay a sum of money the amount of which can be determined at the time of the grant of the option,
(e) the subject of the relevant step is relevant shares (“earmarked shares”) which are earmarked, or otherwise start being held, solely with a view to providing shares, or paying a sum of money, pursuant to—
(i) a relevant share option granted to A under B's employee share scheme as mentioned in paragraph (c) in relation to which the requirements of paragraph (d) are met, or
(ii) a relevant share option which is expected to be granted to A under B's employee share scheme as mentioned in paragraph (c) and in relation to which the requirements of paragraph (d) would be met,
(f) the number of relevant shares of any type which are earmarked shares does not exceed the maximum number of relevant shares of that type which might reasonably be expected to be needed for providing shares, or paying a sum of money, pursuant to the relevant share option which is granted or expected to be granted, and
(g) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
(2) Subsection (3) also applies if—
(a) the relevant step is a step treated as being taken by section 554L(9) or 554M(8), and
(b) in order to exercise the relevant share option to which the step relates so as—
(i) to acquire the shares which are the subject of the relevant step, or
(ii) to receive the sum of money determined by reference to the market value of those shares,
A would, under the terms of the option, have to pay a sum of money the amount of which can be determined at the time the option is granted.
(3) The value of the relevant step (after any reductions under sections 554Z4 to 554Z6) is to be reduced (but not below nil) by—
(a) the amount of the sum of money which A would have to pay as mentioned in subsection (1)(d) or (2)(b), or
(b) if the value of the relevant step was reduced under section 554Z4, X% of the amount of that sum of money.
(4) In subsection (3)(b) “X%” means the proportion of the value of the relevant step (as determined under section 554Z3) left after the reduction under section 554Z4.
(5) If subsection (3) applies by virtue of subsection (1) and the relevant step is taken in relation to an expected grant of a relevant share option as mentioned in subsection (1)(e)(ii), subsection (7) applies if—
(a) the grant is not made before the end of the date (“the final grant date”) falling immediately after the period of three months starting with the date on which the relevant step is taken, and
(b) as at the end of the final grant date, any of the earmarked shares continue to be held by or on behalf of P solely on the basis mentioned in subsection (1)(e).
(6) If subsection (3) applies by virtue of subsection (1), subsection (7) also applies if at any time after the taking of the relevant step—
(a) any of the earmarked shares cease to be held by or on behalf of P solely on the basis mentioned in subsection (1)(e), but
(b) the shares continue to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).
(7) This Part has effect as if a relevant step within section 554B were taken at the end of the final grant date or when the shares cease to be held as mentioned in subsection (6)—
(a) the subject of which is the earmarked shares mentioned in subsection (5)(b) or (6), and
(b) by reason of which this Chapter is to apply (subject only to section 554A(4)).
(8) In this section “relevant shares” has the meaning given by section 554I(4).
554Z8 Cases where consideration given for relevant step
(1) Subsection (2) applies if—
(a) the relevant step is a step within section 554C(1)(a) to (c),
(b) the relevant step is for consideration given by A in the form of the transfer of an asset to P from A,
(c) the transfer by A of the asset is made before, or at or about, the time the relevant step is taken and is not by way of a loan, and
(d) there is no connection (direct or indirect) between the transfer by A of the asset and a tax avoidance arrangement.
(2) The value of the relevant step (after any reductions under sections 554Z4 to 554Z6) is reduced (but not below nil) by—
(a) the market value of the asset transferred by A at the time of its transfer, or
(b) if the value of the relevant step was reduced under section 554Z4, X% of that market value.
(3) For the purposes of subsection (1)(d) it is (in particular) to be assumed that the transfer by A of the asset is connected with a tax avoidance arrangement if—
(a) before the transfer, the asset was transferred to A by another person by way of a loan, or
(b) the asset is, or carries with it, any rights or interests under the relevant arrangement or any arrangement which is connected (directly or indirectly) with the relevant arrangement.
(4) In subsection (3)(b) “the relevant arrangement” has the meaning given by section 554A(1)(b).
(5) Subsection (6) applies if—
(a) the relevant step is a step within section 554C(1)(b) or (c) or (e) or 554D and does not also involve a sum of money,
(b) the relevant step is for consideration given by A in the form of the payment of a sum of money to P by A, ...
(c) the payment is made before, or at or about, the time the relevant step is taken, and
(d) there is no connection (direct or indirect) between the payment and a tax avoidance arrangement.
(6) The value of the relevant step (after any reductions under sections 554Z4 to 554Z6) is reduced (but not below nil) by—
(a) the amount of the consideration given, or
(b) if the value of the relevant step was reduced under section 554Z4, X% of the amount of that consideration.
