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Income Tax (Earnings and Pensions) Act 2003

Type Public General Act

Publication 2003-03-06

Last updated 2026-03-15

State In force

Department Statute Law Database

Source legislation.gov.uk

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(9) If section 437(1) or 452(1) applies in relation to the acquisition, or would apply if Chapter 3 or 4A of Part 7 (as the case may be) applied in relation to the acquisition, in subsection (7) references to the market value of the relevant asset are to be read as references to that value determined on the basis mentioned in section 437(1) or 452(1) (as the case may be).

(10) Subsection (11) also applies if—

(a) there is an acquisition of an asset within section 554C(4)(a) or (b) (“the relevant asset”),

(b) the acquisition is pursuant to an employment-related securities option (within the meaning of Chapter 5 of Part 7...) acquired by reason of A's employment, or former or prospective employment, with B, and

(11) Chapter 2 does not apply by reason of a relevant step taken after the acquisition if—

(a) the subject of the relevant step is the relevant asset, and

(b) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(12) In subsections (7) to (11) “acquisition” is to be read in accordance with section 421B(2)(a).

(13) Chapter 2 does not apply by reason of a relevant step within section 554C(1)(a) taken by a person if—

(a) the payment of the sum of money is by way of a loan (“the relevant loan”),

(b) the relevant loan is made and used solely for the purpose of enabling A to exercise an employment-related securities option (within the meaning of Chapter 5 of Part 7),

(i) which is chargeable to income tax or would be chargeable apart from Chapter 5B of Part 2, or

(ii) which is exempt income, and

(d) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(14) Subsection (15) applies if—

(a) apart from subsection (13), Chapter 2 would apply by reason of the relevant step mentioned in that subsection, and

(b) by the end of the relevant period, the relevant loan has not been fully repaid.

(15) This Part has effect as if a relevant step within section 554C(1)(a) were taken at the end of the relevant period—

(a) the subject of which is a sum of money of an amount equal to the outstanding amount of the relevant loan as at the end of the relevant period,

(b) in relation to which the relevant person (within the meaning of section 554C(1)) is the person to whom the relevant loan is made, and

(16) In subsections (14) and (15) “the relevant period” means the period of 40 days starting with the day on which the relevant step mentioned in subsection (13) is taken.

(17) See paragraph 31 of Schedule 11 to F(No. 2)A 2017 for provision about exclusions where a loan is made for the purpose of enabling the exercise of an employment-related securities option and the relevant step is within paragraph 1 of that Schedule.

554O

(1) This section applies if—

(a) there is an arrangement (“the car ownership arrangement”) which—

(i) provides for A to purchase a new car from another person (“P”) using a loan (“the car loan”) to be made to A by an authorised lender ,

(ii) specifies the date (“the repayment date”) by which the car loan must be fully repaid which must be no later than four years after the date on which the car loan is made, and

(iii) permits A, in order to obtain funds to repay the car loan, to sell the car back to P on a specified date at a specified price based on an estimate (made at the time the car ownership arrangement is made) of the likely outstanding amount of the car loan on the specified date, and

(b) as provided for by the car ownership arrangement, A purchases the car using the car loan.

(2) Chapter 2 does not apply by reason of a relevant step taken for the sole purpose of—

(a) the purchase of the car or its sale-back as provided for by the car ownership arrangement, or

(b) the making of the car loan as so provided,

so long as the car ownership arrangement is not a tax avoidance arrangement and there is no other connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(3) Subsection (4) applies if—

(a) apart from subsection (2), Chapter 2 would apply by reason of the making of the car loan, and

(b) by the end of the repayment date, the car loan has not been fully repaid.

