Income Tax (Earnings and Pensions) Act 2003 Part 1 Overview Overview of contents of this Act 1 1 This Act imposes charges to income tax on— a employment income (see Parts 2 to 7A ), b pension income (see Part 9), and c social security income (see Chapters 1 to 7 of Part 10). 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 This Act also— a confers certain reliefs in respect of liabilities of former employees (see Part 8), aa makes provision for the high income child benefit charge (see Chapter 8 of Part 10), b provides for the assessment, collection and recovery of income tax in respect of employment, pension or social security income that is PAYE income (see Part 11), ... ba allows deductions to be made from such income in respect of certain debts payable to the Commissioners for Her Majesty’s Revenue and Customs (see Part 11), and c allows deductions to be made from such income in respect of payroll giving (see Part 12). Abbreviations and general index in Schedule 1 2 1 Schedule 1 (abbreviations and defined expressions) applies for the purposes of this Act. 2 In Schedule 1— a Part 1 gives the meaning of the abbreviated references to Acts and instruments used in this Act, and b Part 2 lists the places where expressions used in this Act are defined or otherwise explained. 3 Part 2 of Schedule 1 does not apply to expressions used in Chapters 6 to 9 of Part 7 (share incentive plans and other arrangements for acquiring shares): separate indexes relating to these Chapters appear at the end of Schedules 2 to 5. Part 2 Employment income: charge to tax Chapter 1 Introduction Structure of employment income Parts 3 1 The structure of the employment income Parts is as follows— this Part imposes the charge to tax on employment income, and sets out— (a) how the amount charged to tax for a tax year is to be calculated, and (b) who is liable for the tax charged; Part 3 sets out what are earnings and provides for amounts to be treated as earnings; Part 4 deals with exemptions from the charge to tax under this Part (and, in some cases, from other charges to tax); Part 5 deals with deductions from taxable earnings; Part 6 deals with employment income other than earnings or share-related income; and Part 7 deals with income and exemptions relating to securities and securities options acquired in connection with an employment . Part 7A deals with employment income provided through third parties. 2 In this Act “ the employment income Parts ” means this Part and Parts 3 to 7A . “ Employment ” for the purposes of the employment income Parts 4 1 In the employment income Parts “ employment ” includes in particular— a any employment under a contract of service, b any employment under a contract of apprenticeship, and c any employment in the service of the Crown. 2 In those Parts “employed”, “employee” and “employer” have corresponding meanings. Application to offices and office-holders 5 1 The provisions of the employment income Parts that are expressed to apply to employments apply equally to offices, unless otherwise indicated. 2 In those provisions as they apply to an office— a references to being employed are to being the holder of the office; b “ employee ” means the office-holder; c “ employer ” means the person under whom the office-holder holds office. 3 In the employment income Parts “ office ” includes in particular any position which has an existence independent of the person who holds it and may be filled by successive holders. Chapter 2 Tax on employment income Nature of charge to tax on employment income 6 1 The charge to tax on employment income under this Part is a charge to tax on— a general earnings, and b specific employment income. The meaning of “employment income”, “general earnings” and “specific employment income” is given in section 7. 2 The amount of general earnings or specific employment income which is charged to tax in a particular tax year is set out in section 9. 3 The rules in Chapters 4 and 5 of this Part, which are concerned with— a the residence ... of an employee in a tax year, ... aa whether section 809B, 809D or 809E of ITA 2007 (remittance basis) applied to an employee for a tax year, and b the tax year in which amounts are received or remitted to the United Kingdom, apply for the purposes of the charge to tax on general earnings but not that on specific employment income. 3A The rules in Chapter 5B , which are concerned with the matters mentioned in subsection (3)(a) to (b), apply for the purposes of the charge to tax on certain specific employment income arising under Part 7 (securities etc). 4 The person who is liable for any tax charged on employment income is set out in section 13. 5 Employment income is not charged to tax under this Part if it is within the charge to tax under a Part 2 of ITTOIA 2005 (trading income) by virtue of section 15 (divers and diving supervisors), 16A (voluntary office-holders: compensation for lost profits), 16B (payments to company directors) or 16C (professionals in practice: incidental income from an office or employment) of that Act, or b Part 3 of CTA 2009 (trading income) by virtue of section 40A (payments to company directors) or 40B (professionals in practice: incidental income from an office or employment) of that Act. Meaning of “employment income”, “general earnings” and “specific employment income” 7 1 This section gives the meaning for the purposes of the Tax Acts of “employment income”, “general earnings” and “specific employment income”. 2 “ Employment income ” means— a earnings within Chapter 1 of Part 3, b any amount treated as earnings (see subsection (5)), or c any amount which counts as employment income (see subsection (6)). 3 “ General earnings ” means— a earnings within Chapter 1 of Part 3, or b any amount treated as earnings (see subsection (5)), excluding in each case any exempt income. 4 “ Specific employment income ” means any amount which counts as employment income (see subsection (6)), excluding any exempt income. 5 Subsection (2)(b) or (3)(b) refers to any amount treated as earnings under— a Chapters 7 to 10 of this Part (agency workers, workers under arrangements made by intermediaries, and workers providing services through managed service companies), b Chapters 2 to 10 of Part 3 (the benefits code), c Chapter 12 of Part 3 (payments treated as earnings), ca section 402B (termination payments, and other benefits, that cannot benefit from section 403 threshold), or d section 262 of CAA 2001 (balancing charges to be given effect by treating them as earnings). 6 Subsection (2)(c) or (4) refers to any amount which counts as employment income by virtue of— a Part 6 (income which is not earnings or share-related), b Part 7 (income and exemptions relating to securities and securities options) ba Part 7A (employment income provided through third parties), or c any other enactment. Meaning of “exempt income” 8 For the purposes of the employment income Parts, an amount of employment income within paragraph (a), (b) or (c) of section 7(2) is “exempt income” if, as a result of any exemption in Part 4 or elsewhere, no liability to income tax arises in respect of it as such an amount. Chapter 3 Operation of tax charge Amount of employment income charged to tax 9 1 The amount of employment income which is charged to tax under this Part for a particular tax year is as follows. 2 In the case of general earnings, the amount charged is the net taxable earnings from an employment in the year. 3 That amount is calculated under section 11 by reference to any taxable earnings from the employment in the year (see section 10(2)). 4 In the case of specific employment income, the amount charged is the net taxable specific income from an employment for the year. 5 That amount is calculated under section 12 by reference to any taxable specific income from the employment for the year (see section 10(3)). 6 Accordingly, no amount of employment income is charged to tax under this Part for a particular tax year unless— a in the case of general earnings, they are taxable earnings from an employment in that year, or b in the case of specific employment income, it is taxable specific income from an employment for that year. Meaning of “taxable earnings” and “taxable specific income” 10 1 This section explains what is meant by “taxable earnings” and “taxable specific income” in the employment income Parts. 2 “Taxable earnings from an employment in a tax year are to be determined in accordance with Chapters 4 and 5 of this Part . 3 “Taxable specific income from an employment for a tax year means the full amount of any specific employment income which, by virtue of Part 6 , 7 or 7A or any other enactment, counts as employment income for that year in respect of the employment. 4 Subsection (3) is subject to Chapter 5B (taxable specific income from employment-related securities etc : internationally mobile employees) . 5 Subsection (3) is also subject to sections 554Z9 to 554Z11 (employment income under Part 7A: remittance basis). Calculation of “net taxable earnings” 11 1 For the purposes of this Part the “net taxable earnings” from an employment in a tax year are given by the formula— TE - DE where— TE means the total amount of any taxable earnings from the employment in the tax year, and DE means the total amount of any deductions allowed from those earnings under provisions listed in section 327(3) to (5) (deductions from earnings: general). 2 If the amount calculated under subsection (1) is negative, the net taxable earnings from the employment in the year are to be taken to be nil instead. 3 Relief may be available under section 128 of ITA 2007 (set-off against general income)— a where TE is negative, or b in certain exceptional cases where the amount calculated under subsection (1) is negative. 4 If a person has more than one employment in a tax year, the calculation under subsection (1) must be carried out in relation to each of the employments. Calculation of “net taxable specific income” 12 1 For the purposes of this Part the “net taxable specific income” from an employment for a tax year is given by the formula— TSI - DSI where— TSI means the amount of any taxable specific income from the employment for the tax year, and DSI means the total amount of any deductions allowed from that income under provisions of the Tax Acts not included in the lists in section 327 (3) and (4) (deductions from earnings: general). 2 If the amount calculated under subsection (1) is negative, the net taxable specific income from the employment for the year is to be taken to be nil instead. 3 If a person has more than one kind of specific employment income from an employment for a tax year, the calculation under subsection (1) must be carried out in relation to each of those kinds of specific employment income; and in such a case the “net taxable specific income” from the employment for that year is the total of all the amounts so calculated. Person liable for tax 13 1 The person liable for any tax on employment income under this Part is the taxable person mentioned in subsection (2) or (3). This is subject to subsection (4). 2 If the tax is on general earnings, “ the taxable person ” is the person to whose employment the earnings relate. 3 If the tax is on specific employment income, “ the taxable person ” is the person in relation to whom the income is, by virtue of Part 6 , 7 or 7A or any other enactment, to count as employment income. 4 If the tax is on general earnings received, or remitted to the United Kingdom, after the death of the person to whose employment the earnings relate, the person’s personal representatives are liable for the tax. 4A If the tax is on specific employment income received, or remitted to the United Kingdom, after the death of the person in relation to whom the income is, by virtue of Part 7, to count as employment income, the person's personal representatives are liable for the tax. 4B Subject to section 554Z12, if— a the tax is on specific employment income under Chapter 2 of Part 7A, and b the relevant step is taken, or (if relevant) the income is remitted to the United Kingdom, after the death of A, A's personal representatives are liable for the tax. 4C Terms used in subsection (4B) have the same meaning as in Part 7A. 5 If subsection (4) , (4A) or (4B) or section 554Z12(3) applies, the tax is accordingly to be assessed on the personal representatives and is a debt due from and payable out of the estate. Chapter 4 Taxable earnings: UK resident employees Taxable earnings Taxable earnings under this Chapter: introduction 14 1 This Chapter sets out for the purposes of this Part what are taxable earnings from an employment in a tax year in cases where section 15 (earnings for year when employee UK resident ) applies to general earnings for a tax year. 2 In this Chapter— a sections 16 and 17 deal with the year for which general earnings are earned, and b sections 18 and 19 deal with the time when general earnings are received. 3 In the employment income Parts any reference to the charging provisions of this Chapter is a reference to section 15. UK resident employees Earnings for year when employee UK resident 15 1 This section applies to general earnings for a tax year for which the employee is UK resident except that, in the case of a split year, it does not apply to any part of those earnings that is excluded. 1A General earnings are “excluded” if they— a are attributable to the overseas part of the split year, and b are neither— i general earnings in respect of duties performed in the United Kingdom, nor ii general earnings from overseas Crown employment subject to United Kingdom tax. 2 The full amount of any general earnings within subsection (1) which are received in a tax year is an amount of “taxable earnings” from the employment in that year. 3 Subsection (2) applies whether or not the employment is held when the earnings are received. 4 Any attribution required for the purposes of subsection (1A)(a) is to be done on a just and reasonable basis. 5 The following provisions of Chapter 5 of this Part apply for the purposes of subsection (1A)(b) as for the purposes of section 27(2)— a section 28 (which defines “general earnings from overseas Crown employment subject to United Kingdom tax”), ... b sections 38 to 41 (which contain rules for determining the place of performance of duties of employment) , and c section 41ZA (which is about determining the extent to which general earnings are in respect of United Kingdom duties). 6 Subject to any provision made in an order under section 28(5) for the purposes of subsection (1A)(b), provisions made in an order under that section for the purposes of section 27(2) apply for the purposes of subsection (1A)(b) too. Year for which general earnings are earned Meaning of earnings “for” a tax year 16 1 This section applies for determining whether general earnings are general earnings “for” a particular tax year for the purposes of this Chapter. 2 General earnings that are earned in, or otherwise in respect of, a particular period are to be regarded as general earnings for that period. 3 If that period consists of the whole or part of a single tax year, the earnings are to be regarded as general earnings “for” that tax year. 4 If that period consists of the whole or parts of two or more tax years, the part of the earnings that is to be regarded as general earnings “for” each of those tax years is to be determined on a just and reasonable apportionment. 5 This section does not apply to any amount which is required by a provision of Part 3 to be treated as earnings for a particular tax year. Treatment of earnings for year in which employment not held 17 1 This section applies for the purposes of this Chapter in a case where general earnings from an employment would otherwise fall to be regarded as general earnings for a tax year in which the employee does not hold the employment. 2 If that year falls before the first tax year in which the employment is held, the earnings are to be treated as general earnings for that first tax year. 3 If that year falls after the last tax year in which the employment was held, the earnings are to be treated as general earnings for that last tax year. 4 This section does not apply in connection with determining the year for which amounts are to be treated as earnings under Chapters 2 to 10 of Part 3 (the benefits code). When general earnings are received Receipt of money earnings 18 1 General earnings consisting of money are to be treated for the purposes of this Chapter as received at the earliest of the following times— Rule 1 The time when payment is made of or on account of the earnings. Rule 2 The time when a person becomes entitled to payment of or on account of the earnings. Rule 3 If the employee is a director of a company and the earnings are from employment with the company (whether or not as director), whichever is the earliest of— a the time when sums on account of the earnings are credited in the company’s accounts or records (whether or not there is any restriction on the right to draw the sums); b if the amount of the earnings for a period is determined by the end of the period, the time when the period ends; c if the amount of the earnings for a period is not determined until after the period has ended, the time when the amount is determined. 2 Rule 3 applies if the employee is a director of the company at any time in the tax year in which the time mentioned falls. 3 In this section “ director ” means— a in relation to a company whose affairs are managed by a board of directors or similar body, a member of that body, b in relation to a company whose affairs are managed by a single director or similar person, that director or person, and c in relation to a company whose affairs are managed by the members themselves, a member of the company, and includes any person in accordance with whose directions or instructions the directors of the company (as defined above) are accustomed to act. 4 For the purposes of subsection (3) a person is not to be regarded as a person in accordance with whose directions or instructions the directors of the company are accustomed to act merely because the directors act on advice given by that person in a professional capacity. 5 Where this section applies— a to a payment on account of general earnings, or b to sums on account of general earnings, it so applies for the purpose of determining the time when an amount of general earnings corresponding to the amount of that payment or those sums is to be treated as received for the purposes of this Chapter. Receipt of non-money earnings 19 1 General earnings not consisting of money are to be treated for the purposes of this Chapter as received at the following times. 2 If an amount is treated as earnings for a particular tax year under any of the following provisions, the earnings are to be treated as received in that year— section 81 (taxable benefits: cash vouchers), section 94 or 94A (taxable benefits: credit-tokens), Chapter 5 of Part 3 (taxable benefits: living accommodation), Chapter 6 of Part 3 (taxable benefits: cars, vans and related benefits), Chapter 7 of Part 3 (taxable benefits: loans), ... ... Chapter 10 of Part 3 (taxable benefits: residual liability to charge), section 222 (payments treated as earnings: payments on account of tax where deduction not possible), section 223 (payments treated as earnings: payments on account of director’s tax). section 226A (amount treated as earnings: employee shareholder shares). , 3 If an amount is treated as earnings under section 87 or 87A (taxable benefits: non-cash vouchers), the earnings are to be treated as received in the tax year mentioned in section 88. 4 If subsection (2) or (3) does not apply, the earnings are to be treated as received at the time when the benefit is provided. Chapter 5 Taxable earnings: remittance basis rules and rules for non-uk resident employees Taxable earnings Taxable earnings under this Chapter: introduction 20 1 This Chapter contains provision for determining how much of the following are taxable earnings from an employment in a tax year— a general earnings that are for a tax year for which section 809B, 809D or 809E of ITA 2007 (remittance basis) applied to the employee (being a tax year before tax year 2025-26), and b general earnings that are for a tax year for which the employee is non-UK resident. 2 In this Chapter— a sections 29 and 30 deal with the year for which general earnings are earned, b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d sections 38 to 41 deal with the place where the duties of an employment are performed. 