(7) In subsections (2)(b) and (6)(b) “X%” means the proportion of the value of the relevant step (as determined under section 554Z3) left after the reduction under section 554Z4.
(8) In this section references to A include references to any person linked with A.
554Z9 Remittance basis: A did not meet section 26A requirement
(1) Subsections (2) and (2A) apply if—
(a) the value of the relevant step, or a part of it, is “for” a tax year (“the relevant tax year”) as determined under section 554Z4,
(b) section 809B, 809D or 809E of ITA 2007 (remittance basis) applied to A for the relevant tax year,
(c) A did not meet the requirement of section 26A for the relevant tax year (reading references there to the employee as references to A),
(d) A's employment with B in the relevant tax year was employment with a foreign employer, and
(e) the duties of A's employment with B in the relevant tax year were performed wholly outside the United Kingdom.
(1A) But subsections (2) and (2A) do not apply if section 24A applies in relation to A's employment with B for the relevant tax year.
(2) Except in a case within subsection (2A), A's employment income by virtue of section 554Z2(1), or the relevant part of it, is “taxable specific income” in a tax year so far as it is remitted to the United Kingdom in that year.
(2A) Where the relevant step is within paragraph 1 of Schedule 11 to F(No. 2)A 2017, A's employment income by virtue of section 554Z2(1), or the relevant part of it, is “taxable specific income” in the tax year in which the relevant step is treated as being taken so far as the income is remitted to the United Kingdom in that tax year or in any previous tax year.
(3) For the purposes of subsections (2) and (2A), any income which is remitted before A's employment with B starts is treated as being remitted in the tax year in which the employment starts.
(4) Subsection (5) applies if in the relevant tax year—
(a) A has associated employments, and
(b) the duties of the associated employments are not performed wholly outside the United Kingdom.
(5) The amount of A's employment income to which subsection (2) or (2A) applies is limited to such amount as is just and reasonable, having regard to—
(a) A's employment income for the relevant tax year from all associated employments, together with A's employment with B,
(b) the proportion of that income (or of so much of it as is attributable to the UK part of the relevant tax year, if it was a split year as respects A) which is general earnings to which section 22 applies or is employment income to which section 41A applies,
(c) the nature of and time devoted to the duties performed outside the United Kingdom, and those performed in the United Kingdom, in the relevant tax year (or the UK part of it), and
(d) all other relevant circumstances,
and, if the amount of A's employment income to which subsection (2) or (2A) would otherwise apply exceeds that limit, the amount of A's employment income to which subsection (2) or (2A) (as the case may be) applies is instead to be such amount as is just and reasonable.
(6) In this section “associated employments” means employments with B or with employers associated with B; and section 24(5) and (6) applies for the purposes of this subsection.
554Z10 Remittance basis: A met section 26A requirement
(1) Subsections (2) and (2A) apply if—
(a) the value of the relevant step, or a part of it, is “for” a tax year (“the relevant tax year”) as determined under section 554Z4,
(b) section 809B, 809D or 809E of ITA 2007 (remittance basis) applied to A for the relevant tax year, and
(c) A met the requirement of section 26A for the relevant tax year (reading references there to the employee as references to A).
(2) Except in a case within subsection (2AA), The overseas portion of (as the case may be)—
(a) A's employment income by virtue of section 554Z2(1), or
(b) the relevant part of A's employment income by virtue of that section,
is “taxable specific income” in a tax year so far as the overseas portion is remitted to the United Kingdom in that year.
(2AA) Where the relevant step is within paragraph 1 of Schedule 11 to F(No. 2)A 2017, the overseas portion of (as the case may be)—
(a) A's employment income by virtue of section 554Z2(1), or
(b) the relevant part of A's employment income by virtue of that section,
is “taxable specific income” in the tax year in which the relevant step is treated as being taken so far as the overseas portion is remitted to the United Kingdom in that tax year or in any previous tax year.
(2A) The overseas portion” of A's employment income by virtue of section 554Z2(1), or of the relevant part of that income, is so much of that income, or of the relevant part of it, as is not in respect of UK duties.
(2B) “UK duties” means duties performed in the United Kingdom.
(3) For the purposes of this section, any income which is remitted before A's employment with B starts is treated as being remitted in the tax year in which the employment starts.
(4) The extent to which—
(a) the employment income, or the relevant part of it, is not in respect of UK duties, or
(b) so much of the employment income, or of the relevant part of it, as is attributable to the UK part of the relevant tax year is not in respect of UK duties,
is to be determined on a just and reasonable basis.