(4) This Part has effect as if a relevant step within section 554C(1)(a) were taken at the end of the repayment date—

(a) the subject of which is a sum of money of an amount equal to the outstanding amount of the car loan as at the end of the repayment date,

(b) in relation to which the relevant person (within the meaning of section 554C(1)) is A, and

(5) In this section—

“car” has the meaning given by section 235(2), and

“authorised lender” means a person who—has permission under Part 4A of the Financial Services and Markets Act 2000 to enter into, or to exercise or have the right to exercise rights and duties under, a contract of the kind mentioned in paragraph 23 of Schedule 2 to that Act, andis not acting as a trustee.

(6) The definition of “authorised lender” must be read with—

(a) section 22 of the 2000 Act,

(b) any relevant order under that section, and

(7) See paragraph 33 of Schedule 11 to F(No. 2)A 2017 for provision about exclusions for car loans in a case in which the relevant step is within paragraph 1 of that Schedule.

554P

(1) Chapter 2 does not apply by reason of a relevant step if an employment income exemption under Part 4 applies to the subject of the relevant step.

(2) If the employment income exemption applies to the subject of the relevant step in part only, 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 subject of the step so far as the exemption applies to it, and

(b) one in relation to the subject of the step so far as the exemption does not apply to it,

with subsection (1) applying only in relation to the separate relevant step mentioned in paragraph (a).

(3) In order to give effect to subsection (2), 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.

(4) In this section “employment income exemption” includes the exemption under section 271.

554Q

(1) This section applies if—

(a) a sum of money or asset (“sum or asset R”) is held by or on behalf of a person (“P”),

(b) income arises from sum or asset R, and

(i) is received by or on behalf of P, and

(ii) is the subject of a relevant step within section 554B taken by P.

(2) Chapter 2 does not apply by reason of the relevant step mentioned in subsection (1)(c)(ii) if—

(a) before the income arises, sum or asset R was the subject of a relevant step within section 554B taken by P,

(b) Chapter 2 applied by reason of the relevant step mentioned in paragraph (a) in respect of A's employment with B or would have so applied apart from this section or section 554R or any of sections 554H to 554M or section 554T,

(c) immediately before the income arises, sum or asset R is still earmarked or otherwise held on the basis mentioned in section 554B(1)(a) or (b), and

(d) subsection (3) does not apply.

(3) This subsection applies if it is reasonable to suppose that, taking into account the type of investments from which the income derives (directly or indirectly), in essence, the income represents a return from sum or asset R which exceeds the return which might be expected applying the assumption that all relevant connected persons are acting at arm's length of each other.

(4) In subsection (3) “relevant connected person” means a person with a connection (direct or indirect) to the arrangement under which the income arises.

554R

(1) This section applies if—

(a) a sum of money or asset (“sum or asset S”) is held by or on behalf of a person (“P”),

(b) a sum of money or asset (“sum or asset T”) is acquired by or on behalf of P wholly out of sum or asset S,

(d) subsection (2) does not apply.

(2) This subsection applies if it is reasonable to suppose that, in essence—

(a) at the time of the acquisition of sum or asset T, the value of sum or asset T is greater or less than the value of sum or asset S, and

(b) the difference (or any part of the difference) in the values might not have been expected applying the assumption that all relevant connected persons are acting at arm's length of each other.

(3) In subsection (2)—

(a) the reference to sum or asset S is to sum or asset S so far as sum or asset T is acquired out of it, and

(b) “relevant connected person” means a person with a connection (direct or indirect) to the arrangement under which sum or asset T is acquired.

(4) The cases covered by subsection (1)(b) include (in particular) cases in which sum or asset T represents the proceeds of the disposal of sum or asset S.

(5) Subsection (6) applies if, on its acquisition, sum or asset T is the subject of a relevant step within section 554B taken by P.

(6) Chapter 2 does not apply by reason of the relevant step if—

(a) before the acquisition, sum or asset S was the subject of a relevant step within section 554B taken by P,

(b) Chapter 2 applied by reason of the relevant step mentioned in paragraph (a) in respect of A's employment with B or would have applied apart from this section or section 554Q or 554T, and

(c) immediately before the acquisition, sum or asset S is still earmarked or otherwise held on the basis mentioned in section 554B(1)(a) or (b).