3 In the employment income Parts any reference to the charging provisions of this Chapter is a reference to any of sections 22, 26 and 27 . Remittance basis rules for employees outside section 26 Earnings for year when employee resident and ordinarily resident, but not domiciled, in UK, except chargeable overseas earnings 21 1 This section applies to general earnings for a tax year in which the employee is resident and ordinarily resident, but not domiciled, in the United Kingdom except to the extent that they are chargeable overseas earnings for that year. 2 The full amount of any general earnings within subsection (1) which are received in a tax year is an amount of “taxable earnings” from the employment in that year. 3 Subsection (2) applies— a whether the earnings are for that year or for some other tax year, and b whether or not the employment is held at the time when the earnings are received. 4 Section 23 applies for calculating how much of an employee’s general earnings are “chargeable overseas earnings” for a tax year, and are therefore within section 22(1) rather than subsection (1) above. Chargeable overseas earnings for year when remittance basis applied and employee outside section 26 22 1 This section applies to general earnings for a tax year , to the extent that they are chargeable overseas earnings for that year, if— a section 809B, 809D or 809E of ITA 2007 (remittance basis) applied to the employee for that year, and b the employee did not meet the requirement of section 26A for that year. 2 The full amount of any general earnings within subsection (1) which are remitted to the United Kingdom in a tax year is an amount of “taxable earnings” from the employment in that year. 3 Subsection (2) applies whether or not the employment is held when the earnings are remitted. 4 Section 23 applies for calculating how much of an employee’s general earnings are “chargeable overseas earnings” for a tax year .... 5 Where any chargeable overseas earnings are taxable earnings under subsection (2), any deduction taken into account under section 23(3) in calculating the amount of the chargeable overseas earnings— a cannot then be deducted under section 11 from those taxable earnings, but b may be deducted under that section from any taxable earnings under section 15 . 6 See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc. 7 Section 15(1) does not apply to general earnings within subsection (1). Calculation of “chargeable overseas earnings” 23 1 This section applies for calculating how much of an employee’s general earnings for a tax year are “ chargeable overseas earnings ” for the purposes of section 22. 1A But none of an employee's general earnings from an employment for a tax year are to be “chargeable overseas earnings” if section 24A applies in relation to the employment for the tax year. 2 General earnings for a tax year are “overseas earnings” for that year if— a section 809B, 809D or 809E of ITA 2007 (remittance basis) applied to the employee for that year, aa the employee did not meet the requirement of section 26A for that year, b the employment was with a foreign employer, and c the duties of the employment were performed wholly outside the United Kingdom. 3 To calculate the amount of “chargeable overseas earnings” for a tax year— Step 1 Identify— a in the case of a tax year that is not a split year, the full amount of the overseas earnings for that year, and b in the case of a split year, so much of the full amount of the overseas earnings for that year as is attributable to the UK part of the year. Step 2 Subtract any amounts that would (assuming they were taxable earnings) be allowed to be deducted from the earnings identified under step 1 under— a section 232 or Part 5 (deductions allowed from earnings), b sections 188 to 194 of FA 2004 (contributions to registered pension schemes), or d section 262 of CAA 2001 (capital allowances to be given effect by treating them as deductions from earnings). Step 3 Apply any limit imposed by section 24 (limit where duties of associated employment performed in UK). The result is the chargeable overseas earnings for the tax year. 4 Any attribution required for the purposes of step 1 or step 2 in subsection (3) is to be done on a just and reasonable basis. Limit on chargeable overseas earnings where duties of associated employment performed in UK 24 1 This section imposes a limit on how much of an employee’s general earnings are chargeable overseas earnings for a tax year under section 23 if— a in that year the employee holds associated employments as well as the employment to which subsection (2) of that section applies (“ the relevant employment ”), and b the duties of the associated employments are not performed wholly outside the United Kingdom. 2 The limit is the proportion of the aggregate earnings for that year from all the employments concerned that is reasonable having regard to— a the nature of and time devoted to each of the following— i the duties performed outside the United Kingdom, and ii those performed in the United Kingdom, and b all other relevant circumstances. 2A If the tax year is a split year as respects the employee, subsection (2) has effect as if for “the aggregate earnings for that year from all the employments concerned” there were substituted “ so much of the aggregate earnings for that year from all the employments concerned as is attributable to the UK part of that year ” . 3 For the purposes of subsection (2) “ the aggregate earnings for a year from all the employments concerned ” means the amount produced by aggregating the full amount of earnings from each of those employments for the year mentioned in subsection (1) so far as remaining after subtracting any amounts of the kind mentioned in step 2 in section 23(3). 3A Any attribution required for the purposes of subsection (2A) is to be done on a just and reasonable basis. 4 In this section— a “ the employments concerned ” means the relevant employment and the associated employments; b “ associated employments ” means employments with the same employer or with associated employers. 5 The following rules apply to determine whether employers are associated— Rule A An individual is associated with a partnership or company if that individual has control of the partnership or company. Rule B A partnership is associated with another partnership or with a company if one has control of the other or both are under the control of the same person or persons. Rule C A company is associated with another company if one has control of the other or both are under the control of the same person or persons. 6 In subsection (5)— a in rules A and B “ control ” has the meaning given by section 995 of ITA 2007 (in accordance with section 719 of this Act), and b in rule C “ control ” means control within the meaning given by sections 450 and 451 of CTA 2010 (meaning of expressions relating to close companies). 7 If an amount of chargeable overseas earnings is reduced under step 3 in section 23(3) as a result of applying any limit imposed by this section, the amount of general earnings corresponding to the reduction remains an amount of general earnings within section 15(1) . Restrictions on remittance basis 24A 1 This section applies in relation to an employment (“ the relevant employment ”) for a tax year (“the relevant tax year”) if— a one or more of the paragraphs in subsection (5) applies, b conditions 1 to 4 are met, and c condition 5 is not met. 2 The consequences of this section applying are set out in sections 23(1A), 41C(4A), 41H(5) and 554Z9(1A). 3 But, for the purpose of determining if, and the extent to which, any provision of Part 11 ( PAYE ), or of PAYE regulations, applies in relation to any income, the application of any provision mentioned in subsection (2) in relation to the income is to be ignored. 4 In this section— a “ the relevant employee ” means the employee in respect of the relevant employment, b “ the relevant employer ” means the employer in respect of the relevant employment, and c “ UK employment ” means an employment the duties of which are not performed wholly outside the United Kingdom and “ UK employer” is to be read accordingly, and the rules in section 24(5) (“associated” persons) apply for the purposes of this section. 5 The paragraphs referred to in subsection (1)(a) are— a general earnings from the relevant employment which are for the relevant tax year would, apart from section 23(1A) and step 3 in section 23(3), be “chargeable overseas earnings” under section 23(3); b employment income in respect of the relevant employment which is treated as accruing in the relevant tax year under section 41C(2) would, apart from sections 41C(4A), 41D and 41E, be “foreign” under section 41C(3); c employment income in respect of the relevant employment which is treated as accruing in the relevant tax year under section 41H(2) would, apart from sections 41H(5), 41I and 41L, be “chargeable foreign securities income” under section 41H(3); d section 554Z9(2) would, apart from section 554Z9(1A) and (4) and (5), apply to employment income in respect of the relevant employment which corresponds to the value of a relevant step, or a part of the value of a relevant step, which is “for” the relevant tax year as determined under section 554Z4. 6 Condition 1 is that the relevant employee holds a UK employment— a at a time in the relevant tax year when the relevant employee also holds the relevant employment, or b if the relevant tax year is a split year as respects the relevant employee, at a time in the UK part of the relevant tax year when the relevant employee also holds the relevant employment. 7 Condition 2 is that the UK employer is the same as, or is associated with, the relevant employer. 8 Condition 3 is that the UK employment and the relevant employment are related to each other. 9 Without prejudice to the generality of subsection (8), the UK employment and the relevant employment are to be assumed to be related to each other if one or more of the following paragraphs applies— a it is reasonable to suppose that— i the relevant employee would not hold one employment without holding the other employment, or ii the employments will cease at the same time or one employment will cease in consequence of the other employment ceasing; b the terms of one employment operate to any extent by reference to the other employment; c the performance of duties of one employment is (wholly or partly) dependent upon, or otherwise linked (directly or indirectly) to, the performance of duties of the other employment; d the duties of the employments are wholly or mainly of the same type (ignoring the fact that they may be performed (wholly or partly) in different locations); e the duties of the employments involve (wholly or partly) the provision of goods or services to the same customers or clients; f the relevant employee is— i a director (as defined in section 67) of the UK employer or the relevant employer who has a material interest (as defined in section 68) in the UK employer or the relevant employer, ii a senior employee of the UK employer or the relevant employer, or iii one of the employees of the UK employer or the relevant employer who receives the higher or highest levels of remuneration. 10 In subsection (9)(f) references to the UK employer or the relevant employer include references to— a any person with which the UK employer or the relevant employer (as the case may be) is associated, and b if the UK employer or the relevant employer (as the case may be) is a company, the following companies taken together as if they were one company— i the UK employer or the relevant employer (as the case may be), and ii all the companies with which the UK employer or the relevant employer (as the case may be) is associated. 11 The Treasury may by regulations amend this section so as to add to, reduce or modify the cases in which the UK employment and the relevant employment are to be assumed to be related to each other. 12 A statutory instrument containing regulations under subsection (11) may not be made unless a draft has been laid before, and approved by a resolution of, the House of Commons. 13 Condition 4 is that X% is less than Y%. 14 “X%” is given by the following formula— C I × 100 % See section 24B for the definitions of “C” and “I”. 15 “Y%” is 65% of the additional rate for the relevant tax year. 16 The Treasury may by regulations amend this section so as to amend the definition of “Y%”. 17 Condition 5 is that— a were the duties of the relevant employment to be duties of the UK employment instead, all or substantially all of them could not lawfully be performed in the relevant territory (whether on the meeting of any condition or otherwise) by virtue of any regulatory requirements imposed by or under the law of that territory, and b were the UK duties of the UK employment to be duties of the relevant employment instead, all or substantially all of them could not lawfully be performed in the part of the United Kingdom in which they are performed (whether on the meeting of any condition or otherwise) by virtue of any regulatory requirements imposed by or under the law of that part of the United Kingdom. 18 In subsection (17)— “ the relevant territory ” means the territory in which the duties of the relevant employment are performed, and “ UK duties ” means duties performed in the United Kingdom. Definitions of “C” and “ I ” for the purposes of section 24A(14) 24B 1 This section applies for the purposes of section 24A(14). 2 “C” is the total amount of credit which would be allowed under section 18(2) of TIOPA 2010 (double taxation relief by way of credit) against income tax in respect of all the employment income falling within section 24A(5)(a) to (d) were none of that income to be, as relevant— a “chargeable overseas earnings”, b “foreign”, c “chargeable foreign securities income”, or d income to which section 554Z9(2) applies. 3 For this purpose, assume— a that all relief is claimed within the applicable time limit given by section 19 of TIOPA 2010, and b that all reasonable steps are taken to minimise any amounts of tax payable as mentioned in section 33 of that Act. 4 “I” is the total amount of all the employment income falling within section 24A(5)(a) to (d). Remittance basis rules: employees who met section 26A requirement UK-based earnings for year when employee resident, but not ordinarily resident, in UK 25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign earnings for year when remittance basis applied and employee met section 26A requirement 26 1 This section applies to general earnings for a tax year where section 809B, 809D or 809E of ITA 2007 (remittance basis) applied to the employee for that year and the employee met the requirement of section 26A for that year, if the general earnings meet all of the following conditions— a they are neither— i general earnings in respect of duties performed in the United Kingdom, nor ii general earnings from overseas Crown employment subject to United Kingdom tax, and b if the tax year is a split year as respects the employee, they are attributable to the UK part of the year. 2 The full amount of any general earnings within subsection (1) which are remitted to the United Kingdom in a tax year is an amount of “taxable earnings” from the employment in that year. 3 Subsection (2) applies whether or not the employment is held when the earnings are remitted. 4 Section 28 explains what is meant by “general earnings from overseas Crown employment subject to United Kingdom tax”. 5 See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc. 5A Any attribution required for the purposes of subsection (1)(b) is to be done on a just and reasonable basis. 6 Section 15(1) does not apply to general earnings within subsection (1). Section 26: requirement for 3-year period of non-residence 26A 1 An employee meets the requirement of this section for a tax year if the employee was— a non-UK resident for the previous 3 tax years, or b UK resident for the previous tax year but non-UK resident for the 3 tax years before that, or c UK resident for the previous 2 tax years but non-UK resident for the 3 tax years before that, or d non-UK resident for the previous tax year, UK resident for the tax year before that and non-UK resident for the 3 tax years before that. 2 The residence status of the employee before the 3 years of non-UK residence is not relevant for these purposes. Employees not resident in UK UK-based earnings for year when employee not resident in UK 27 1 This section applies to general earnings for a tax year for which the employee is not resident in the United Kingdom if they are— a general earnings in respect of duties performed in the United Kingdom, ... b general earnings from overseas Crown employment subject to United Kingdom tax , or c general earnings to which section 402B (termination payments, and other benefits, that cannot benefit from the section 403 threshold, to be treated as earnings) applies. 2 The full amount of any general earnings within subsection (1)(a) or (b) which are received in a tax year is an amount of “taxable earnings” from the employment in that year. 2A The percentage of the general earnings within subsection (1)(c) that are an amount of “taxable earnings” from the employment in the tax year in which they are received is given by— A B x 100 where— B is the total amount of general earnings from the employment that it is reasonable to assume the employee would have received in respect of the post-employment notice period (within the meaning given by section 402E(5)) if the employee's employment had not been terminated until the end of that period, and A is the total amount of those general earnings that it is reasonable to assume would have been taxable earnings by virtue of subsection (1)(a) or (b). 3 Subsections (2) and (2A) apply whether or not the employment is held when the earnings are received. 4 Section 28 explains what is meant by “general earnings from overseas Crown employment subject to United Kingdom tax”. 5 Sections 18 and 19 (time when earnings are received) apply for the purposes of this section. Special class of earnings for purposes of sections 25 to 27 Meaning of “general earnings from overseas Crown employment subject to UK tax” 28 1 This section explains for the purposes of sections 25 to 27 what is meant by “general earnings from overseas Crown employment subject to United Kingdom tax”. 2 “ Crown employment ” means employment under the Crown— a which is of a public nature, and b the earnings from which are payable out of the public revenue of the United Kingdom or of Wales, Scotland or Northern Ireland. 3 “ General earnings from overseas Crown employment ” means general earnings from such employment in respect of duties performed outside the United Kingdom. 4 Such earnings are to be taken as being “subject to United Kingdom tax” unless they fall within any exception contained in an order under subsection (5). 5 the Commissioners for Her Majesty’s Revenue and Customs may make an order excepting from the operation of sections 25(2) and 27(2)— a general earnings of any description of employee specified in the order; b general earnings from any description of employment so specified. 6 The Commissioners may make the order if they consider that such earnings should not be subject to those provisions having regard to the international obligations of Her Majesty’s Government and such other matters as appear to them to be relevant. 7 An order may make provision by reference to all or any of the following— a the residence or nationality of the employee; b whether the employee was engaged in or outside the United Kingdom; c the nature of the post, the rate of remuneration and any other terms and conditions applying to it. 8 Subsection (7) does not affect the generality of the power to make provision by reference to such factors as the Board consider appropriate. Year for which general earnings are earned Meaning of earnings “for” a tax year 29 1 This section applies for determining whether general earnings are general earnings “for” a particular tax year for the purposes of this Chapter. 2 General earnings that are earned in, or otherwise in respect of, a particular period are to be regarded as general earnings for that period. 3 If that period consists of the whole or part of a single tax year, the earnings are to be regarded as general earnings “for” that tax year. 4 If that period consists of the whole or parts of two or more tax years, the part of the earnings that is to be regarded as general earnings “for” each of those tax years is to be determined on a just and reasonable apportionment. 5 This section does not apply to any amount which is required by a provision of Part 3 to be treated as earnings for a particular tax year. Treatment of earnings for year in which employment not held 30 1 This section applies for the purposes of this Chapter in a case where general earnings from an employment would otherwise fall to be regarded as general earnings for a tax year in which the employee does not hold the employment. 