(1) Subsection (2) applies if section 554Z9(1)(a) or 554Z10(1)(a) applies to a part (“the relevant part”) of the value of the relevant step.
(2) Any reduction to the value of the relevant step to be made under any of sections 554Z5 to 554Z8 is to be made so that X% of the reduction is made by way of reducing the relevant part.
(3) In subsection (2) “X%” means the proportion of the value of the relevant step represented by the relevant part before any reductions under any of sections 554Z5 to 554Z8.
(4) For the purpose of applying section 554Z9(2) or (2A) or 554Z10(2) or (2AA) , see Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc.
(5) If the relevant step involves a sum of money, for the purposes of that Chapter the sum of money is treated as deriving from A's employment income (or the relevant part of it) to which section 554Z9(2) or (2A) or 554Z10(2) or (2AA) applies.
(6) In any other case, for the purposes of that Chapter the asset which is the subject of the relevant step is treated as deriving from A's employment income (or the relevant part of it) to which section 554Z9(2) or (2A) or 554Z10(2) or (2AA) applies.
(7) Subsection (8) applies if—
(a) after the relevant step is taken, there is another relevant step (“the later relevant step”) by reason of which this Chapter applies in respect of A's employment with B, and
(b) within the meaning of section 554Z5, there is overlap between the sum of money or asset (“sum or asset R”) which is the subject of the relevant step and the sum of money or asset (“sum or asset S”) which is the subject of the later relevant step.
(8) Except so far as, in any event—
(a) sum or asset S and sum or asset R are the same sum of money or asset, or
(b) sum or asset S derives from sum or asset R,
for the purposes of Chapter A1 of Part 14 of ITA 2007 sum or asset S is treated, to the extent of the overlap, as deriving from sum or asset R.
(9) Subsections (10) and (11) apply if—
(a) the relevant tax year within the meaning of section 554Z9 or 554Z10 is the tax year 2007-08 or any earlier tax year, and
(b) A—
(i) was UK resident in that year, but
(ii) was not domiciled in the United Kingdom, or was not ordinarily UK resident, in that year.
(10) Section 554Z9 or 554Z10 (as the case may be) applies as if section 809B of ITA 2007 applied to A for the relevant tax year.
(11) In section 554Z9(1)(d) the reference to a foreign employer is to be read as not including a person resident in the Republic of Ireland.
(1) This section applies if A is temporarily non-resident.
(2) Any amount within subsection (3) is to be treated for the purposes of section 554Z9(2) or (2A) or (as the case may be) 554Z10(2) or (2AA) as if it were remitted to the United Kingdom in the period of return.
(3) An amount is within this subsection if—
(a) it is all or part of a relevant benefit provided to a relevant person (see section 554C(2)) under a relevant scheme,
(b) it is provided in the form of the lump sum,
(c) it is remitted to the United Kingdom in the temporary period of non-residence, and
(d) ignoring this section—
(i) no charge to tax arises by virtue of section 554Z9(2) or 554Z10(2) in respect of it, but
(ii) such a charge would arise by virtue of one of those sections if the existence of any double taxation relief arrangements were disregarded.
(4) Subsection (3)(d)(i) includes a case where the charge could be prevented by making a DTR claim, even if no claim is in fact made.
(5) Nothing in any double taxation relief arrangements is to be read as preventing A from being chargeable to income tax in respect of any income treated by virtue of this section as remitted to the United Kingdom in the period of return (or as preventing a charge to that tax from arising as a result).
(6) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains—
(a) when an individual is to be regarded as “temporarily non-resident”, and
(b) what “the temporary period of non-residence” and “the period of return” mean.
(7) In this section—
“double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010;
“DTR claim” means a claim for relief under section 6 of that Act;
“relevant benefit” has the same meaning as in Chapter 2 of Part 6;
“relevant scheme” means an employer-financed retirement benefits scheme (within the meaning of that Chapter) or a superannuation fund to which section 615(3) of ICTA applies;
“remitted to the United Kingdom” has the same meaning as in Chapter A1 of Part 14 of ITA 2007.
554Z11B Earlier income tax liability: application of section 554Z11C
(1) Section 554Z11C applies if the conditions in subsections (2) and (3) are met.
(2) The first condition is that there is overlap between—
(a) the sum of money or asset (“sum or asset P”) which is the subject of the relevant step, and
(b) a sum of money or asset (“sum or asset Q”) by reference to which, on an occasion that occurred before the relevant step is taken, A became subject to a liability for income tax (“the earlier tax liability”).