(7) Subsection (8) applies if—

(a) on its acquisition, sum or asset T—

(i) is the subject of a relevant step within section 554B taken by P by reason of which Chapter 2 applies or would apply apart from subsection (6) above or any of sections 554H to 554M, 554Q or 554T, or

(ii) if sub-paragraph (i) does not apply, is held by or on behalf of P on the same basis as that on which sum or asset S was held by or on behalf of P immediately before the acquisition, and

(b) for the sole purpose of the acquisition, sum or asset S or sum or asset T is the subject of a relevant step within section 554C(1)(a) to (c).

(8) Chapter 2 does not apply by reason of the relevant step mentioned in subsection (7)(b).

554S

(1) Chapter 2 does not apply by reason of a relevant step within section 554C or 554D if the step is the provision of pension income which is chargeable to income tax under Part 9 or is exempt income (within the meaning of that Part).

(2) Sections 554T, 554U, 554V, 554W and 554X contain further provision relating to retirement benefits etc and are to be applied, so far as applicable, in that order.

554T

(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),

(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

(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

(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, andpayable 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, ora person resident in a territory outside the European Economic Area—whose normal business includes the provision of annuities, andwho 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.

554W

(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

(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

(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, orhave 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.

554Y

(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

(3) Regulations under this section may contain incidental, supplemental, consequential and transitional provision and savings.

(4) Regulations under this section may have retrospective effect.

Interpretation

554Z

(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) , ...

(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.

554Z1

(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.

CHAPTER 2 — Treatment of relevant step for income tax purposes

Employment income

554Z2

(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.

554Z3

(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.

554Z4

(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$where—A is so much of the lump sum as is in respect of rights which accrued before 6 April 2017,LS is the amount of the lump sum, andR is the amount which (ignoring this subsection) is given by subsection (4) as the amount of the reduction.$

(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).

554Z5

(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

(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.

554Z6

(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

(4) But anything which is exempt income, or which falls within Chapter 3 of Part 4 of ITTOIA 2005, is not “relevant”.

554Z7

(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

(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, ...

(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.

Remittance basis

554Z9

(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

(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.

554Z11

(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.

Supplementary

554Z12

(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.

554Z13

(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

(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.

554Z15

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),

(d) section 41 (but as if references to general earnings were to the value of the relevant step or a part of it).

CHAPTER 3 — Undertakings given by employers etc in relation to retirement benefits etc

554Z16

(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,

(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

(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

(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.

554Z18

(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.

554Z19

(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.

554Z20

(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

(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).

567A

(1) This section applies if—

(a) for a tax year there is an amount (“amount TPI”) of taxable pension income for a pension, annuity or other item of pension income,

(b) the pension, annuity or other item of pension income accrues or arises out of rights (“the relevant rights”) which represent, or have arisen or derived (directly or indirectly) from, a sum of money or asset which was the subject of a relevant step within the meaning of Part 7A, and

(2) A deduction is allowed from amount TPI.

(3) The amount of the deduction allowed is the amount (“amount EI”) which counted as employment income of A under Chapter 2 of Part 7A in relation to the relevant step (see section 554Z2(1)).

(4) If amount EI exceeds amount TPI, the excess is to be carried forward to future tax years to be deducted under this section (when applicable) until all of amount EI has been deducted.

(5) Subsection (6) applies if it is determined on a just and reasonable basis that the relevant rights represent, or have arisen or derived from, only part of the sum of money or asset which was the subject of the relevant step.

(6) In subsection (3) the reference to the amount which counted as employment income is to be read as a reference to the corresponding proportion of that amount.

576A

(1) This section applies if a person is temporarily non-resident.

(2) Any relevant withdrawals within subsection (3) are to be treated for the purposes of section 575 as if they arose in the period of return , but only if the total amount of—

(a) the relevant withdrawals within subsection (3), and

(b) the relevant withdrawals (as defined by section 579CA(4)) within section 579CA(3) for the same temporary period of non-residence,

exceeds £100,000.