2 If that year falls before the first tax year in which the employment is held, the earnings are to be treated as general earnings for that first tax year. 3 If that year falls after the last tax year in which the employment was held, the earnings are to be treated as general earnings for that last tax year. 4 This section does not apply in connection with determining the year for which amounts are to be treated as earnings under Chapters 2 to 10 of Part 3 (the benefits code). ... Receipt of money earnings 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Receipt of non-money earnings 32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings remitted to UK 33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings remitted to UK: further provisions about UK-linked debts 34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Relief for delayed remittances Relief for delayed remittances 35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Election in respect of delayed remittances 36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Claims for relief on delayed remittances 37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Place of performance of duties of employment Earnings for period of absence from employment 38 1 This section applies if a person ordinarily performs the whole or part of the duties of an employment in the United Kingdom. 2 General earnings for a period of absence from the employment are to be treated for the purposes of this Chapter as general earnings for duties performed in the United Kingdom except in so far as they would, but for that absence, have been general earnings for duties performed outside the United Kingdom. Duties in UK merely incidental to duties outside UK 39 1 This section applies if in a tax year an employment is in substance one whose duties fall to be performed outside the United Kingdom. 2 Duties of the employment performed in the United Kingdom whose performance is merely incidental to the performance of duties outside the United Kingdom are to be treated for the purposes of this Chapter as performed outside the United Kingdom. 3 This section does not affect any question as to— a where any duties are performed, or b whether a person is absent from the United Kingdom, for the purposes of section 378 (deduction from seafarers' earnings: eligibility), and section 383 (place of performance of incidental duties) applies instead. Duties on board vessel or aircraft 40 1 Duties which a person performs on a vessel engaged on a voyage not extending to a port outside the United Kingdom are to be treated for the purposes of this Chapter as performed in the United Kingdom. 2 Duties which a person resident in the United Kingdom performs on a vessel or aircraft engaged— a on a voyage or journey beginning or ending in the United Kingdom, or b on a part beginning or ending in the United Kingdom of any other voyage or journey, are to be treated as performed in the United Kingdom for the purposes of this Chapter. 3 Subsection (2) does not, however, apply for the purposes of section 24(1)(b) (limit on chargeable overseas earnings under section 23 where duties of associated employment performed in UK) in relation to any duties of a person’s employment if— a the employment is as a seafarer, and b the duties are performed on a ship. 4 Instead, any duties of the employment which are performed on a ship engaged— a on a voyage beginning or ending outside the United Kingdom (but excluding any part of it beginning and ending there), or b on a part beginning or ending outside the United Kingdom of any other voyage, are to be treated as performed outside the United Kingdom for the purposes of section 24(1)(b). 5 For the purposes of subsections (3) and (4)— a employment “ as a seafarer ” means an employment consisting of the performance of duties on a ship or of such duties and others incidental to them; b “ ship ” does not include an offshore installation; c the areas designated under section 1(7) of the Continental Shelf Act 1964 (c. 29) are treated as part of the United Kingdom. Employment in UK sector of continental shelf 41 1 General earnings in respect of duties performed in the UK sector of the continental shelf in connection with exploration or exploitation activities are to be treated for the purposes of this Chapter as general earnings in respect of duties performed in the United Kingdom. 2 In this section— “ the UK sector of the continental shelf ” means the areas designated under section 1(7) of the Continental Shelf Act 1964, and “ exploration or exploitation activities ” means activities carried on in connection with the exploration or exploitation of so much of the seabed and subsoil and their natural resources as is situated in the United Kingdom or the UK sector of the continental shelf. Apportionment of earnings Basis of apportionment 41ZA The extent to which general earnings are in respect of duties performed in the United Kingdom is to be determined under this Chapter on a just and reasonable basis. Chapter 5A Taxable specific income: effect of remittance basis Taxable specific income from employment-related securities: effect of remittance basis 41A 1 This section applies if— a an amount within subsection (2) counts as employment income of an individual for a tax year in respect of an employment (“the securities income”), and b any part of the relevant period (see section 41B) is within a tax year for which section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual. 2 An amount is within this subsection if it counts as employment income under any provision of any of Chapters 2, 3 and 3C to 5 of Part 7 (employment-related securities etc ) except section 446UA. 3 The reference in subsection (2) to an amount that counts as employment income under any of the provisions mentioned there does not include an amount which counts as employment income by virtue of any provision of Chapter 3A or 3B of Part 7. 4 An amount equal to— SI - FSI is an amount of “taxable specific income” from the employment for the tax year mentioned in subsection (1)(a). 5 In subsection (4)— a SI is the amount of the securities income, and b FSI is the amount of the securities income that is “foreign” (see sections 41C to 41E). 6 The full amount of any of the foreign securities income which is remitted to the United Kingdom in a tax year is an amount of “taxable specific income” from the employment for that year. 7 Subsection (6) applies whether or not the employment is held when the foreign securities income is remitted. 8 For the purposes of Chapter A1 of Part 14 of ITA 2007 (remittance basis), treat the relevant securities or securities option as deriving from the foreign securities income. 9 But where— a the chargeable event is the disposal of the relevant securities or the assignment or release of the relevant securities option, and b the individual receives consideration for the disposal, assignment or release of an amount equal to or exceeding the market value of the relevant securities or securities option, for the purposes of that Chapter treat the consideration (and not the relevant securities or securities option) as deriving from the foreign securities income. 10 In this section and section 41B— “ the chargeable event ” means the event giving rise to the securities income, and “ the relevant securities ” or “ the relevant securities option ” means the employment-related securities or employment-related securities option by virtue of which the amount mentioned in subsection (1)(a) counts as employment income. 11 See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc. Section 41A: the relevant period 41B 1 “The relevant period” is to be determined as follows. 2 In the case of an amount that counts as employment income by virtue of Chapter 2 (restricted securities) or Chapter 3 (convertible securities), the relevant period— a begins with the day of the acquisition, and b ends with the day of the chargeable event. 3 In the case of an amount that counts as employment income by virtue of section 446U (securities acquired for less than market value: discharge of notional loan)— a if the relevant securities were acquired by virtue of the exercise of a securities option (“the option”), the relevant period— i begins with the day of the acquisition of the option, and ii ends with the day the option vests, and b otherwise, the relevant period is— i the tax year in which the notional loan (within the meaning of Chapter 3C) is treated as made, or ii if the chargeable event occurs in that year, the period beginning at the beginning of that year and ending with the day of that event. 4 In the case of an amount that counts as employment income by virtue of— a Chapter 3D (securities disposed of for more than market value), or b Chapter 4 (post-acquisition benefits from securities), the relevant period is the tax year in which the chargeable event occurs. 5 In the case of an amount that counts as employment income by virtue of Chapter 5 (employment-related securities options), the relevant period— a begins with the day of the acquisition, and b ends with the day of the chargeable event or, if earlier, the day the relevant securities option vests. 6 In this section “ the acquisition ” has the same meaning as in Chapters 2 to 4 or Chapter 5 (see section 421B or 471). 7 For the purposes of this section an option “vests” when it is first capable of being exercised. 8 References in this section to a Chapter are to a Chapter of Part 7. Section 41A: foreign securities income 41C 1 The extent to which the securities income is “foreign” is to be determined as follows. 2 Treat an equal amount of the securities income as accruing on each day of the relevant period. 3 If any part of the relevant period is within a tax year to which subsection (4) applies, the securities income treated as accruing in that part of the relevant period is “foreign”. This is subject to section 41D (limit where duties of associated employment performed in UK ). 4 This subsection applies to a tax year if— a section 809B, 809D or 809E of ITA 2007 applies to the individual for the year, b the individual does not meet the requirement of section 26A for the year (reading references there to the employee as references to the individual), c the employment is with a foreign employer, and d the duties of the employment are performed wholly outside the United Kingdom. 4A But subsection (4) does not apply to a tax year if section 24A applies in relation to the employment for the tax year. 5 If any part of the relevant period is within a tax year to which subsection (6) applies— a if the duties of the employment are performed wholly outside the United Kingdom, the securities income treated as accruing in that part of the relevant period is “foreign”, and b if some but not all of those duties are performed outside the United Kingdom— i the securities income mentioned in paragraph (a) is to be apportioned (on a just and reasonable basis) between duties performed in the United Kingdom and duties performed outside the United Kingdom, and ii the income apportioned in respect of duties performed outside the United Kingdom is “foreign”. 6 This subsection applies to a tax year if— a section 809B, 809D or 809E of ITA 2007 applies to the individual for the year, b the individual meets the requirement of section 26A for the year (reading references there to the employee as references to the individual), and c some or all of the duties of the employment are performed outside the United Kingdom. 7 If the individual is not resident in the United Kingdom in a tax year, for the purposes of this section treat section 809B of ITA 2007 as applying to the individual for that year. 8 This section is subject to section 41E (foreign securities income: just and reasonable apportionment). 9 If subsection (4) does not apply to a tax year by virtue of subsection (4A), it is to be assumed for the purposes of section 41E that it is just and reasonable for none of the securities income treated as accruing in the tax year to be “foreign”. Limit on foreign securities income where duties of associated employment performed in UK 41D 1 This section imposes a limit on the extent to which section 41C(3) applies in relation to a period when— a the individual holds associated employments as well as the employment in relation to which section 41C(4) applies, and b the duties of the associated employments are not performed wholly outside the United Kingdom. 2 The amount of the securities income for the period that is to be regarded as “foreign” is limited to such amount as is just and reasonable, having regard to— a the employment income for the period from all the employments mentioned in subsection (1)(a), b the proportion of that income that is general earnings to which section 22 applies (chargeable overseas earnings), c the nature of and time devoted to the duties performed outside the United Kingdom, and those performed in the United Kingdom, in the period, and d all other relevant circumstances. 3 In this section “ associated employments ” means employments with the same employer or with associated employers. 4 Section 24(5) and (6) (meaning of “associated employer”) apply for the purposes of this section. Foreign securities income: just and reasonable apportionment 41E 1 This section applies if the proportion of the securities income that would otherwise be regarded as “foreign” is not, having regard to all the circumstances, one that is just and reasonable. 2 The amount of the securities income that is “foreign” is such amount as is just and reasonable (rather than the amount calculated in accordance with section 41C). CHAPTER 5B Taxable specific income from employment-related securities etc : internationally mobile employees Taxable specific income: internationally mobile employees etc 41F 1 This section applies if— a an amount counts under Chapters 2 to 5 of Part 7 (employment-related securities etc ) as employment income of an individual for a tax year (“the securities income”) in respect of an employment (“ the relevant employment ”), and b one or more of the international mobility conditions is met in relation to the individual (see subsection (2)). 2 The “international mobility conditions” are— a that any part of the relevant period (see section 41G) is within a tax year for which section 809B, 809D or 809E of ITA 2007 (remittance basis) applied to the individual; b that any part of the relevant period is within a tax year for which the individual is not UK resident; c that any part of the relevant period is within the overseas part of a tax year that is a split year with respect to the individual. 3 An amount equal to— SI − FSI is an amount of “taxable specific income” from the relevant employment for the tax year mentioned in subsection (1)(a). 4 In subsection (3)— a SI is the amount of the securities income, and b FSI is the amount of the securities income that is “foreign”. 5 The amount of the securities income that is “foreign” is the sum of any chargeable foreign securities income and any unchargeable foreign securities income (see sections 41H to 41L). 6 The full amount of any chargeable foreign securities income which is remitted to the United Kingdom in a tax year is an amount of “taxable specific income” from the relevant employment for that year. 7 Subsection (6) applies whether or not the relevant employment is held when the chargeable foreign securities income is remitted. 8 For the purposes of Chapter A1 of Part 14 of ITA 2007 (remittance basis), treat the relevant securities or relevant securities option as deriving from the chargeable foreign securities income. 9 But where— a the chargeable event is the disposal of the relevant securities or the assignment or release of the relevant securities option, and b the individual receives consideration for the disposal, assignment or release of an amount equal to or exceeding the market value of the relevant securities or relevant securities option, for the purposes of that Chapter treat the consideration (and not the relevant securities or relevant securities option) as deriving from the chargeable foreign securities income. 10 See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom”. 11 In this section and section 41G— “ the chargeable event ” means the event giving rise to the securities income, and “the relevant securities” or “ the relevant securities option ” means the employment-related securities or employment-related securities option by virtue of which the amount mentioned in subsection (1)(a) counts as employment income. Section 41F: the relevant period 41G 1 “The relevant period” is to be determined as follows. 2 In the case of an amount that counts as employment income by virtue of Chapter 2 of Part 7 (restricted securities) (other than where subsection (4) applies) or Chapter 3 of that Part (convertible securities), the relevant period— a begins with the day of the acquisition, and b ends with the day of the chargeable event. 3 In the case of an amount that counts as employment income by virtue of section 446B (securities with artificially depressed market value: charge on acquisition), the relevant period is the tax year in which the acquisition occurs. 4 In a case within subsection (1)(aa) or (b) of section 446E (securities with artificially depressed market value: charge on restricted securities) where an amount counts as employment income by virtue of that section, the relevant period— a begins at the beginning of the tax year in which the chargeable event is treated as occurring, and b ends with the day on which the chargeable event is treated as occurring. 5 In the case of an amount that counts as employment income by virtue of section 446L (securities with artificially enhanced market value), the relevant period— a begins at the beginning of the tax year in which the valuation date (within the meaning of that section) falls, and b ends with the valuation date. 6 In the case of an amount that counts as employment income by virtue of section 446U (securities acquired for less than market value: discharge of notional loan) or 446UA (avoidance cases in respect of such securities)— a if the relevant securities were acquired by virtue of the exercise of a securities option (“the option”), the relevant period— i begins with the day of the acquisition of the option, and ii ends with the day the option vests, and b otherwise, the relevant period is— i the tax year in which the notional loan (within the meaning of Chapter 3C of Part 7) is treated as made, or ii if the chargeable event occurs in that year, the period beginning at the beginning of that year and ending with the day of that event. 7 In the case of an amount that counts as employment income by virtue of— a Chapter 3D of Part 7 (securities disposed of for more than market value), or b Chapter 4 of that Part (post-acquisition benefits from securities), the relevant period is the tax year in which the chargeable event occurs. 8 In the case of an amount that counts as employment income by virtue of Chapter 5 of Part 7 (employment-related securities options), the relevant period— a begins with the day of the acquisition, and b ends with the day of the chargeable event or, if earlier, the day the relevant securities option vests. 9 If the relevant period determined in accordance with subsections (2) to (8) would not, in all the circumstances, be just and reasonable, the relevant period is to be such period as is just and reasonable. 10 In this section “ the acquisition ” has the same meaning as in Chapters 2 to 4 or Chapter 5 of Part 7 (see section 421B or 471). 11 For the purposes of this section an option “vests”— a when it becomes exercisable, or b if earlier, when it becomes exercisable subject only to a period of time expiring. 12 See section 41F(11) for the definitions of “the chargeable event”, “the relevant securities” and “the relevant securities option”. Section 41F: chargeable and unchargeable foreign securities income 41H 1 The extent to which the securities income is “chargeable foreign securities income” or “unchargeable foreign securities income” is to be determined as follows. 2 Treat an equal amount of the securities income as accruing on each day of the relevant period. 3 If any part of the relevant period is within a tax year to which subsection (4) applies, the securities income treated as accruing in that part of the relevant period is “chargeable foreign securities income”. This is subject to subsection (9) and section 41I (limit where duties of associated employment performed in UK). 