(3) The second condition is that at the time the relevant step is taken—
(a) an amount is payable by a person (the “liable person”) in respect of the earlier tax liability, but the whole or part of that amount is unpaid and not otherwise accounted for, and
(b) the liable person has not agreed any terms with an officer of Revenue and Customs for the discharge of the earlier tax liability.
(4) For the purposes of this section there is overlap between sum or asset P and sum or asset Q so far as it is just and reasonable to conclude that—
(a) they are the same sum of money or asset, or
(b) sum or asset P directly, or indirectly, represents sum or asset Q.
(5) In subsection (2)(b)—
(a) the reference to A includes a reference to any person linked with A, and
(b) the reference to a liability for income tax does not include a reference to a liability for income tax arising by reason of section 175 (benefit of taxable cheap loan treated as earnings).
554Z11C Earlier income tax liability: treatment of payments
(1) In this section—
(a) “the earlier charge” means so much of the earlier tax liability as relates to the overlap between sum or asset P and sum or asset Q, and
(b) “the Chapter 2 overlap charge” means so much of the Chapter 2 tax liability as relates to the overlap between sum or asset P and sum or asset Q.
(2) The amount of a tax liability that relates to the overlap between sum or asset P and sum or asset Q is to be determined on a just and reasonable basis.
(3) Subsection (4) applies where, after the relevant step is taken, an amount (the “earlier charge paid amount”) is paid in respect of all or part of—
(a) the earlier charge, or
(b) any late payment interest in respect of the charge.
(4) An amount equal to the earlier charge paid amount is treated as a payment on account of—
(a) the Chapter 2 overlap charge, or
(b) if that charge has been paid in full, any late payment interest payable in respect of the charge.
(5) Except where subsection (10) applies, subsection (6) applies where an amount (the “Chapter 2 paid amount”) is paid in respect of all or part of—
(a) the Chapter 2 overlap charge, or
(b) any late payment interest in respect of the charge.
(6) An amount equal to the Chapter 2 paid amount is treated as a payment on account of—
(a) the earlier charge, or
(b) if the earlier charge has been paid in full, any late payment interest payable in respect of the charge.
(7) Subsection (10) applies where—
(a) the condition in 554Z11B(2) is met because there is overlap between sum or asset P and each of two or more items within section 554Z11B(2)(b), and
(b) an amount (the “Chapter 2 aggregate paid amount”) is paid in respect of all or part of—
(i) two or more relevant Chapter 2 overlap charges, or
(ii) any late payment interest in respect of any of those charges.
(8) In subsection (7)(b), “relevant Chapter 2 overlap charge” means so much of the Chapter 2 tax liability as relates to the overlap between sum or asset P and one of those items within section 554Z11B(2)(b).
(9) For the purposes of subsection (10)—
(a) in the case of each of those items, the “earlier charge” in respect of the overlap between sum or asset P and the item is so much of the liability mentioned in section 554Z11B(2)(b) in the case of the item as relates to the overlap, and
(b) the Chapter 2 aggregate paid amount is to be allocated, in such proportions as are just and reasonable in all the circumstances, between the earlier charges given by paragraph (a).
(10) The amount allocated to an earlier charge under subsection (9) is treated as a payment on account of—
(a) the earlier charge to which it is allocated, and
(b) if the earlier charge has been paid in full, any late payment interest payable in respect of the charge.
(11) In this section—
“late payment interest” means interest payable under—
section 86 of TMA 1970,
section 101 of FA 2009, or
regulation 82 of the Income Tax (Pay As You Earn) Regulations 2003 (S.I. 2003/2682);
“Chapter 2 tax liability” means the liability for income tax arising by virtue of the application of Chapter 2 by reason of the relevant step.
554Z11D Earlier income tax liability: provisional payments of tax
(1) Subsection (2) applies for the purposes of—
(a) section 554Z11B(3)(a), and
(b) section 554Z11C(3), (4)(b), (7)(b) and (10)(b).
(2) A person is not to be regarded as having paid, or otherwise accounted for, any tax by reason only of making a provisional payment of tax, except in accordance with an application granted under section 554Z11E.
(3) In this Part, “provisional payment of tax” means—
(a) a payment on account of income tax,
(b) a payment that is treated as a payment on account under section 223(3) of FA 2014 (accelerated payments), or
(c) a payment pending determination of an appeal made in accordance with section 55 of TMA 1970.
(4) The reference in subsection (3)(a) to a payment on account of income tax does not include a reference to a payment treated under section 554Z11C as a payment on account of a tax liability.
554Z11E Application for provisional payments to be treated as payment of tax
(1) A person may make an application to Her Majesty's Revenue and Customs for a provisional payment of tax to be treated for the purposes of section 554Z11C as—
(a) an earlier charge paid amount,
(b) a Chapter 2 paid amount, or
(c) a Chapter 2 aggregate paid amount.