(3) A relevant withdrawal is within this subsection if—

(a) it is paid to the person in the temporary period of non-residence, and

(b) ignoring this section, it is not chargeable to tax under this Part (or would not be if a DTR claim were made in respect of it).

(4) A “relevant withdrawal” is an amount paid under a relevant non-UK scheme that—

(a) is paid to the person in respect of an arrangement relating to the person under the scheme and would, if the scheme were a registered pension scheme, be income withdrawal (within the meaning of paragraph 7 of Schedule 28 to FA 2004) paid to the person from the person's member's flexi-access drawdown fund in respect of the arrangement,

(b) is paid to the person in respect of an arrangement relating to the person under the scheme and would, if the scheme were a registered pension scheme, be dependants' income withdrawal (within the meaning of paragraph 21 of Schedule 28 to FA 2004) paid to the person from the person's dependant's flexi-access drawdown fund in respect of the arrangement,

(c) is paid to the person in respect of an arrangement relating to the person under the scheme and would, if the scheme were a registered pension scheme, be nominees' income withdrawal (within the meaning of paragraph 27D of Schedule 28 to FA 2004) paid to the person from the person's nominee's flexi-access drawdown fund in respect of the arrangement,

(d) is paid to the person in respect of an arrangement relating to the person under the scheme and would, if the scheme were a registered pension scheme, be successors' income withdrawal (within the meaning of paragraph 27J of Schedule 28 to FA 2004) paid to the person from the person's successor's flexi-access drawdown fund in respect of the arrangement,

(e) is a payment to the person of an annuity purchased using sums or assets held for the purposes of an arrangement relating to the person under the scheme and would, if the scheme were a registered pension scheme, be a payment of a short-term annuity (within the meaning of paragraph 6 of Schedule 28 to FA 2004) purchased using sums or assets out of the person's member's flexi-access drawdown fund in respect of the arrangement,

(f) is a payment to the person of an annuity purchased using sums or assets held for the purposes of an arrangement relating to the person under the scheme and would, if the scheme were a registered pension scheme, be a payment of a dependants' short-term annuity (within the meaning of paragraph 20 of Schedule 28 to FA 2004) purchased using sums or assets out of the person's dependant's flexi-access drawdown fund in respect of the arrangement,

(g) is a payment to the person of an annuity purchased using sums or assets held for the purposes of an arrangement relating to the person under the scheme and would, if the scheme were a registered pension scheme, be a payment of a nominees' short-term annuity (within the meaning of paragraph 27C of Schedule 28 to FA 2004) purchased using sums or assets out of the person's nominee's flexi-access drawdown fund in respect of the arrangement,

(h) is a payment to the person of an annuity purchased using sums or assets held for the purposes of an arrangement relating to the person under the scheme and would, if the scheme were a registered pension scheme, be a payment of a successors' short-term annuity (within the meaning of paragraph 27H of Schedule 28 to FA 2004) purchased using sums or assets out of the person's successor's flexi-access drawdown fund in respect of the arrangement,

(i) is paid before 6 April 2015 to the person in respect of an arrangement relating to the person under the scheme which at the time of the payment was an arrangement to which section 165(3A) or 167(2A) of FA 2004 (flexible drawdown arrangements) applied and would, if the scheme had been a registered pension scheme, have been income withdrawal or dependants' income withdrawal (within the meaning of paragraphs 7 and 21 of Schedule 28 to FA 2004),

(j) is a payment to the person of an annuity purchased using sums or assets held for the purposes of an arrangement relating to the person under the scheme where—

(i) the payment would, if the scheme were a registered pension scheme, be of a lifetime annuity or dependants' annuity within paragraph 3(1A) or 17(1ZA), as the case may be, of Schedule 28 to FA 2004, and

(ii) the terms of the contract under which it is paid are such that there will or could be decreases in the amount of the annuity other than decreases which, if the scheme were a registered pension scheme, would be decreases from time to time allowed by regulations under paragraph 3(1)(d) or 17(1)(c), as the case may be, of Schedule 28 to FA 2004 (and any such regulations are to be treated as having effect for this purpose), or

(k) is a payment to the person under a money purchase arrangement relating to the person under the scheme that, if the scheme were a registered pension scheme, would be a payment to the person of a scheme pension that the person would for the purposes of Part 4 of FA 2004 be treated as having become entitled to at a time on or after 6 April 2015 when fewer than 11 other individuals were entitled to present payment of a scheme pension under the scheme.