4 This subsection applies to a tax year if— a section 809B, 809D or 809E of ITA 2007 applied to the individual for the year, b the individual did not meet the requirement of section 26A for the year (reading references there to the employee as references to the individual), c the relevant employment was with a foreign employer, and d the duties of the relevant employment were performed wholly outside the United Kingdom in the year. 5 But subsection (4) does not apply to a tax year if section 24A applies in relation to the relevant employment for the tax year. 6 If any part of the relevant period is within a tax year to which subsection (7) applies— a if the duties of the relevant employment are performed wholly outside the United Kingdom, the securities income treated as accruing in that part of the relevant period is “chargeable foreign securities income”, and b if some, but not all, of those duties are performed outside the United Kingdom— i the securities income mentioned in paragraph (a) is to be apportioned (on a just and reasonable basis) between duties performed in the United Kingdom and duties performed outside the United Kingdom, and ii the income apportioned in respect of duties performed outside the United Kingdom is “chargeable foreign securities income”. This is subject to subsection (9). 7 This subsection applies to a tax year if— a section 809B, 809D or 809E of ITA 2007 applied to the individual for the year, b the individual met the requirement of section 26A for the year (reading references there to the employee as references to the individual), and c some or all of the duties of the relevant employment were performed outside the United Kingdom in the year. 8 If any part of the relevant period is within a tax year for which the individual is not UK resident— a if the duties of the relevant employment are performed wholly outside the United Kingdom in that year, the securities income treated as accruing in that part of the relevant period is “unchargeable foreign securities income”, or b if some, but not all, of those duties are performed outside the United Kingdom in that year— i the securities income mentioned in paragraph (a) is to be apportioned (on a just and reasonable basis) between duties performed in the United Kingdom and duties performed outside the United Kingdom, and ii the income apportioned in respect of duties performed outside the United Kingdom is “unchargeable foreign securities income”. 9 If any part of the relevant period is within the overseas part of a tax year that is a split year with respect to the individual— a if the duties of the relevant employment are performed wholly outside the United Kingdom in that overseas part, the securities income treated as accruing in that part of the relevant period is “unchargeable foreign securities income”, or b if some, but not all, of those duties are performed outside the United Kingdom in that overseas part— i the securities income mentioned in paragraph (a) is to be apportioned (on a just and reasonable basis) between duties performed in the United Kingdom and duties performed outside the United Kingdom, and ii the income apportioned in respect of duties performed outside the United Kingdom is “unchargeable foreign securities income”. 10 If subsection (4) does not apply to a tax year by virtue of subsection (5), it is to be assumed for the purposes of section 41L that it is just and reasonable for none of the securities income treated as accruing in the tax year to be “chargeable foreign securities income”. 11 See section 41J for further provision about the location of employment duties. 12 This section is subject to— a section 41K (securities income from overseas Crown employment), and b section 41L (chargeable and unchargeable foreign securities income: just and reasonable apportionment). Limit on “chargeable foreign securities income” where duties of associated employment performed in UK 41I 1 This section imposes a limit on the extent to which section 41H(3) applies in relation to a period when— a the individual holds associated employments as well as the relevant employment, and b the duties of the associated employments are not performed wholly outside the United Kingdom. 2 The amount of the securities income for the period that is to be regarded as “chargeable foreign securities income” is limited to such amount as is just and reasonable, having regard to— a the employment income for the period from all the employments mentioned in subsection (1)(a), b the proportion of that income that is general earnings to which section 22 applies (chargeable overseas earnings), c the nature of, and time devoted to, the duties performed outside the United Kingdom, and those performed in the United Kingdom, in the period, and d all other relevant circumstances. 3 In this section “ associated employments ” means employments with the same employer or with associated employers. 4 Section 24(5) and (6) (meaning of “associated employer”) applies for the purposes of this section. Location of employment duties 41J 1 The following provisions apply for the purposes of this Chapter— a section 39(1) and (2), and b section 40 (but as if in subsections (3) and (4) of that section references to section 24(1)(b) were to section 41I(1)(b)). 2 Duties of an employment performed in the UK sector of the continental shelf in connection with exploration or exploitation activities are to be treated for the purposes of this Chapter as being performed in the United Kingdom. 3 In subsection (2) “ the UK sector of the continental shelf ” and “ exploration or exploitation activities ” have the same meaning as in section 41 (treatment of general earnings from employment in the UK sector of the continental shelf). Securities income from overseas Crown employment 41K 1 If securities income is from overseas Crown employment subject to United Kingdom tax, it is (notwithstanding any other provision of this Chapter) not “foreign”. 2 “ Securities income from overseas Crown employment ” means securities income from Crown employment (within the meaning given by section 28(2)) in respect of duties performed outside the United Kingdom. 3 Such securities income is to be taken as being “subject to United Kingdom tax” unless, by virtue of subsection (4), it falls within an exception contained in an order under section 28(5). 4 Subject to any provision made in an order under section 28(5) for the purposes of this section, provisions made in an order under that section for the purposes of excepting general earnings from overseas Crown employment from the operation of section 27(2) also have effect for the purposes of excepting securities income from such employment from the operation of subsection (1). 5 For the purposes of this section, if securities income is partly from overseas Crown employment subject to United Kingdom tax, a just and reasonable proportion of the securities income is to be taken to be from such employment. Chargeable and unchargeable foreign securities income: just and reasonable apportionment 41L 1 This section applies if the proportion of the securities income that would otherwise be regarded as “chargeable foreign securities income” or “unchargeable foreign securities income” is not, having regard to all the circumstances, just and reasonable. 2 The amounts of the securities income that are “chargeable foreign securities income” and “unchargeable foreign securities income” are such amounts as are just and reasonable (rather than the amounts calculated in accordance with section 41H). Chapter 5C Relief for new residents on foreign employment income Foreign employment election Foreign employment election for qualifying new residents 41M 1 This Chapter applies if an individual is a qualifying new resident for a tax year (the “qualifying year”). 2 An individual is a qualifying new resident for a tax year for the purposes of this Chapter if the individual is a qualifying new resident for the tax year for the purposes of Chapter 5 of Part 8 of ITTOIA 2005 (see section 845B of that Act). 3 The individual may make an election for the qualifying year under this section (“a foreign employment election”). 4 Section 41P makes provision about a claim for relief— a which an individual can make for the qualifying year or any subsequent tax year, where the individual has made a foreign employment election, and b which entitles the individual to relief in that year calculated by reference to employment income that is in respect of the qualifying year. 5 Sections 41Q (amount of relief available) and 41R (limit on relief) set out how to determine the amount of relief to which the individual is entitled. 6 See also— a sections 845C to 845E of ITTOIA 2005, which set out some income tax consequences of a foreign employment election, and b section 1K of TCGA 1992, which provides for the loss of the individual’s annual exempt amount for capital gains tax where a foreign employment election is made. 7 A foreign employment election must be made in a return. 8 A foreign employment election for the qualifying year must be made before the end of the period of 12 months beginning with 31 January after the end of the qualifying year. 9 A foreign employment election may not be made as a consequential claim (within the meaning of section 43C(5) of TMA 1970) if the circumstances which give rise to the consequential claim result from a loss of tax brought about carelessly or deliberately by the individual or a person acting on the individual’s behalf. 10 For the purposes of this Chapter— a “ return ” means a return under section 8 of TMA 1970 (personal return), b references to a claim or election being included in a return include a claim or election being so included as a result of an amendment of the return, and c subsections (5) to (7) of section 118 of TMA 1970 (loss of tax brought about carelessly or deliberately) apply as they apply for the purposes of that Act. Key definitions Key definitions 41N 1 This section sets out some definitions that apply for the purposes of this Chapter. 2 “ Qualifying employment income ” means— a qualifying general earnings, b qualifying third party income, and c qualifying securities income. 3 “ Qualifying foreign employment income ” means— a qualifying foreign general earnings, b qualifying foreign third party income, and c qualifying foreign securities income. 4 Section 41T defines what it means— a for general earnings to be “qualifying general earnings”, and b for qualifying general earnings to be “qualifying foreign general earnings”. 5 Section 41U defines what it means— a for third party income to be “qualifying third party income”, and b for qualifying third party income to be “qualifying foreign third party income”. 6 Section 41V defines what it means— a for securities income to be “qualifying securities income”, and b for qualifying securities income to be “qualifying foreign securities income”. Claim for relief Claim for relief for qualifying new residents 41P 1 Where an individual has made a foreign employment election, the individual may make a claim for relief for the qualifying year or any subsequent tax year (“a foreign employment relief claim”). 2 Where an individual makes a foreign employment relief claim for a tax year, the individual is entitled to relief that is equal to so much of the net taxable employment income for that year as— a reflects qualifying foreign employment income (see section 41Q), and b is identified as such in the claim. 3 But subsection (2) only applies to the extent the total amount of the relief given does not exceed the limit (see section 41R). 4 The relief is given by deducting the amount of the relief in calculating the individual's net income for the tax year for which the claim is made (see Step 2 of the calculation in section 23 of ITA 2007). 5 A foreign employment relief claim must be made in a return. 6 A foreign employment relief claim for a tax year must be made before the end of the period of 12 months beginning with 31 January after the end of that tax year. 7 A foreign employment relief claim may not be made as a consequential claim (within the meaning of section 43C(5) of TMA 1970) if the circumstances which give rise to the consequential claim result from a loss of tax brought about carelessly or deliberately by the individual or a person acting on the individual’s behalf. 8 For the purposes of this Chapter “ net taxable employment income ”, in relation to a tax year, means the employment income on which the individual is charged to tax for the tax year (see section 9(1)). Amount of relief available 41Q 1 For the purposes of section 41P(2), the amount of net taxable employment income for a tax year that “reflects” qualifying foreign employment income is the total of— a the total of the amount of the net taxable earnings from each employment in the tax year that reflects qualifying foreign general earnings (see subsections (2) to (5)), and b the total of the amount of the net taxable specific income from each employment for the tax year that reflects qualifying foreign third party income or qualifying foreign securities income (see subsection (6) ). 2 The amount of the net taxable earnings from an employment in a tax year that “reflects” qualifying foreign general earnings is— a the amount of the taxable earnings from the employment in the tax year that are qualifying foreign general earnings, minus b the amount of the qualifying deductions. 3 If the amount calculated under subsection (2) is nil or a negative amount, then none of the net taxable earnings from the employment in the tax year reflect qualifying foreign general earnings. 4 If the foreign employment relief claim is for the qualifying year, the amount of the qualifying deductions is the proportion of the total deductions that is the same as the proportion of the claim year taxable earnings that are qualifying foreign general earnings. 5 If the foreign employment relief claim is for a subsequent tax year, the amount of the qualifying deductions is the amount resulting from the following steps— Step 1 Deduct the claim year taxable earnings from the total deductions. If the result is nil or a negative amount, there are no qualifying deductions. Step 2 Deduct any other taxable earnings that are not qualifying foreign general earnings. If the result is nil or a negative amount, there are no qualifying deductions. 6 The proportion of the net taxable specific income from an employment for a tax year that “reflects” qualifying foreign third party income or qualifying foreign securities income is the same as the proportion of the taxable specific income for the employment in that year that is qualifying foreign third party income or qualifying foreign securities income. 7 In this section— “ claim year taxable earnings ” means the taxable earnings from the employment in the tax year that are “for” the year for which the claim is made determined in accordance with section 16 and 17; “ total deductions ” means the total amount of any deductions allowed from the taxable earnings from the employment in the tax year under provisions listed in section 327(3) to (5) (see section 11(1)). Limit on relief 41R 1 This section sets out how to determine the limit on the amount of relief the individual is entitled to when making a foreign employment relief claim for a year for the purposes of section 41P(3). 2 The limit is the lesser of— a 30% of the relevant qualifying employment income, and b £300,000. 3 For the purposes of this section “ relevant qualifying employment income ” means— a so much of the net taxable employment income for the tax year for which the claim is made as reflects qualifying employment income, and b if the foreign employment relief claim is for a tax year that is subsequent to the qualifying year, so much of any net taxable employment income for any earlier tax year (but not any tax year before the qualifying year) as would reflect qualifying employment income if that earlier year was the year for which the claim was made. 4 If the foreign employment relief claim is for a tax year that is subsequent to the qualifying year, the limit is reduced by the total of any amounts reflecting qualifying foreign employment income that have previously been relieved under section 41P. 5 To determine the amounts mentioned in subsection (3)(a) and (b), apply section 41Q, but as if— a the references in that section to qualifying foreign employment income were to qualifying employment income, b the references in that section to qualifying foreign general earnings were to qualifying general earnings, and c the references in that section to qualifying foreign third party income and qualifying foreign securities income were references to qualifying third party income and qualifying securities income. Effect of claim on relief for contributions to registered pension schemes 41S 1 This section applies where an individual who is an active member of a registered pension scheme for the purposes of section 188 of FA 2004 (relief for contributions) makes a foreign employment relief claim for a tax year. 2 For the purposes of sections 189(1)(a) and 190 of that Act, references to the amount of the individual’s relevant UK earnings chargeable to income tax for that year are to be read as references to that amount minus the relieved amount. 3 The “relieved amount” is the amount of the relief to which the individual is entitled under section 41P(2) of this Act as a result of making the foreign employment relief claim. Foreign employment relief ignored for purposes of determining adjusted net income 41T 1 Subsection (2) applies for the purpose of determining the adjusted net income under section 58 of ITA 2007 of an individual for a tax year for which the individual is entitled to relief under section 41P. 2 The adjusted net income is to be determined as if the relief had not been deducted in calculating the individual’s net income for the tax year. Qualifying foreign employment income Qualifying foreign general earnings 41U 1 General earnings are “qualifying general earnings” if they are— a “for” the qualifying year determined in accordance with sections 16 and 17, b if the qualifying year is a split year as respects the individual, attributable to the UK part of the year, and c from an employment the duties of which are performed wholly or partly outside the UK during the qualifying year. 2 Any attribution required for the purposes of subsection (1)(b) is to be done on a just and reasonable basis. 3 Qualifying general earnings are “qualifying foreign general earnings” if they are neither— a in respect of duties performed in the United Kingdom, nor b from overseas Crown employment subject to United Kingdom tax (see section 41W ). 4 For the purposes of subsection (3), the extent to which qualifying general earnings are in respect of duties performed in the United Kingdom is to be determined on a just and reasonable basis. Qualifying foreign third party income 41V 1 For the purposes of this Chapter, “third party income” is an amount that counts under Chapter 2 of Part 7A (treatment of relevant step for income tax purposes) as employment income in respect of an employment. 2 Third party income is “qualifying third party income”— a if it is in respect of an employment the duties of which are performed wholly or partly outside the UK during the qualifying year, and b to the extent that the value of the relevant step that counts as employment income (see section 554Z3) is— i “for” the qualifying year determined in accordance with section 554Z4(2), and ii if the qualifying year is a split year as respects the individual, attributable to the UK part of the year. 3 Any attribution required for the purposes of subsection (2)(b)(ii) is to be done on a just and reasonable basis. 4 Qualifying third party income is “qualifying foreign third party income” to the extent that it is not in respect of duties performed in the United Kingdom. 5 The extent to which qualifying third party income is not in respect of duties performed in the United Kingdom is to be determined on a just and reasonable basis. Qualifying foreign securities income 41W 1 For the purpose of this Chapter, “securities income” is an amount that counts under Chapters 2 to 5 of Part 7 (employment-related securities etc) as employment income in respect of an employment (the “relevant employment”). 2 Securities income is “qualifying securities income”— a if the duties of the relevant employment are performed wholly or partly outside the UK during the qualifying year, and b to the extent that it— i accrues during the qualifying year, or ii if the qualifying year is a split year as respects the individual, accrues during the UK part of the year. 3 To determine when securities income accrues treat an equal amount of the securities income as accruing on each day of the relevant period determined in accordance with section 41G. 4 But if the proportion of the securities income that would be regarded as qualifying securities income by virtue of subsection (3) is not, having regard to all the circumstances, just and reasonable, the amount of the securities income that is qualifying securities income is such amount as is just and reasonable. 