(2) Where an application under subsection (1) is granted, the provisional payment of tax to which it relates may not be repaid.
(3) An application for approval must be made in such form and manner, and contain such information, as may be specified by, or on behalf of, the Commissioners for Her Majesty's Revenue and Customs.
(4) An officer of Revenue and Customs must notify the applicant of the decision on an application.
554Z11F Provisional payments of tax: further provision
(1) This section applies in a case to which section 554Z11C applies (see section 554Z11B(1)).
(2) If a provisional payment of tax is made in respect of an earlier charge in relation to an overlap, it is to be treated as also being made in respect of the Chapter 2 overlap charge in relation to the overlap.
(3) If a provisional payment of tax is made in respect of a Chapter 2 overlap charge in relation to an overlap, it is to be treated as also being made in respect of the earlier charge in relation to the overlap.
(4) If section 554Z11C(10) applies in a case (see section 554Z11C(7)) and a provisional payment of tax is made in respect of two or more relevant Chapter 2 overlap charges—
(a) the amount of the provisional payment of tax is to be allocated, in such proportions as are just and reasonable in all the circumstances, between those relevant Chapter 2 overlap charges, and
(b) a provisional payment of tax, equal to the amount allocated to the relevant Chapter 2 overlap charge relating to any particular overlap, is to be treated as also being made in respect of the earlier charge given by section 554Z11C(9) in respect of that overlap.
(5) Subsection (6) applies if—
(a) the provisional payment of tax is repaid, and
(b) late payment interest on the earlier charge or the Chapter 2 overlap charge would have accrued during the relevant period if the provisional payment of tax had not been made.
(6) The late payment interest mentioned in subsection (5) is treated as having accrued as if the provisional payment of tax had not been made.
(7) For the purposes of subsection (5), the “relevant period” is the period beginning on the day on which the provisional payment of tax is made and ending with the day on which the repayment is made.
554Z11G Earlier income tax liability: supplementary provision
(1) This section applies in a case to which section 554Z11C applies (see section 554Z11B(1)).
(2) Subsection (3) applies where an employer is treated by virtue of section 687A or 695A as making a payment of income (“the notional payment”) by reason of the value of the relevant step, of which sum or asset P is the subject, counting as employment income.
(3) The reference in section 222 (payments by employer on account of tax where deduction not possible) to the notional payment is to be treated as a reference to that payment reduced by an amount equal to so much of the sum of money or (as the case may be) the value of so much of the asset—
(a) as is within the overlap, and
(b) in relation to which an amount is treated under section 554Z11C as a payment on account of either the earlier charge or the Chapter 2 overlap charge.
(3) Subsection (4) applies for the purposes of sections 65(5)(b) and 70(3)(b) of the Inheritance Tax Act 1984 (tax relief for payments which are income of a person for income tax purposes etc).
(4) The value of the relevant step of which sum or asset P is the subject is to be treated as reduced by an amount equal to so much of the sum of money or (as the case may be) the value of so much of the asset —
(a) as is within the overlap, and
(b) in relation to which an amount is treated under section 554Z11C as a payment on account of either the earlier charge or the Chapter 2 overlap charge.
(1) Subsection (3), (4) or (5) (as the case may be) applies if the relevant step is a step within section 554C , by virtue of subsection (1)(a) or (b) to (e) of that section, or 554D and—
(a) the relevant step is taken on or after A's death, or
(b) if relevant, any of A's employment income by virtue of section 554Z2(1) is remitted to the United Kingdom on or after A's death.
But none of those subsections applies if A's employment with B never started before A's death.
(2) In subsections (3) to (5) “the relevant person” means the relevant person (within the meaning of section 554C(1) or 554D(1) or (2)) in relation to the relevant step.
(3) If the relevant person is A, A's personal representatives are liable for, as the case may be, the income tax on—
(a) A's employment income by virtue of section 554Z2(1), or
(b) so much of that income as is remitted.
(4) If the relevant person is an individual other than A, the amount which, as the case may be—
(a) counts as employment income of A, or
(b) is remitted,
is to count as an amount of employment income of the relevant person for the tax year in which the relevant step is taken or the income is remitted.
(5) If the relevant person is not an individual, the relevant taxable person is chargeable to income tax on the amount which, as the case may be—
(a) counts as employment income of A, or
(b) is remitted.