(4A) For the purpose of determining whether the figure specified in subsection (2) is exceeded, any relevant withdrawal paid in a currency other than sterling is to be translated into sterling using the average exchange rate for the year ending with 31 March in the tax year in which the relevant withdrawal is paid.

(5) If section 809B, 809D or 809E of ITA 2007 (remittance basis) applied to the person for the year of return, any relevant withdrawal within subsection (3) that was remitted to the United Kingdom in the temporary period of non-residence is to be treated as remitted to the United Kingdom in the period of return.

(6) This section does not apply to a relevant withdrawal if—

(a) it is paid to or in respect of a relieved member of the scheme and is not referable to the member's UK tax-relieved fund under the scheme, or

(b) it is paid to or in respect of a transfer member of the scheme and is not referable to the member's relevant transfer fund under the scheme.

(7) Nothing in any double taxation relief arrangements is to be read as preventing the person from being chargeable to income tax in respect of any relevant withdrawal treated by virtue of this section as arising in the period of return (or as preventing a charge to that tax from arising as a result).

(8) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains—

(a) when a person is to be regarded as “temporarily non-resident”, and

(b) what “the temporary period of non-residence” and “the period of return” mean.

(9) 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;

“member's flexi-access drawdown fund” and “dependant's flexi-access drawdown fund” have the same meaning as in Part 4 of FA 2004 (see paragraphs 8A and 22A of Schedule 28 to FA 2004);

“remitted to the United Kingdom” has the same meaning as in Chapter A1 of Part 14 of ITA 2007;

“scheme pension” means a scheme pension within the meaning of paragraph 2 of Schedule 28 to FA 2004 or a dependants' scheme pension within the meaning of paragraphs 16 to 16C of that Schedule;

“the year of return” means the tax year that consists of or includes the period of return.

(10) The following expressions have the meaning given in Schedule 34 to FA 2004—

“relevant non-UK scheme” (see paragraph 1(5));

“relieved member” (see paragraph 1(7));

“transfer member” (see paragraph 1(8));

“member's UK tax-relieved fund” (see paragraph 3(2));

“member's relevant transfer fund” (see paragraph 4(2)).

579CA

(1) This section applies if a person is temporarily non-resident.

(2) Any relevant withdrawals within subsection (3) are to be treated for the purposes of section 579B as if they accrued in the period of return , but only if the total amount of—

(a) the relevant withdrawals within subsection (3), and

(b) the relevant withdrawals (as defined by section 576A(4)) within section 576A(3) for the same temporary period of non-residence,

exceeds £100,000

(3) A relevant withdrawal is within this subsection if—

(a) it is paid to the person in the temporary period of non-residence, and

(b) ignoring this section, it is not chargeable to tax under this Part (or would not be if a DTR claim were made in respect of it).

(4) A “relevant withdrawal” is—

(a) any income withdrawal paid to the person from a member's flexi-access drawdown fund in respect of an arrangement relating to the person under a registered pension scheme,

(b) any dependants' income withdrawal paid to the person from a dependant's flexi-access drawdown fund in respect of an arrangement relating to the person under a registered pension scheme,

(c) any nominees' income withdrawal paid to the person from a nominee's flexi-access drawdown fund in respect of an arrangement relating to the person under a registered pension scheme,

(d) any successors' income withdrawal paid to the person from a successor's flexi-access drawdown fund in respect of an arrangement relating to the person under a registered pension scheme,