5 Qualifying securities income is wholly “qualifying foreign securities income” if the duties of the relevant employment are performed wholly outside the United Kingdom. 6 If some, but not all, of the duties of the relevant employment are performed outside the United Kingdom— a the qualifying securities income is to be apportioned (on a just and reasonable basis) between duties performed in the United Kingdom and duties performed outside the United Kingdom, and b the income apportioned in respect of duties performed outside the United Kingdom is qualifying foreign securities income. 7 But qualifying securities income from overseas Crown employment subject to United Kingdom tax is not qualifying foreign securities income. Meaning of “overseas Crown employment subject to UK tax” 41X 1 This section explains what is meant by — a qualifying general earnings “ from overseas Crown employment subject to United Kingdom tax ” for the purposes of section 41T(3)(b), and b qualifying securities income “ from overseas Crown employment subject to United Kingdom tax ” for the purposes of section 41V(7). 2 Qualifying general earnings and qualifying securities income are “from overseas Crown employment” if the earnings or income is from Crown employment (within the meaning of section 28(2)) in respect of duties performed outside the United Kingdom. 3 Such earnings or income are to be taken as being “subject to United Kingdom tax” unless they fall within any exception contained in an order made under section 28(5) for the purposes of section 27(2). 4 An order made under section 28(5) may also— a provide for any exceptions mentioned in subsection (3) to not apply for the purposes of this section, and b make exceptions for the purposes of this section. 5 For the purposes of this section, if securities income is partly from overseas Crown employment subject to United Kingdom tax, a just and reasonable proportion of the securities income is to be taken to be from such employment. Location of employment duties 41Y 1 Section 38 (period of absence from employment) applies for the purposes of this Chapter as if references to general earnings were to general earnings or third party income. 2 Section 40(1) and (2) (place of performance of duties on board vessel or aircraft) applies for the purposes of this Chapter. 3 Duties of an employment performed in the UK sector of the continental shelf in connection with exploration of exploitation activities are to be treated for the purposes of this Chapter as being performed in the United Kingdom. 4 In subsection (3) “ the UK sector of the continental shelf ” and “ exploration or exploitation activities ” have the same meaning as in section 41 (treatment of general earnings from employment in the UK sector of the continental shelf). Other rules for determining amounts of qualifying foreign employment income Artificial arrangements to be disregarded 41Z 1 Any arrangements falling within subsection (2) are to be disregarded for the purposes of determining the extent to which— a general earnings are qualifying general earnings; b third party income is qualifying third party income; c securities income is qualifying securities income; 2 Arrangements fall within this subsection if the main purpose, or one of the main purposes of the arrangements is to enable an individual to obtain— a relief under this Chapter to which they would not otherwise be entitled, or b relief under this Chapter of a greater amount than that to which they would otherwise be entitled. 3 In this section “ arrangements ” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable). Limit on qualifying foreign employment income from associated employments 41Z1 1 This section applies if— a the individual has associated employments from or in respect of which there is qualifying employment income, and b the duties of the associated employments are not performed wholly outside the United Kingdom. 2 There is a limit on how much of the qualifying employment income from or in respect of the associated employments is qualifying foreign employment income. 3 The limit is the proportion of the qualifying employment income that is reasonable having regard to— a the nature of, and time devoted to, the duties performed outside the United Kingdom, and those performed in the United Kingdom, and b all other relevant circumstances. 4 In this section “ associated employments ” means employments with the same employer or with associated employers; and section 24(5) and (6) applies for the purposes of this section. Chapter 6 Disputes as to domicile or ordinary residence Commissioners to determine dispute as to domicile or ordinary residence 42 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appeal against Commissioners' decision on domicile or ordinary residence 43 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 7 Application of provisions to agency workers Agency workers Treatment of workers supplied by agencies 44 1 This section applies if— a an individual (“the worker”) personally provides services (which are not excluded services) to another person (“ the client ”), b there is a contract between— i the client or a person connected with the client, and ii a person other than the worker, the client or a person connected with the client (“the agency”), and c under or in consequence of that contract— i the services are provided, or ii the client or any person connected with the client pays, or otherwise provides consideration, for the services. 2 But this section does not apply if— a it is shown that the manner in which the worker provides the services is not subject to (or to the right of) supervision, direction or control by any person, or b remuneration receivable by the worker in consequence of providing the services constitutes employment income of the worker apart from this Chapter. 3 If this section applies— a the worker is to be treated for income tax purposes as holding an employment with the agency, the duties of which consist of the services the worker provides to the client, and b all remuneration receivable by the worker (from any person) in consequence of providing the services is to be treated for income tax purposes as earnings from that employment, but this is subject to subsections (4) to (6). 4 Subsection (5) applies if (whether before or after the worker begins to provide the services)— a the client provides the agency with a fraudulent document which is intended to constitute evidence that, by virtue of subsection (2)(a), this section does not or will not apply, or b a relevant person provides the agency with a fraudulent document which is intended to constitute evidence that, by virtue of subsection (2)(b), this section does not or will not apply. 5 In relation to services the worker provides to the client after the fraudulent document is provided— a subsection (3) does not apply, b the worker is to be treated for income tax purposes as holding an employment with the client or (as the case may be) with the relevant person, the duties of which consist of the services, and c all remuneration receivable by the worker (from any person) in consequence of providing the services is to be treated for income tax purposes as earnings from that employment. 6 In subsections (4) and (5) “ relevant person ” means a person, other than the client, the worker or a person connected with the client or with the agency, who— a is resident, or has a place of business, in the United Kingdom, and b is party to a contract with the agency or a person connected with the agency, under or in consequence of which— i the services are provided, or ii the agency, or a person connected with the agency, makes payments in respect of the services. Arrangements with agencies 45 If— a an individual (“the worker”), with a view to personally providing services (which are not excluded services) to another person (“ the client ”), enters into arrangements with a third person ..., and b the arrangements are such that the services (if and when they are provided) will be treated for income tax purposes under section 44 as duties of an employment held by the worker ..., any remuneration receivable under or in consequence of the arrangements is to be treated for income tax purposes as earnings from that employment. Cases involving unincorporated bodies etc. 46 1 Section 44 also applies— a if the worker personally provides ... the services in question as a partner in a firm or a member of an unincorporated body; b if the agency in question is an unincorporated body of which the worker is a member. 2 In a case within subsection (1)(a), remuneration receivable in consequence of the worker providing the services is to be treated for income tax purposes as income of the worker and not as income of the firm or body. Anti-avoidance Anti-avoidance 46A 1 This section applies if— a an individual (“W”) personally provides services (which are not excluded services) to another person (“C”), b a third person (“A”) enters into arrangements the main purpose, or one of the main purposes, of which is to secure that the services are not treated for income tax purposes under section 44 as duties of an employment held by W with A, and c but for this section, section 44 would not apply in relation to the services. 2 In subsection (1)(b) “ arrangements ” includes any scheme, transaction or series of transactions, agreement or understanding, whether or not legally enforceable, and any associated operations. 3 Subject to subsection (2) of section 44, that section applies in relation to the services. 4 For the purposes of subsection (3)— a W is to be treated as being the worker, b C is to be treated as being the client, c A is to be treated as being the agency, and d section 44 has effect as if subsections (4) to (6) of that section were omitted. Supplementary Interpretation of this Chapter 47 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 In this Chapter “ excluded services ” means— a services as an actor, singer, musician or other entertainer or as a fashion, photographic or artist’s model, or b services provided wholly— i in the worker’s own home, or ii at other premises which are neither controlled or managed by the client nor prescribed by the nature of the services. 3 For the purposes of this Chapter “remuneration”— a does not include anything that would not have constituted employment income of the worker if it had been receivable in connection with an employment apart from this Chapter, but b subject to paragraph (a), includes every form of payment, gratuity, profit and benefit. Chapter 8 Workers' services provided through intermediaries to small clients Application of this Chapter Scope of this Chapter 48 1 This Chapter has effect with respect to the provision of services through an intermediary in a case where the services are provided to a person who is not a public authority and who either— a qualifies as small for a tax year, or b does not have a UK connection for a tax year. 2 Nothing in this Chapter— a affects the operation of Chapter 7 of this Part, aa applies to services provided by a managed service company (within the meaning of Chapter 9 of this Part), or b applies to payments or transfers to which section 966(3) or (4) of ITA 2007 applies (visiting performers: duty to deduct and account for sums representing income tax) . 3 In this Chapter “ public authority ” has the same meaning as in Chapter 10 of this Part (see section 61L). 4 For provisions determining when a person qualifies as small for a tax year, see sections 60A to 60G. 5 For provision determining when a person has a UK connection for a tax year, see section 60I. Engagements to which this Chapter applies 49 1 This Chapter applies where— a an individual (“the worker”) personally performs, or is under an obligation personally to perform, services for another person (“ the client ”), aa the client is not a public authority, b the services are provided not under a contract directly between the client and the worker but under arrangements involving a third party (“the intermediary”), and c the circumstances are such that— i if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client or the holder of an office under the client, or ii the worker is an office-holder who holds that office under the client and the services relate to the office. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 The reference in subsection (1)(b) to a “ third party ” includes a partnership or unincorporated body of which the worker is a member. 4 The circumstances referred to in subsection (1)(c) include the terms on which the services are provided, having regard to the terms of the contracts forming part of the arrangements under which the services are provided. 4A Holding office as statutory auditor of the client does not count as holding office under the client for the purposes of subsection (1)(c), and here “ statutory auditor ” means a statutory auditor within the meaning of Part 42 of the Companies Act 2006 (see section 1210 of that Act). 5 In this Chapter “ engagement to which this Chapter applies ” means any such provision of services as is mentioned in subsection (1). Worker treated as receiving earnings from employment 50 1 If, in the case of an engagement to which this Chapter applies, in any tax year— za the client qualifies as small or does not have a UK connection, a the conditions specified in section 51, 52 or 53 are met in relation to the intermediary, and b the worker, or an associate of the worker— i receives from the intermediary, directly or indirectly, a payment or benefit that is not employment income, or ii has rights which entitle, or which in any circumstances would entitle, the worker or associate to receive from the intermediary, directly or indirectly, any such payment or benefit, the intermediary is treated as making to the worker, and the worker is treated as receiving, in that year a payment which is to be treated as earnings from an employment (“the deemed employment payment”). 2 A single payment is treated as made in respect of all engagements in relation to which the intermediary is treated as making a payment to the worker in the tax year. 3 The deemed employment payment is treated as made at the end of the tax year, unless section 57 applies (earlier date of deemed payment in certain cases). 4 In this Chapter “ the relevant engagements ”, in relation to a deemed employment payment, means the engagements mentioned in subsection (2). 5 The condition in paragraph (za) of subsection (1) is to be ignored if— a the client concerned is an individual, and b the services concerned are performed otherwise than for the purposes of the client's business. 6 For the purposes of paragraph (za) of subsection (1) the client is to be treated as not qualifying as small for the tax year concerned if the client is treated as medium or large for that tax year by reason of section 61TA(3)(a). Conditions of liability where intermediary is a company 51 1 Where the intermediary is a company the conditions are that the intermediary is not an associated company of the client that falls within subsection (2) and either— a the worker has a material interest in the intermediary, or b the payment or benefit mentioned in section 50(1)(b)— i is received or receivable by the worker directly from the intermediary, and ii can reasonably be taken to represent remuneration for services provided by the worker to the client. 2 An associated company of the client falls within this subsection if it is such a company by reason of the intermediary and the client being under the control— a of the worker, or b of the worker and other persons. 3 A worker is treated as having a material interest in a company if— a the worker, alone or with one or more associates of the worker, or b an associate of the worker, with or without other such associates, has a material interest in the company. 4 For this purpose a material interest means— a beneficial ownership of, or the ability to control, directly or through the medium of other companies or by any other indirect means, more than 5% of the ordinary share capital of the company; or b possession of, or entitlement to acquire, rights entitling the holder to receive more than 5% of any distributions that may be made by the company; or c where the company is a close company, possession of, or entitlement to acquire, rights that would in the event of the winding up of the company, or in any other circumstances, entitle the holder to receive more than 5% of the assets that would then be available for distribution among the participators. 5 In subsection (4)(c) “ participator ” has the meaning given by section 454 of CTA 2010 . Conditions of liability where intermediary is a partnership 52 1 Where the intermediary is a partnership the conditions are as follows. 2 In relation to any payment or benefit received or receivable by the worker as a member of the partnership the conditions are— a that the worker, alone or with one or more relatives, is entitled to 60% or more of the profits of the partnership; or b that most of the profits of the partnership concerned derive from the provision of services under engagements to which one or other of this Chapter and Chapter 10 applies— i to a single client, or ii to a single client together with associates of that client; or c that under the profit sharing arrangements the income of any of the partners is based on the amount of income generated by that partner by the provision of services under engagements to which one or other of this Chapter and Chapter 10 applies. In paragraph (a) “ relative ” means spouse or civil partner , parent or child or remoter relation in the direct line, or brother or sister. 3 In relation to any payment or benefit received or receivable by the worker otherwise than as a member of the partnership, the conditions are that the payment or benefit— a is received or receivable by the worker directly from the intermediary, and b can reasonably be taken to represent remuneration for services provided by the worker to the client. Conditions of liability where intermediary is an individual 53 Where the intermediary is an individual the conditions are that the payment or benefit— a is received or receivable by the worker directly from the intermediary, and b can reasonably be taken to represent remuneration for services provided by the worker to the client. The deemed employment payment Calculation of deemed employment payment 54 1 The amount of the deemed employment payment for a tax year (“ the year ”) is the amount resulting from the following steps— Step 1 Find (applying section 55) the total amount of all payments and benefits received by the intermediary in the year in respect of the relevant engagements, and reduce that amount by 5%. Step 2 Add (applying that section) the amount of any payments and benefits received by the worker in the year in respect of the relevant engagements, otherwise than from the intermediary, that— a are not chargeable to income tax as employment income, and b would be so chargeable if the worker were employed by the client. Step 3 Deduct (applying Chapters 1 to 5 of Part 5) the amount of any expenses met in the year by the intermediary that would have been deductible from the taxable earnings from the employment if— a the worker had been employed by the client, and b the expenses had been met by the worker out of those earnings. If the result at this or any later point is nil or a negative amount, there is no deemed employment payment. Step 4 Deduct the amount of any capital allowances in respect of expenditure incurred by the intermediary that could have been deducted from employment income under section 262 of CAA 2001 (employments and offices) if the worker had been employed by the client and had incurred the expenditure. Step 5 Deduct any contributions made in the year for the benefit of the worker by the intermediary to a registered pension scheme that if made by an employer for the benefit of an employee would not be chargeable to income tax as income of the employee. This does not apply to excess contributions made and later repaid. Step 6 Deduct the amount of any employer’s national insurance contributions paid by the intermediary for the year in respect of the worker. Step 7 Deduct the amount of any payments and benefits received in the year by the worker from the intermediary— a in respect of which the worker is chargeable to income tax as employment income, and b which do not represent items in respect of which a deduction was made under step 3. Step 8 Assume that the result of step 7 represents an amount together with employer’s national insurance contributions on it, and deduct what (on that assumption) would be the amount of those contributions. The result is the deemed employment payment. 