(6) In subsection (5) “the relevant taxable person” is to be read as follows—
(a) if the person (or any of the persons) who took the relevant step is UK resident, “the relevant taxable person” is the person (or each of the UK resident persons) who took the relevant step,
(b) if paragraph (a) does not apply and B is still alive or in existence when the relevant step is taken, “the relevant taxable person” is B, or
(c) if neither paragraph (a) nor paragraph (b) applies, “the relevant taxable person” is the non-UK resident person (or each of the non-UK resident persons) who took the relevant step.
(7) For the purposes of subsection (5)—
(a) the rate of tax is the rate applying for the purposes of section 394(2) (see section 394(4)) at the time of the relevant step or remittance of income, and
(b) the tax is charged for the tax year in which the relevant step is taken or the income is remitted.
(8) If there is more than one relevant person in relation to the relevant step, the amount which, as the case may be—
(a) counts as employment income of A, or
(b) is remitted,
is to be apportioned between the relevant persons on a just and reasonable basis with subsections (3) to (5) applying accordingly.
(9) Section 554Z4A and section 554Z11A apply for the purposes of subsection (4) as for the purposes of section 554Z2 and section 554Z9(2) or 554Z10(2) respectively (reading references in sections 554Z4A and 554Z11A to “A” as references to “the relevant person”).
(10) But those sections do not apply for the purposes of subsection (4) if the relevant person's temporary period of non-residence began before A died.
(1) This section applies if—
(a) after the relevant step is taken, another event (“the later event”) occurs,
(b) other than by virtue of—
(i) this Chapter,
(ii) Chapters 2 to 5 of Part 7, or
(iii) Part 9,
the later event would (apart from this section) give rise to a liability for income tax of A or any other person on an amount (“the later amount”), and
(c) it is just and reasonable for this section to apply in order to avoid a double charge to income tax in respect of the sum of money or asset which is the subject of the relevant step.
(2) So far as it is just and reasonable in order to avoid a double charge to income tax as mentioned in subsection (1)(c), there is to be no liability to income tax on the later amount by virtue of the later event.
554Z14 Relief where earmarking not followed by further relevant step
(1) An application for relief may be made by A (or, if A has died, A's personal representatives) to an officer of Revenue and Customs if—
(a) this Chapter has applied by reason of a relevant step (“the original relevant step”) within section 554B taken by a person (“P”),
(b) there occurs an event (“the relevant event”) which is not a relevant step in relation to a relevant sum or asset,
(c) by reason of the relevant event no further relevant step is or will be taken by P or any other person in relation to any relevant sum or asset, and
(d) there is no connection (direct or indirect) between the relevant event and a tax avoidance arrangement.
(2) In section 554Z(15) the reference to the avoidance of tax includes (in particular) a reference to the avoidance of tax by way of obtaining relief under this section.
(3) In subsection (1) “relevant sum or asset” means—
(a) the sum of money or asset which is the subject of the original relevant step, or
(b) a sum of money or asset which (directly or indirectly) has arisen or derived, or may arise or derive, from the sum of money or asset mentioned in paragraph (a).
(4) The application for relief must be made within four years from the time when the relevant event occurs.
(5) If an officer of Revenue and Customs is satisfied that the requirements in subsection (1) are met, the officer must give such relief as the officer considers just and reasonable (if any) in respect of income tax paid on any previously charged amount.
(6) In subsection (5) “previously charged amount” means—
(a) the amount which counted as employment income of A under this Chapter as a result of this Chapter applying by reason of the original relevant step, or
(b) any amount treated by section 222 as earnings of A in relation to the notional payment (within the meaning of that section) which B is treated as having made by virtue of the original relevant step.
(7) Subsection (8) applies if, by virtue of this Chapter having applied by reason of the original relevant step, any tax liability of A or any other person arising from another event is reduced (including to nil) by virtue of section 554Z5 or 554Z13 or otherwise.
(8) In determining what is a just and reasonable amount of relief, the officer of Revenue and Customs must have regard (in particular) to the reduction in the tax liability and reduce the amount of relief which would otherwise have been given accordingly (including to nil).
(9) The relief is to be given by repayment or otherwise as appropriate.
(10) In relation to times after the relief is given, the Tax Acts have effect as if this Chapter had never applied by reason of the original relevant step.
The following provisions apply for the purposes of this Chapter—
(a) section 38 (but as if references to general earnings were to the value of the relevant step or a part of it),
(b) section 39(1) and (2),
(c) section 40 (but as if in subsections (3) and (4) references to section 24(1)(b) were to section 554Z9(4)(b)), and
(d) section 41 (but as if references to general earnings were to the value of the relevant step or a part of it).
(1) This Chapter applies if there is an undertaking (“the relevant undertaking”) that a contribution to which subsection (2) would apply will be paid.