(e) any payment to the person of a short-term annuity purchased using sums or assets out of a member's flexi-access drawdown fund in respect of an arrangement relating to the person under a registered pension scheme,

(f) any payment to the person of a dependants' short-term annuity purchased using sums or assets out of a dependant's flexi-access drawdown fund in respect of an arrangement relating to the person under a registered pension scheme,

(g) any payment to the person of a nominees' short-term annuity purchased using sums or assets out of a nominee's flexi-access drawdown fund in respect of an arrangement relating to the person under a registered pension scheme,

(h) any payment to the person of a successors' short-term annuity purchased using sums or assets out of a successor's flexi-access drawdown fund in respect of an arrangement relating to the person under a registered pension scheme,

(i) any uncrystallised funds pension lump sum paid to the person in respect of an arrangement relating to the person under a registered pension scheme, but only so far as section 579A applies in relation to the sum (see section 636A),

(j) any income withdrawal, or dependants' income withdrawal, paid before 6 April 2015 to the person under a registered pension scheme in respect of an arrangement relating to the person under the scheme which at the time of the payment was an arrangement to which section 165(3A) or 167(2A) of FA 2004 applied (flexible drawdown arrangements),

(k) any payment to the person of a lifetime annuity or dependants' annuity where—

(i) the annuity is within paragraph 3(1A) or 17(1ZA), as the case may be, of Schedule 28 to FA 2004,

(ii) the terms of the contract under which the annuity is paid are such that there will or could be decreases in the amount of the annuity other than decreases from time to time allowed by regulations under paragraph 3(1)(d) or 17(1)(c), as the case may be, of Schedule 28 to FA 2004 (and any such regulations are to be treated as having effect for this purpose), and

(iii) the annuity is purchased using sums or assets held for the purposes of a registered pension scheme, ...

(l) any payment to the person of a scheme pension, or dependants' scheme pension, under a money purchase arrangement under a registered pension scheme where—

(i) the person first acquired an actual (rather than a prospective) right to receive the scheme pension on or after 6 April 2015,

(ii) when the person first acquired that actual right, fewer than 11 other individuals were entitled to the present payment of a scheme pension, or dependants' scheme pension, under the registered pension scheme, and

(iii) the scheme pension is not payable under an annuity contract treated under section 153(8) or (8A) of FA 2004 as having become a registered pension scheme, or

(m) any payment to the person of a lump sum to which section 579A applies by virtue of section 636A(4ZA).

(4A) For the purpose of determining whether the figure specified in subsection (2) is exceeded, any relevant withdrawal paid in a currency other than sterling is to be translated into sterling using the average exchange rate for the year ending with 31 March in the tax year in which the relevant withdrawal is paid.

(5) Nothing in any double taxation relief arrangements is to be read as preventing the person from being chargeable to income tax in respect of any relevant withdrawal treated by virtue of this section as accruing 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 a person 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;

“dependants' annuity”, “dependant's flexi-access drawdown fund”, “dependants' scheme pension”, “dependants' short-term annuity”, “lifetime annuity”, “member's flexi-access drawdown fund”, “money purchase arrangement”, “nominee's flexi-access drawdown fund”, “scheme pension”, “short-term annuity”, “successor's flexi-access drawdown fund” and “uncrystallised funds pension lump sum” have the same meaning as in Part 4 of FA 2004 (see section 152 of FA 2004 and paragraphs 2, 3, 6, 8A, 16 to 16C, 17, 20, 22A, 27E and 27K of Schedule 28, and paragraph 4A of Schedule 29, to FA 2004).

687A

(1) This section applies if—

(a) the value of a relevant step counts as employment income under Chapter 2 of Part 7A, and

(b) the relevant step is the payment of a sum of money,

and references to A and B are to be read accordingly.

(2) For the purposes of PAYE regulations B is treated as making a payment of PAYE income of A of an amount which, on the basis of the best estimate which can reasonably be made, is the amount of the employment income.

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