1A For the purposes of step 1 of subsection (1), any payment or benefit which is employment income of the worker by virtue of section 863G(4) of ITTOIA 2005 (salaried members of limited liability partnerships: anti-avoidance) is to be ignored. 2 If section 61 of the Finance Act 2004 applies (sub-contractors in the construction industry: payments to be made under deduction), the intermediary is treated for the purposes of step 1 of subsection (1) as receiving the amount that would have been received had no deduction been made under that section. 3 In step 3 of subsection (1), the reference to expenses met by the intermediary includes— a expenses met by the worker and reimbursed by the intermediary, and b where the intermediary is a partnership and the worker is a member of the partnership, expenses met by the worker for and on behalf of the partnership. 4 In step 3 of subsection (1), the expenses deductible include the amount of any mileage allowance relief for the year which the worker would have been entitled to in respect of the use of a vehicle falling within subsection (5) if— a the worker had been employed by the client, and b the vehicle had not been a company vehicle (within the meaning of Chapter 2 of Part 4). 5 A vehicle falls within this subsection if— a it is provided by the intermediary for the worker, or b where the intermediary is a partnership and the worker is a member of the partnership, it is provided by the worker for the purposes of the business of the partnership. 6 Where, on the assumptions mentioned in paragraphs (a) and (b) of step 3 of subsection (1), the deductibility of the expenses is determined under sections 337 to 342 (travel expenses), the duties performed under the relevant engagements are treated as duties of a continuous employment with the intermediary. 7 In step 7 of subsection (1), the amounts deductible include any payments received in the year from the intermediary that— a are exempt from income tax by virtue of section 229 or 233 (mileage allowance payments and passenger payments), and b do not represent items in respect of which a deduction was made under step 3. 8 For the purposes of subsection (1) any necessary apportionment is to be made on a just and reasonable basis of amounts received by the intermediary that are referable— a to the services of more than one worker, or b partly to the services of the worker and partly to other matters. Application of rules relating to earnings from employment 55 1 The following provisions apply in relation to the calculation of the deemed employment payment. 2 A “ payment or benefit ” means anything that, if received by an employee for performing the duties of an employment, would be earnings from the employment. 3 The amount of a payment or benefit is taken to be— a in the case of a payment or cash benefit, the amount received, and b in the case of a non-cash benefit, the cash equivalent of the benefit. 4 The cash equivalent of a non-cash benefit is taken to be— a the amount that would be earnings if the benefit were earnings from an employment, or b in the case of living accommodation, whichever is the greater of that amount and the cash equivalent determined in accordance with section 398(2). 5 A payment or benefit is treated as received— a in the case of a payment or cash benefit, when payment is made of or on account of the payment or benefit; b in the case of a non-cash benefit that is calculated by reference to a period within the tax year, at the end of that period; c in the case of a non-cash benefit that is not so calculated, when it would have been treated as received for the purposes of Chapter 4 or 5 of this Part (see section 19 or 32) if— i the worker had been an employee, and ii the benefit had been provided by reason of the employment. Application of Income Tax Acts in relation to deemed employment 56 1 The Income Tax Acts (in particular, the PAYE provisions) apply in relation to the deemed employment payment as follows. 2 They apply as if— a the worker were employed by the intermediary, and b the relevant engagements were undertaken by the worker in the course of performing the duties of that employment. 3 The deemed employment payment is treated in particular— a as taxable earnings from the employment for the purpose of securing that any deductions under Chapters 2 to 6 of Part 5 do not exceed the deemed employment payment; and b as taxable earnings from the employment for the purposes of section 232. 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Where the intermediary is a partnership or unincorporated association, the deemed employment payment is treated as received by the worker in the worker’s personal capacity and not as income of the partnership or association. 7 Where— a the worker is resident in the United Kingdom, and b the services in question are provided in the United Kingdom, ... c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . the intermediary is treated as having a place of business in the United Kingdom, whether or not it in fact does so. 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supplementary provisions Earlier date of deemed employment payment in certain cases 57 1 If in any tax year— a a deemed employment payment is treated as made, and b before the date on which the payment would be treated as made under section 50(2) any relevant event (as defined below) occurs in relation to the intermediary, the deemed employment payment for that year is treated as having been made immediately before that event or, if there is more than one, immediately before the first of them. 2 Where the intermediary is a company the following are relevant events— a the company ceasing to trade; b where the worker is a member of the company, the worker ceasing to be such a member; c where the worker holds an office with the company, the worker ceasing to hold such an office; d where the worker is employed by the company, the worker ceasing to be so employed. 3 Where the intermediary is a partnership the following are relevant events— a the dissolution of the partnership or the partnership ceasing to trade or a partner ceasing to act as such; b where the worker is employed by the partnership, the worker ceasing to be so employed. 4 Where the intermediary is an individual and the worker is employed by the intermediary, it is a relevant event if the worker ceases to be so employed. 5 The fact that the deemed employment payment is treated as made before the end of the tax year does not affect what receipts and other matters are taken into account in calculating its amount. Relief in case of distributions by intermediary 58 1 A claim for relief may be made under this section where the intermediary— a is a company, b is treated as making a deemed employment payment in any tax year, and c either in that tax year (whether before or after that payment is treated as made), or in a subsequent tax year, makes a distribution (a “relevant distribution”). 2 A claim for relief under this section must be made— a by the intermediary by notice to an officer of Revenue and Customs , and b within 5 years after the 31st January following the tax year in which the distribution is made. 3 If on a claim being made an officer of Revenue and Customs is satisfied that relief should be given in order to avoid a double charge to tax, the officer must direct the giving of such relief by way of amending any assessment, by discharge or repayment of tax, or otherwise, as appears to the officer appropriate. 4 Relief under this section is given by setting the amount of the deemed employment payment against the relevant distribution so as to reduce the distribution. 5 In the case of more than one relevant distribution, an officer of Revenue and Customs must exercise the power conferred by this section so as to secure that so far as practicable relief is given by setting the amount of a deemed employment payment— a against relevant distributions of the same tax year before those of other years, b against relevant distributions received by the worker before those received by another person, and c against relevant distributions of earlier years before those of later years. 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions applicable to multiple intermediaries 59 1 The provisions of this section apply where in the case of an engagement to which this Chapter applies the arrangements involve more than one relevant intermediary. 2 All relevant intermediaries in relation to the engagement are jointly and severally liable, subject to subsection (3), to account for any amount required under the PAYE provisions to be deducted from a deemed employment payment treated as made by any of them— a in respect of that engagement, or b in respect of that engagement together with other engagements. 3 An intermediary is not so liable if it has not received any payment or benefit in respect of that engagement or any such other engagement as is mentioned in subsection (2)(b). 4 Subsection (5) applies where a payment or benefit has been made or provided, directly or indirectly, from one relevant intermediary to another in respect of the engagement. 5 In that case, the amount taken into account in relation to any intermediary in step 1 or step 2 of section 54(1) is reduced to such extent as is necessary to avoid double-counting having regard to the amount so taken into account in relation to any other intermediary. 6 Except as provided by subsections (2) to (5), the provisions of this Chapter apply separately in relation to each relevant intermediary. 7 In this section “ relevant intermediary ” means an intermediary in relation to which the conditions specified in section 51, 52 or 53 are met. Meaning of “associate” 60 1 In this Chapter “associate”— a in relation to an individual, has the meaning given by section 448 of CTA 2010 , subject to the following provisions of this section; b in relation to a company, means a person connected with the company; and c in relation to a partnership, means any associate of a member of the partnership. 2 Where an individual has an interest in shares or obligations of the company as a beneficiary of an employee benefit trust, the trustees are not regarded as associates of the individual by reason only of that interest except in the following circumstances. 3 The exception is where— a the individual, either alone or with any one or more associates of the individual, or b any associate of the individual, with or without other such associates, has at any time on or after 14th March 1989 been the beneficial owner of, or able (directly or through the medium of other companies or by any other indirect means) to control more than 5% of the ordinary share capital of the company. 4 In subsection (3) “ associate ” does not include the trustees of an employee benefit trust as a result only of the individual’s having an interest in shares or obligations of the trust. 5 Sections 549 to 554 (attribution of interests in companies to beneficiaries of employee benefit trusts) apply for the purposes of subsection (3) as they apply for the purposes of the provisions listed in section 549(2). 6 In this section “ employee benefit trust ” has the meaning given by sections 550 and 551. When a person qualifies as small for a tax year When a company qualifies as small for a tax year 60A 1 For the purposes of this Chapter, a company qualifies as small for a tax year if one of the following conditions is met (but this is subject to section 60C). 2 The first condition is that the company's first financial year is not relevant to the tax year. 3 The second condition is that the small companies regime applies to the company for its last financial year that is relevant to the tax year. 4 For the purposes of this section, a financial year of a company is “relevant to” a tax year if the period for filing the company's accounts and reports for the financial year ends before the beginning of the tax year. 5 Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act. When a company qualifies as small for a tax year: joint ventures 60B 1 This section applies when determining for the purposes of section 60A(3) whether the small companies regime applies to a company for a financial year in a case where— a at the end of the financial year the company is jointly controlled by two or more other persons, and b one or more of those other persons are undertakings (“the joint venturer undertakings”). 2 If the company is a parent company, the joint venturer undertakings are to be treated as members of the group headed by the company. 3 If the company is not a parent company, the company and the joint venturer undertakings are to be treated as constituting a group of which the company is the parent company. 4 In this section the expression “ jointly controlled ” is to be read in accordance with those provisions of international accounting standards which relate to joint ventures. 5 Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act. When a company qualifies as small for a tax year: subsidiaries 60C 1 A company does not qualify as small for a tax year by reason of the condition in section 60A(3) being met if— a the company is a member of a group at the end of its last financial year that is relevant to the tax year, b the company is not the parent undertaking of that group at the end of that financial year, and c the undertaking that is the parent undertaking of that group at that time does not qualify as small in relation to its last financial year that is relevant to the tax year. 2 Where the parent undertaking mentioned in subsection (1)(c) is not a company, sections 382 and 383 of the Companies Act 2006 have effect for determining whether the parent undertaking qualifies as small in relation to its last financial year that is relevant to the tax year as if references in those sections to a company and a parent company included references to an undertaking and a parent undertaking. 3 For the purposes of subsections (1)(c) and (2) a financial year of an undertaking that is not a company is “relevant to” a tax year if it ends at least 9 months before the beginning of the tax year. 4 For the purposes of this section, a financial year of a company is “relevant to” a tax year if the period for filing the company's accounts and reports for the financial year ends before the beginning of the tax year. 5 Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act. When a relevant undertaking qualifies as small for a tax year 60D 1 Sections 60A to 60C apply in relation to a relevant undertaking as they apply in relation to a company, subject to any necessary modifications. 2 In this section “ relevant undertaking ” means an undertaking in respect of which regulations have effect under— a section 15(a) of the Limited Liability Partnerships Act 2000, b section 1043 of the Companies Act 2006 (unregistered companies), or c section 1049 of the Companies Act 2006 (overseas companies). 3 Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act. When other undertakings qualify as small for a tax year 60E 1 An undertaking that is not a company or a relevant undertaking qualifies as small for a tax year if one of the following conditions is met. 2 The first condition is that the undertaking's first financial year is not relevant to the tax year. 3 The second condition is that the undertaking's turnover for its last financial year that is relevant to the tax year is not more than the amount for the time being specified in the second column of item 1 of the Table in section 382(3) of the Companies Act 2006. 4 For the purposes of this section a financial year of an undertaking is “relevant to” a tax year if it ends at least 9 months before the beginning of the tax year. 5 In this section— “ relevant undertaking ” has the meaning given by section 60D, and “ turnover ”, in relation to an undertaking, means the amounts derived from the provision of goods or services after the deduction of trade discounts, value added tax and any other taxes based on the amounts so derived. 6 Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act. When other persons qualify as small for a tax year 60F 1 For the purposes of this Chapter, a person who is not a company, relevant undertaking or other undertaking qualifies as small for a tax year if the person's turnover for the last calendar year before the tax year is not more than the amount for the time being specified in the second column of item 1 of the Table in section 382(3) of the Companies Act 2006. 2 In this section— “ company ” and “ undertaking ” have the same meaning as in the Companies Act 2006, “ relevant undertaking ” has the meaning given by section 60D, and “ turnover ”, in relation to a person, means the amounts derived from the provision of goods or services after the deduction of trade discounts, value added tax and any other taxes based on the amounts so derived. Sections 60A to 60F: connected persons 60G 1 This section applies where— a it is necessary for the purposes of determining whether a person qualifies as small for a tax year (“the tax year concerned”) to first determine the person's turnover for a financial year or calendar year (“the assessment year”), and b at the end of the assessment year the person is connected with one or more other persons (“the connected persons”). 2 For the purposes of determining whether the person qualifies as small for the tax year concerned the person's turnover for the assessment year is to be taken to be the sum of— a the person's turnover for the assessment year, and b the relevant turnover of each of the connected persons. 3 In subsection (2)(b) “the relevant turnover” of a connected person means— a in a case where the connected person is a company, relevant undertaking or other undertaking, its turnover for its last financial year that is relevant to the tax year concerned, and b in a case where the connected person is not a company, relevant undertaking or other undertaking, the turnover of the connected person for the last calendar year ending before the tax year concerned. 4 For the purposes of subsection (3)(a)— a a financial year of a company or relevant undertaking is relevant to the tax year concerned if the period for filing accounts and reports for the financial year ends before the beginning of the tax year concerned, and b a financial year of any other undertaking is relevant to the tax year concerned if it ends more than 9 months before the beginning of the tax year concerned. 5 In a case where— a the person mentioned in subsection (1)(a) is a company or relevant undertaking, and b at the end of the assessment period the person is a member of a group, the person is to be treated for the purposes of this section as not being connected with any person that is a member of that group. 6 In this section— “ turnover ”, in relation to a person, means the amounts derived from the provision of goods or services after the deduction of trade discounts, value added tax and any other taxes based on the amounts so derived, and “ relevant undertaking ” has the meaning given by section 60D. 7 For provision determining whether one person is connected with another, see section 718 (connected persons). 8 Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act. Duty on client to state whether it qualifies as small for a tax year 60H 1 This section applies if, in the case of an engagement that meets conditions (a) to (b) in section 49(1), the client receives from the client's agent or the worker a request to state whether in the client's opinion the client qualifies as small for a tax year specified in the request. 2 The client must provide to the person who made the request a statement as to whether in the client's opinion the client qualifies as small for the tax year specified in the request. 3 If the client fails to provide the statement by the time mentioned in subsection (4) the duty to do so is enforceable by an injunction or, in Scotland, by an order for specific performance under section 45 of the Court of Session Act 1988. 4 The time is whichever is the later of— a the end of the period of 45 days beginning with the date the client receives the request, and b the beginning of the period of 45 days ending with the start of the tax year specified in the request. 