(2) This subsection applies to a contribution if—
(a) the contribution is paid to an arrangement which is not a registered pension scheme,
(b) in connection with that arrangement (directly or indirectly), relevant benefits are to be provided (directly or indirectly) out of the contribution by a relevant third person,
(c) the provision of the relevant benefits would be a relevant step, and
(d) the contribution is neither a tax-relieved contribution nor tax-exempt provision.
(3) In subsection (2)—
“relevant benefits” has the same meaning as in Chapter 2 of Part 6, but ignoring section 393B(2)(a),
“relevant third person” means a person within section 554A(7)(a) to (c) (ignoring this Chapter), and
“tax-exempt provision” and “tax-relieved contribution” have the meaning given by paragraph 3(3) and (4) of Schedule 34 to FA 2004.
(4) In this Chapter references to an undertaking include references to—
(a) an undertaking which is not legally enforceable, and
(b) an undertaking which is to be performed only on or following the meeting of a condition (including a condition which might never be met).
554Z17 Employer etc to be treated as relevant third person etc
(1) If B takes a step within section 554Z18 or 554Z19, Chapters 1 and 2 have effect in relation to the step—
(a) as if B were a relevant third person for the purposes of section 554A(1)(d), and
(b) as if the step were a relevant step within section 554B (if it would not otherwise be).
(2) For the purpose of determining whether Chapter 2 applies by reason of the step, Chapter 1 has effect—
(a) as if sections 554F to 554O, 554S to 554U, 554W and 554X were omitted,
(b) if the step is within section 554Z18, as if sections 554Q(2)(d), (3) and (4) and 554R(1)(c) and (d), (2) and (3) were omitted, and
(c) if the step is within section 554Z19, as if sections 554Q and 554R were omitted.
(3) If Chapter 2 applies by reason of the step, Chapter 2 has effect as if sections 554Z7 to 554Z12 were omitted.
(4) If Chapter 2 does not apply by reason of the step by virtue of section 554E(3) or (6), section 554E(10) and (11) does not apply in relation to the step.
(5) For further modifications of Chapters 1 and 2, see sections 554Z18(3) and (4), 554Z19(5) and (6), 554Z20 and 554Z21.
(6) Regulations under section 554Y may (in particular) make provision covering cases in which Chapters 1 and 2 have effect as provided for by this section.
(7) In this Chapter—
(a) references to B do not include references to B acting as a trustee,
(b) if B is a company and is a member of a group of companies, references to B are to be read as including references to any other company which is a member of that group, and
(c) if B is a limited liability partnership, references to B are to be read as including references to any company which is a wholly-owned subsidiary (as defined in section 1159(2) of the Companies Act 2006) of B.
(1) B takes a step within this section if—
(a) a sum of money or asset held by or on behalf of B is earmarked (however informally) by B with a view to the relevant undertaking being performed at a later time (wholly or partly) out of—
(i) that sum of money or asset, or
(ii) any sum of money or asset which may arise or derive (directly or indirectly) from it, or
(b) a sum of money or asset otherwise starts being held by or on behalf of B, specifically with a view, so far as B is concerned, to the relevant undertaking being performed at a later time (wholly or partly) out of—
(i) that sum of money or asset, or
(ii) any sum of money or asset which may arise or derive (directly or indirectly) from it.
(2) For the purposes of subsection (1)(b) it does not matter whether or not the sum of money or asset in question has previously been held by or on behalf of B on a basis which is different to that mentioned in subsection (1)(b).
(3) Subsection (4) applies if, in the application of section 554Q or 554R in any case, the relevant step mentioned in section 554Q(2)(a) or 554R(6)(a) is a step within this section taken by B.
(4) In section 554Q(2)(c) or 554R(6)(c) (as the case may be) the reference to section 554B(1)(a) or (b) is to be read as a reference to subsection (1)(a) or (b) above.
(1) B takes a step within this section if B provides security for the performance of the relevant undertaking.
(2) For the purposes of this Part, the sum of money or asset which is the subject of the step is to be taken to be—
(a) any sums of money which, as at the time the step is taken, are the subject of the security, and
(b) any assets which, as at that time, are the subject of the security,
and references to the sum of money or asset which is the subject of a relevant step are to be read accordingly.
(3) If, when the step is taken, the security covers other undertakings as well as the relevant undertaking, the sums of money and assets within subsection (2)(a) and (b) are to be apportioned between the relevant undertaking and the other undertakings on a just and reasonable basis.
(4) Subsections (2) and (3) are subject to section 554Z20(7).
(5) Section 554Q does not apply in any case in which the relevant step mentioned in section 554Q(2)(a) would be a step within this section taken by B.