5 In this section “ the client's agent ” means a person with whom the client entered into a contract as part of the arrangements mentioned in paragraph (b) of section 49(1). When a person has a UK connection When a person has a UK connection for a tax year 60I 1 For the purposes of this Chapter, a person has a UK connection for a tax year if (and only if) immediately before the beginning of that tax year the person— a is resident in the United Kingdom, or b has a permanent establishment in the United Kingdom. 2 In this section “permanent establishment”— a in relation to a company, is to be read (by virtue of section 1007A of ITA 2007) in accordance with Chapter 2 of Part 24 of CTA 2010, and b in relation to any other person, is to be read in accordance with that Chapter but as if references in that Chapter to a company were references to that person. Interpretation Interpretation 61 1 In this Chapter— “ associate ” has the meaning given by section 60; “ associated company ” has the meaning given by section 449 of CTA 2010 ; “ business ” means any trade, profession or vocation and includes a UK property business within the meaning of Chapter 2 of Part 3 of ITTOIA 2005 or Chapter 2 of Part 4 of CTA 2009 ; “ company ” (except in sections 60A to 60G) means a body corporate or unincorporated association, and does not include a partnership; “ employer’s national insurance contributions ” means secondary Class 1 or Class 1A national insurance contributions; “ engagement to which Chapter 10 applies ” has the meaning given by section 61M(5); “ engagement to which this Chapter applies ” has the meaning given by section 49(5); “ national insurance contributions ” means contributions under Part 1 of SSCBA 1992 or Part 1 of SSCB( NI )A 1992; “ PAYE provisions ” means the provisions of Part 11 or PAYE regulations; “ the relevant engagements ” has the meaning given by section 50(4). 2 References in this Chapter to payments or benefits received or receivable from a partnership or unincorporated association include payments or benefits to which a person is or may be entitled in the person’s capacity as a member of the partnership or association. 3 For the purposes of this Chapter— a anything done by or in relation to an associate of an intermediary is treated as done by or in relation to the intermediary, and b a payment or other benefit provided to a member of an individual’s family or household is treated as provided to the individual. 4 For the purposes of this Chapter, two people living together as if they were a married couple or civil partners are treated as if they were married to, or civil partners of, each other. Chapter 9 Managed service companies Application of this Chapter Scope of this Chapter 61A 1 This Chapter has effect with respect to the provision of services by a managed service company. 2 Nothing in this Chapter— a affects the operation of Chapter 7 of this Part (agency workers), or b applies to payments or transfers to which section 966(3) or (4) of ITA 2007 applies (visiting performers: duty to deduct and account for sums representing income tax). 3 See also section 61D(4A) (disapplication of this Chapter if Chapter 10 applies). Meaning of “managed service company” 61B 1 A company is a “managed service company” if— a its business consists wholly or mainly of providing (directly or indirectly) the services of an individual to other persons, b payments are made (directly or indirectly) to the individual (or associates of the individual) of an amount equal to the greater part or all of the consideration for the provision of the services, c the way in which those payments are made would result in the individual (or associates) receiving payments of an amount (net of tax and national insurance) exceeding that which would be received (net of tax and national insurance) if every payment in respect of the services were employment income of the individual, and d a person who carries on a business of promoting or facilitating the use of companies to provide the services of individuals (“an MSC provider”) is involved with the company. 2 An MSC provider is “involved with the company” if the MSC provider or an associate of the MSC provider— a benefits financially on an ongoing basis from the provision of the services of the individual, b influences or controls the provision of those services, c influences or controls the way in which payments to the individual (or associates of the individual) are made, d influences or controls the company's finances or any of its activities, or e gives or promotes an undertaking to make good any tax loss. 3 A person does not fall within subsection (1)(d) merely by virtue of providing legal or accountancy services in a professional capacity. 4 A person does not fall within subsection (1)(d) merely by virtue of carrying on a business consisting only of placing individuals with persons who wish to obtain their services (including by contracting with companies which provide their services). 5 Subsection (4) does not apply if the person or an associate of the person— a does anything within subsection (2)(c) or (e), or b does anything within subsection (2)(d) other than influencing the company's finances or activities by doing anything within subsection (2)(b). Section 61B: supplementary 61C 1 The Treasury may by order provide that persons of a prescribed description do not fall within section 61B(1)(d). 2 An order under subsection (1) may be made so as to have effect in relation to the whole of the tax year in which it is made. 3 In section 61B and this section, “ company ” means a body corporate or partnership. 4 References in section 61B to an associate of a person (“P”) include a person who, for the purpose of securing that the individual's services are provided by a company, acts in concert with P (or with P and other persons). 5 In section 61B(2)(e), “ undertaking to make good any tax loss ” means an undertaking (in any terms) to make good (in whole or in part, and by any means) any cost to the individual or an associate of the individual resulting from a relevant provision, or a particular kind of relevant provision, applying in relation to payments made to the individual or associate. 6 In subsection (5) “ relevant provision ” means— a a provision of the Tax Acts, b an enactment relating to national insurance, or c a provision of subordinate legislation made under any such provision or enactment. The deemed employment payment Worker treated as receiving earnings from employment 61D 1 This section applies if— a the services of an individual (“the worker”) are provided (directly or indirectly) by a managed service company (“the MSC ”), b the worker, or an associate of the worker, receives (from any person) a payment or benefit which can reasonably be taken to be in respect of the services, and c the payment or benefit is not earnings (within Chapter 1 of Part 3) received by the worker directly from the MSC. 2 The MSC is treated as making to the worker, and the worker is treated as receiving, a payment which is to be treated as earnings from an employment (“the deemed employment payment”). 3 The deemed employment payment is treated as made at the time the payment or benefit mentioned in subsection (1)(b) is received. 4 In this Chapter— “ the worker ” has the meaning given by subsection (1), “ the relevant services ” means the services mentioned in that subsection, and “ the client ” means the person to whom the relevant services are provided. 4A This section does not apply where the provision of the relevant services gives rise (directly or indirectly) to an engagement to which Chapter 10 applies and either— a the client for the purposes of section 61M(1) is a public authority, or b the client for the purposes of section 61M(1)— i qualifies as medium or large for the tax year in which the payment or benefit mentioned in subsection (1)(b) is received, and ii has a UK connection for the tax year in which the payment or benefit mentioned in subsection (1)(b) is received. 4B Sections 60I (when a person has a UK connection for a tax year), 61K(3) (when a person qualifies as medium or large for a tax year) and 61L (meaning of public authority) apply for the purposes of subsection (4A). 4C It does not matter for the purposes of subsection (4A) whether the client for the purposes of this Chapter is also “ the client ” for the purposes of section 61M(1). 5 Section 61F supplements this section. Calculation of deemed employment payment 61E 1 The amount of the deemed employment payment is the amount resulting from the following steps— Step 1 Find (applying section 61F) the amount of the payment or benefit mentioned in section 61D(1)(b). Step 2 Deduct (applying Chapters 1 to 5 of Part 5) the amount of any expenses met by the worker that would have been deductible from the taxable earnings from the employment if— a the worker had been employed by the client to provide the relevant services, and b the expenses had been met by the worker out of those earnings. If the result at this point is nil or a negative amount, there is no deemed employment payment. Step 3 Assume that the result of step 2 represents an amount together with employer's national insurance contributions on it, and deduct what (on that assumption) would be the amount of those contributions. The result is the deemed employment payment. 2 In step 2 of subsection (1), the reference to expenses met by the worker includes, where the MSC is a partnership and the worker is a member of the partnership, expenses met by the worker for and on behalf of the partnership. 3 In step 2 of subsection (1), the expenses deductible include the amount of any mileage allowance relief which the worker would have been entitled to in respect of the use of a vehicle falling within subsection (4) if— a the worker had been employed by the client to provide the relevant services, and b the vehicle had not been a company vehicle (within the meaning of Chapter 2 of Part 4). 4 A vehicle falls within this subsection if— a it is provided by the MSC for the worker, or b where the MSC is a partnership and the worker is a member of the partnership, it is provided by the worker for the purposes of the business of the partnership. 5 For the purposes of subsection (1) any necessary apportionment of payments or benefits that are referable partly to the provision of the relevant services and partly to other matters is to be made on a just and reasonable basis. Sections 61D and 61E: application of rules relating to earnings from employment 61F 1 The following provisions apply for the purposes of sections 61D and 61E. 2 A “ payment or benefit ” means anything that, if received by an employee for performing the duties of an employment, would be general earnings from the employment. 3 The amount of a payment or benefit is taken to be— a in the case of a payment or cash benefit, the amount received, and b in the case of a non-cash benefit, the cash equivalent of the benefit. 4 The cash equivalent of a non-cash benefit is taken to be— a the amount that would be general earnings if the benefit were general earnings from an employment, or b in the case of living accommodation, whichever is the greater of that amount and the cash equivalent determined in accordance with section 398(2). 5 A payment or benefit is treated as received— a in the case of a payment or cash benefit, when payment is made of or on account of the payment or benefit; b in the case of a non-cash benefit, when it would have been treated as received for the purposes of Chapter 4 or 5 of this Part (see section 19 or 32) if— i the worker had been an employee, and ii the benefit had been provided by reason of the employment. Application of Income Tax Acts in relation to deemed employment 61G 1 The Income Tax Acts (in particular, the PAYE provisions) apply in relation to the deemed employment payment as follows. 2 They apply as if— a the worker were employed by the MSC to provide the relevant services, and b the deemed employment payment were a payment by the MSC of earnings from that employment; but this is subject to subsection (3). 3 No deduction under Part 5 (deductions allowed from employment income) or section 232 (mileage allowance relief) may be made from the deemed employment payment. 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Where the MSC is a partnership and the worker is a member of the partnership, the deemed employment payment is treated as received by the worker in the worker's personal capacity and not as income of the partnership. 7 Where— a the worker is resident in the United Kingdom, and b the relevant services are provided in the United Kingdom, the MSC is treated as having a place of business in the United Kingdom, whether or not it in fact does so. Supplementary provisions Relief in case of distributions by managed service company 61H 1 A claim for relief may be made under this section where the MSC — a is a body corporate, b is treated as making a deemed employment payment in any tax year, and c either in that tax year (whether before or after that payment is treated as made), or in a subsequent tax year, makes a distribution (a “relevant distribution”). 2 A claim for relief under this section must be made— a by the MSC by notice to an officer of Revenue and Customs, and b within 5 years after 31st January following the tax year in which the distribution is made. 3 If on a claim being made an officer of Revenue and Customs is satisfied that relief should be given in order to avoid a double charge to tax, the officer must direct the giving of such relief by way of amending any assessment, by discharge or repayment of tax, or otherwise, as appears to the officer appropriate. 4 Relief under this section is given by setting the amount of the deemed employment payment against the relevant distribution so as to reduce the distribution. 5 In the case of more than one relevant distribution, an officer of Revenue and Customs must exercise the power conferred by this section so as to secure that so far as practicable relief is given by setting the amount of a deemed employment payment— a against relevant distributions of the same tax year before those of other years, b against relevant distributions received by the worker before those received by another person, and c against relevant distributions of earlier years before those of later years. 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “associate” 61I 1 Subsections (2) to (4) apply for the purposes of this Chapter. 2 “ Associate ”, in relation to an individual, means— a a member of the individual's family or household, b a relative of the individual, c a partner of the individual, or d the trustee of any settlement in relation to which the individual, or a relative of the individual or member of the individual's family (living or dead), is or was a settlor. 3 “ Associate ”, in relation to a company, means a person connected with the company. 4 “ Associate ”, in relation to a partnership, means any associate of a member of the partnership. 5 If— a a managed service company (“the MSC ”) is a partnership, and b a person is an associate of another person by virtue only of being a member of the partnership, the person is to be treated, for the purposes of this Chapter as it applies in relation to the MSC , as if the person were not an associate of that other person. 6 In subsection (2), “ relative ” means ancestor, lineal descendant, brother or sister. 7 For the purposes of subsection (2), two people living together as if they were a married couple or civil partners are treated as if they were married to, or civil partners of, each other. Interpretation of Chapter 61J 1 In this Chapter— “ associate ” has the meaning given by section 61I, “ business ” means any trade, profession or vocation, “ the client ” has the meaning given by section 61D(4), “ employer's national insurance contributions ” means secondary Class 1 or Class 1A national insurance contributions, “ engagement to which Chapter 10 applies ” has the meaning given by section 61M(5), “ managed service company ” has the meaning given by section 61B, “ national insurance contributions ” means contributions under Part 1 of SSCBA 1992 or Part 1 of SSCB( NI )A 1992, “ PAYE provisions ” means the provisions of Part 11 or PAYE regulations, “ the relevant services ” has the meaning given by section 61D(4), and “ the worker ” has the meaning given by section 61D(4). 2 Nothing in section 995 of ITA 2007 (meaning of control) applies for the purposes of this Chapter. CHAPTER 10 Workers' services provided through intermediaries to public authorities or medium or large clients Scope of this Chapter 61K 1 This Chapter has effect with respect to the provision of services through an intermediary in a case where the services are provided to a person who— a is a public authority, or b qualifies as medium or large and has a UK connection for a tax year 2 Nothing in this Chapter— a affects the operation of Chapter 7 of this Part (agency workers), or b applies to payments or transfers to which section 966(3) or (4) of ITA 2007 applies (visiting performers: duty to deduct and account for sums representing income tax). 3 For the purposes of this Chapter a person qualifies as medium or large for a tax year if the person does not qualify as small for the tax year for the purposes of Chapter 8 of this Part (see sections 60A to 60G). 4 Section 60I (when a person has a UK connection for a tax year) applies for the purposes of this Chapter. Meaning of “public authority” 61L 1 In this Chapter “ public authority ” means— a a public authority as defined by the Freedom of Information Act 2000, aa a body specified in section 23(3) of the Freedom of Information Act 2000, b a Scottish public authority as defined by the Freedom of Information (Scotland) Act 2002 (asp 13), ba the Advanced Research and Invention Agency, c the Corporate Officer of the House of Commons, d the Corporate Officer of the House of Lords, e the National Assembly for Wales Commission, ... f the Northern Ireland Assembly Commission , or g a company connected with any person mentioned in paragraphs (a) to (f). 2 An authority within paragraph (a) or (b) of subsection (1) is a public authority for the purposes of this Chapter in relation to all its activities even if provisions of the Act mentioned in that paragraph do not apply to all information held by the authority. 3 Subsection (1) is subject to subsection (4). 4 A primary-healthcare provider is a public authority for the purposes of this Chapter only if the primary-healthcare provider— a has a registered patient list for the purposes of relevant medical-services regulations, b is within paragraph 43A in Part 3 of Schedule 1 to the Freedom of Information Act 2000 (providers of primary healthcare services in England and Wales) by reason of being a person providing primary dental services, c is within paragraph 51 in that Part of that Schedule (providers of healthcare services in Northern Ireland) by reason of being a person providing general dental services, or d is within paragraph 33 in Part 4 of Schedule 1 to the Freedom of Information (Scotland) Act 2002 (providers of healthcare services in Scotland) by reason of being a person providing general dental services. 5 In this section— “ primary-healthcare provider ” means an authority that is within subsection (1)(a) or (b) only because it is within a relevant paragraph, “ relevant paragraph ” means— any of paragraphs 43A to 45A and 51 in Part 3 of Schedule 1 to the Freedom of Information Act 2000, or any of paragraphs 33 to 35 in Part 4 of Schedule 1 to the Freedom of Information (Scotland) Act 2002, and “ relevant medical-services regulations ” means any of the following— the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) Regulations 2004 ( S.I. 2004/906), the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) (Wales) Regulations 2004 ( S.I. 2004/1017), the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) (Scotland) Regulations 2004 ( S.S.I. 2004/162), and the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) Regulations (Northern Ireland) 2004 (S.R. (N.I.) 2004 No. 477). 6 The Commissioners for Her Majesty's Revenue and Customs may by regulations amend this section in consequence of— a any amendment or revocation of any regulations for the time being referred to in this section, b any amendment in Part 3 of Schedule 1 to the Freedom of Information Act 2000, or c any amendment in Part 4 of Schedule 1 to the Freedom of Information (Scotland) Act 2002. Engagements to which Chapter applies 61M 1 Sections 61N to 61R apply where— a an individual (“the worker”) personally performs, or is under an obligation personally to perform, services for another person (“ the client ”), b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c the services are provided not under a contract directly between the client and the worker but under arrangements involving a third party (“the intermediary”), ... ca the client— i is a public authority, or ii is a person who qualifies as medium or large and has a UK connection for one or more tax years during which the arrangements mentioned in paragraph (c) have effect, and d the circumstances are such that— i if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client or the holder of an office under the client, or ii the worker is an office-holder who holds that office under the client and the services relate to the office. 