(6) Section 554R(6) does not apply in any case in which the relevant step mentioned in section 554R(6)(a) would be a step within this section taken by B.
(7) In this Chapter references to providing security for the performance of an undertaking are references to providing such security in any way, however informal.
(1) This section applies if, by virtue of section 554Z17, Chapter 2 applies by reason of a step taken by B within section 554Z19.
(2) Section 554Z3 has effect as if subsections (3) and (4) below were substituted for subsections (1) to (6) of that section.
(3) The value of the relevant step is—
(a) the amount to be paid as a contribution under the relevant undertaking determined, as at the time the step is taken, on a just and reasonable basis assuming that any condition to be met before any payment is made will be met, or
(b) if lower, the value of the security.
(4) For the purposes of subsection (3)(b) the value of the security—
(a) consists of—
(i) the total amount of the sums of money included in the subject of the step (see section 554Z19(2)(a)), and
(ii) the total market value, as at the time the step is taken, of the assets included in the subject of the step (see section 554Z19(2)(b)), but
(b) is to be subject to a just and reasonable reduction to take account of any term of the security which limits the total amount which may be made available under the security for the performance of the relevant undertaking to an amount which is lower than the amount determined under paragraph (a).
(5) The following subsections apply if, as at the end of the day of an anniversary of the taking of the step (“the anniversary day”), B continues to provide the security for the performance of the relevant undertaking.
(6) This Part has effect as if B's continuing to provide the security were a new step (“the anniversary step”) within section 554Z19—
(a) which is taken by B at the end of the anniversary day, and
(b) by reason of which Chapter 2 is to apply by virtue of section 554Z17 (subject only to section 554A(4)).
(7) If the total amount of the sums of money which are the subject of the security (“the security sums”) varies from time to time, for the purpose of determining the sums of money included in the subject of the anniversary step, in section 554Z19(2)(a) the reference to the time the step is taken is to be read as a reference to the time during the preceding year at which the total amount of the security sums is at its highest.
(8) For the purposes of subsection (4)(a)(ii) the market value of any asset included in the subject of the anniversary step may be determined as at any time during the preceding year (so long as the asset is the subject of the security, or one of the assets which is the subject of the security, as at that time).
(9) In subsections (7) and (8) “the preceding year” means the year ending with the anniversary day.
554Z21 Relief for earmarking or security not followed by contribution or relevant benefit
(1) This section applies if, by virtue of section 554Z17, Chapter 2 applies by reason of a step taken by B within section 554Z18 or 554Z19.
(2) Section 554Z14 has effect in relation to the step with the following modifications.
(3) Subsection (1)(b) has effect as if for “not a relevant step in relation to a relevant sum or asset” there were substituted “ neither the payment of the relevant contribution (or any part of it) nor the provision of any relevant benefit ”.
(4) Subsection (1)(c) has effect as if for the words from “no further relevant step” to “any relevant sum or asset” there were substituted “ the relevant contribution (or any part of it) will not be paid or a relevant benefit will not be provided ”.
(5) Subsection (1) has effect as if subsection (6) below were substituted for subsection (3).
(6) In subsection (1)—
(a) “the relevant contribution” means the contribution to be paid under the relevant undertaking (within the meaning of Chapter 3), and
(b) “relevant benefit” means a relevant benefit to be provided out of the relevant contribution as mentioned in section 554Z16(2)(b) and (c).
555 Former employee entitled to deduction in calculating net income
(1) This Part applies if—
(a) a former employee makes a deductible payment, or
(b) a former employer makes a deductible payment on behalf of a former employee and the payment is treated—
(i) as a relevant retirement benefit, or
(ii) as post-employment earnings,
of the former employee.
(2) A deduction of the amount of the deductible payment may be made in calculating the former employee's net income for the tax year in which the payment is made (see Step 2 of the calculation in section 23 of ITA 2007).
(3) Subsection (2) applies only if the former employee makes a claim to the deduction.
(4) The entitlement to a deduction under this section is subject to sections 556 and 557.
(5) For the application of this Part in relation to former office-holders, see section 564.
(6) See section 263ZA of TCGA 1992 for relief from capital gains tax where the amount of the deduction allowed under this section exceeds the remaining total income (as defined in that section).
556 Deductible payments made outside the time limits allowed
(1) No deduction may be made under section 555 if the deductible payment is made—
(a) on or before the day on which the former employee ceased to hold the former employment, or
(b) after the end of the sixth tax year following the tax year in which the former employee ceased to hold the former employment.
(2) If subsection (1)(a) applies, see section 346 (deduction for employee liabilities).