1A But sections 61N to 61R do not apply if— a the client is an individual, and b the services are provided otherwise than for the purposes of the client's trade or business. 2 The reference in subsection (1)(c) to a “ third party ” includes a partnership or unincorporated association of which the worker is a member. 3 The circumstances referred to in subsection (1)(d) include the terms on which the services are provided, having regard to the terms of the contracts forming part of the arrangements under which the services are provided. 4 Holding office as statutory auditor of the client does not count as holding office under the client for the purposes of subsection (1)(d), and here “ statutory auditor ” means a statutory auditor within the meaning of Part 42 of the Companies Act 2006 (see section 1210 of that Act). 5 In this Chapter “ engagement to which this Chapter applies ” means any such provision of services as is mentioned in subsection (1). Worker treated as receiving earnings from employment 61N 1 If one of Conditions A to C is met, identify the chain of two or more persons where— a the highest person in the chain is the client, b the lowest person in the chain is the intermediary, and c each person in the chain above the lowest makes a chain payment to the person immediately below them in the chain. (See section 61U for cases where one of Conditions A to C is treated as being met.) 2 In this section and sections 61O to 61S— “ chain payment ” means a payment, or money's worth or any other benefit, that can reasonably be taken to be for the worker's services to the client, “make”— in relation to a chain payment that is money's worth, means transfer, and in relation to a chain payment that is a benefit other than a payment or money's worth, means provide, and “ the fee-payer ” means the person in the chain immediately above the lowest. 3 The fee-payer is treated as making to the worker, and the worker is treated as receiving, a payment which is to be treated as earnings from an employment (“the deemed direct payment”), but this is subject to subsections (5) to (7) and (8A) and sections 61T , 61TA , 61V and 61WA . 4 The deemed direct payment is treated as made at the same time as the chain payment made by the fee-payer. 5 Unless and until the client gives a status determination statement to the worker (see section 61NA), subsections (3) and (4) have effect as if for any reference to the fee-payer there were substituted a reference to the client; but this is subject to sections 61V and 61WA . 5A Subsections (6) and (7) apply, subject to sections 61T, 61TA , 61V and 61WA , if— a the client has given a status determination statement to the worker, b the client is not the fee-payer, and c the fee-payer is not a qualifying person. 6 If there is no person in the chain below the highest and above the lowest who is a qualifying person, subsections (3) and (4) have effect as if for any reference to the fee-payer there were substituted a reference to the client. 7 Otherwise, subsections (3) and (4) have effect as if for any reference to the fee-payer there were substituted a reference to the person in the chain who— a is above the lowest, b is a qualifying person, and c is lower in the chain than any other person in the chain who— i is above the lowest, and ii is a qualifying person. 8 In subsections (5) to (7) a “qualifying person” is a person who— za has been given by the person immediately above them in the chain the status determination statement given by the client to the worker, a is resident in the United Kingdom or has a place of business in the United Kingdom, b is not a person who is controlled by— i the worker, alone or with one or more associates of the worker, or ii an associate of the worker, with or without other associates of the worker, and c if a company, is not one in which— i the worker, alone or with one or more associates of the worker, or ii an associate of the worker, with or without other associates of the worker, has a material interest (within the meaning given by section 51(4) and (5)). 8A If the client is not a public authority, a person is to be treated by subsection (3) as making a deemed direct payment to the worker only if the chain payment made by the person is made in a tax year for which the client qualifies as medium or large and has a UK connection. 9 Condition A is that— a the intermediary is a company, and b the conditions in section 61O are met in relation to the intermediary. 10 Condition B is that— a the intermediary is a partnership, b the worker is a member of the partnership, c the provision of the services is by the worker as a member of the partnership, and d the condition in section 61P is met in relation to the intermediary. 11 Condition C is that the intermediary is an individual. 12 Where a payment, money's worth or any other benefit can reasonably be taken to be for both— a the worker's services to the client, and b anything else, then, for the purposes of this Chapter, so much of it as can, on a just and reasonable apportionment, be taken to be for the worker's services is to be treated as (and the rest is to be treated as not being) a payment, or money's worth or another benefit, that can reasonably be taken to be for the worker's services. Meaning of status determination statement 61NA 1 For the purposes of section 61N “ status determination statement ” means a statement by the client that— a states that the client has concluded that the condition in section 61M(1)(d) is met in the case of the engagement and explains the reasons for that conclusion, or b states (albeit incorrectly) that the client has concluded that the condition in section 61M(1)(d) is not met in the case of the engagement and explains the reasons for that conclusion. 2 But a statement is not a status determination statement if the client fails to take reasonable care in coming to the conclusion mentioned in it. 3 For further provisions concerning status determination statements, see section 61T (client-led status disagreement process) and section 61TA (duty for client to withdraw status determination statement if it ceases to be medium or large). Conditions where intermediary is a company 61O 1 The conditions mentioned in section 61N(9)(b) are that— a the intermediary is not an associated company of the client that falls within subsection (2), and b subsection (1A) or (1B) is satisfied. 1A This subsection is satisfied where the worker has a material interest in the intermediary. 1B This subsection is satisfied where— a the worker has a non-material interest in the intermediary, b the worker— i has received, ii has rights which entitle, or which in any circumstances would entitle, the worker to receive, or iii expects to receive, a chain payment from the intermediary, and c the chain payment does not, or will not, wholly constitute employment income of the worker (apart from as a result of this Chapter). 2 An associated company of the client falls within this subsection if it is such a company by reason of the intermediary and the client being under the control— a of the worker, or b of the worker and other persons. 3 The worker is treated as having a material interest in the intermediary if— a the worker, alone or with one or more associates of the worker, or b an associate of the worker, with or without other associates of the worker, has a material interest in the intermediary. 4 For this purpose “ material interest ” has the meaning given by section 51(4) and (5). 4A The worker is treated as having a non-material interest in the intermediary if— a the worker, alone or with one or more associates of the worker, or b an associate of the worker, with or without other associates of the worker, has a non-material interest in the intermediary. 4B For this purpose a non-material interest means— a beneficial ownership of, or the ability to control, directly or through the medium of other companies or by any other indirect means, 5% or less of the ordinary share capital of the company, b possession of, or entitlement to acquire, rights entitling the holder to receive 5% or less of any distributions that may be made by the company, or c where the company is a close company, possession of, or entitlement to acquire, rights that would in the event of the winding up of the company, or in any other circumstances, entitle the holder to receive 5% or less of the assets that would then be available for distribution among the participators. 4C In subsection (4B)(c) “ participator ” has the meaning given by section 454 of CTA 2010. 5 In this section “ associated company ” has the meaning given by section 449 of CTA 2010. Conditions where intermediary is a partnership 61P 1 The condition mentioned in section 61N(10)(d) is— a that the worker, alone or with one or more relatives, is entitled to 60% or more of the profits of the partnership, or b that most of the profits of the partnership derive from the provision of services under engagements to which one or other of this Chapter and Chapter 8 applies— i to a single client, or ii to a single client together with associates of that client, or c that under the profit sharing arrangements the income of any of the partners is based on the amount of income generated by that partner by the provision of services under engagements to which one or other of this Chapter and Chapter 8 applies. 2 In subsection (1)(a) “ relative ” means spouse or civil partner, parent or child or remoter relation in the direct line, or brother or sister. 3 Section 61(4) and (5) apply for the purposes of this section as they apply for the purposes of Chapter 8. Calculation of deemed direct payment 61Q 1 The amount of the deemed direct payment is the amount resulting from the following steps— Step 1 Identify the amount or value of the chain payment made by the person who is treated as making the deemed direct payment, and deduct from that amount so much of it (if any) as is in respect of value added tax. Step 2 Deduct, from the amount resulting from Step 1, so much of that amount as represents the direct cost to the intermediary of materials used, or to be used, in the performance of the services. Step 3 Deduct, at the option of the person treated as making the deemed direct payment, from the amount resulting from Step 2, so much of that amount as represents expenses met by the intermediary that would have been deductible from the taxable earnings from the employment if— the worker had been employed by the client, and the expenses had been met by the worker out of those earnings. Step 4 If the amount resulting from the preceding Steps is nil or negative, there is no deemed direct payment. Otherwise, that amount is the amount of the deemed direct payment. 2 For the purposes of Step 1 of subsection (1), any part of the amount or value of the chain payment which is employment income of the worker by virtue of section 863G(4) of ITTOIA 2005 (salaried members of limited liability partnerships: anti-avoidance) is to be ignored. 3 In subsection (1), the reference to the amount or value of the chain payment means the amount or value of that payment before the deduction (if any) permitted under section 61S. 4 If the actual amount or value of the chain payment mentioned in Step 1 of subsection (1) is such that its recipient bears the cost of amounts due under PAYE regulations or contributions regulations in respect of the deemed direct payment, that Step applies as if the amount or value of that chain payment were what it would be if the burden of that cost were not being passed on through the setting of the level of the payment. 5 In Step 3 of subsection (1), the reference to expenses met by the intermediary includes— a expenses met by the worker and reimbursed by the intermediary, and b where the intermediary is a partnership and the worker is a member of the partnership, expenses met by the worker for and on behalf of the partnership. 6 In subsection (4) “ contributions regulations ” means regulations under the Contributions and Benefits Act providing for primary Class 1 contributions to be paid in a similar manner to income tax in relation to which PAYE regulations have effect (see, in particular, paragraph 6(1) of Schedule 1 to the Act); and here “ primary Class 1 contribution ” means a primary Class 1 contribution within the meaning of Part 1 of the Contributions and Benefits Act. Application of Income Tax Acts in relation to deemed employment 61R 1 The Income Tax Acts (in particular, Part 11 and PAYE regulations) apply in relation to the deemed direct payment as follows. 2 They apply as if— a the worker were employed by the person treated as making the deemed direct payment, and b the services were performed, or to be performed, by the worker in the course of performing the duties of that employment. 3 The deemed direct payment is treated in particular— a as taxable earnings from the employment for the purpose of securing that any deductions under Chapters 2 to 6 of Part 5 do not exceed the deemed direct payment, and b as taxable earnings from the employment for the purposes of section 232. 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Where the intermediary is a partnership or unincorporated association, the deemed direct payment is treated as received by the worker in the worker's personal capacity and not as income of the partnership or association. 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deductions from chain payments 61S 1 This section applies if, as a result of section 61R, a person who is treated as making a deemed direct payment is required under PAYE Regulations to pay an amount to the Commissioners for Her Majesty's Revenue and Customs (“ the Commissioners ”) in respect of the payment. (But see subsection (4)). 2 The person may deduct from the underlying chain payment an amount which is equal to the amount payable to the Commissioners, but where the amount or value of the underlying chain payment is treated by section 61Q(4) as increased by the cost of any amount due under PAYE Regulations, the amount that may be deducted is limited to the difference (if any) between the amount payable to the Commissioners and the amount of that increase. 3 Where a person in the chain other than the intermediary receives a chain payment from which an amount has been deducted in reliance on subsection (2) or this subsection, that person may deduct the same amount from the chain payment made by them. 4 This section does not apply in a case to which 61V(2) applies ( relevant person treated as making deemed direct payment). 5 In subsection (2) “ the underlying chain payment ” means the chain payment whose amount is used at Step 1 of section 61Q(1) as the starting point for calculating the amount of the deemed direct payment. Client-led status disagreement process 61T 1 This section applies if, before the final chain payment is made in the case of an engagement to which this Chapter applies, the worker or the deemed employer makes representations to the client that the conclusion contained in a status determination statement is incorrect. 2 The client must either— a give a statement to the worker or (as the case may be) the deemed employer that— i states that the client has considered the representations and has decided that the conclusion contained in the status determination statement is correct, and ii states the reasons for that decision, or b give a new status determination statement to the worker and the deemed employer that— i contains a different conclusion from the conclusion contained in the previous status determination statement, ii states the date from which the client considers that the conclusion contained in the new status determination statement became correct, and iii states that the previous status determination statement is withdrawn. 3 If the client fails to comply with the duty in subsection (2) before the end of the period of 45 days beginning with the date the client receives the representations, section 61N(3) and (4) has effect from the end of that period until the duty is complied with as if for any reference to the fee-payer there were substituted a reference to the client; but this is subject to sections 61V and 61WA . 4 A new status determination statement given to the deemed employer under subsection (2)(b) is to be treated for the purposes of section 61N(8)(za) as having been given to the deemed employer by the person immediately above the deemed employer in the chain. 5 In this section— “ the deemed employer ” means the person who, assuming one of conditions A to C in section 61N were met, would be treated as making a deemed direct payment to the worker under section 61N(3) on the making of a chain payment; “ status determination statement ” has the meaning given by section 61NA. Duty for client to withdraw status determination statement if it ceases to be medium or large 61TA 1 This section applies if in the case of an engagement to which this Chapter applies— a the client is not a public authority, b the client gives a status determination statement to the worker, the client's agent or both, and c the client does not (but for this section) qualify as medium or large for a tax year beginning after the status determination statement is given. 2 Before the beginning of the tax year the client must give a statement to the relevant person, or (as the case may be) to both of the relevant persons, stating— a that the client does not qualify as medium or large for the tax year, and b that the status determination statement is withdrawn with effect from the beginning of the tax year. 3 If the client fails to comply with that duty the following rules apply in relation to the engagement for the tax year— a the client is to be treated as medium or large for the tax year, and b section 61N(3) and (4) have effect as if for any reference to the fee-payer there were substituted a reference to the client. 4 For the purposes of subsection (2)— a the worker is a relevant person if the status determination statement was given to the worker, and b the deemed employer is a relevant person if the status determination statement was given to the client's agent. 5 In this section— “ client's agent ” means a person with whom the client entered into a contract as part of the arrangements mentioned in section 61M(1)(c); “ the deemed employer ” means the person who, assuming one of conditions A to C in section 61N were met, would be treated as making a deemed direct payment to the worker under section 61N(3) on the making of a chain payment; “ status determination statement ” has the meaning given by section 61NA. Information to be provided by worker or intermediary and consequences of failure 61U 1 In the case of an engagement to which this Chapter applies, the relevant person must inform the potential deemed employer of which one of the following is applicable— a that one of conditions A to C in section 61N is met in the case; b that none of conditions A to C in section 61N is met in the case. 2 If the relevant person has not complied with subsection (1) then, for the purposes of section 61N(1), one of conditions A to C in section 61N is to be treated as met. 3 In this section — “ relevant person ” means the worker or, in a case where the worker has not complied with subsection (1), the intermediary; “the potential deemed employer” is the person who, if one of conditions A to C in section 61N were met, would be treated as making a deemed direct payment to the worker under section 61N(3). Consequences of providing fraudulent information 61V 1 Subsection (2) applies if in any case— a a person (“the deemed employer”) would, but for this section, be treated by section 61N(3) as making a payment to another person (“the services-provider”), and b the fraudulent documentation condition is met. 2 Section 61N(3) has effect in the case as if the reference to the fee-payer were a reference to the relevant person (or if more than one, the first relevant person) in relation to whom the fraudulent documentation condition is met , but— a section 61N(4) continues to have effect as if the reference to the fee-payer were a reference to the deemed employer, and b Step 1 of section 61Q(1) continues to have effect as referring to the chain payment made by the deemed employer. 3 Subsection (2) has effect even though that may involve a services-provider being treated as both employer and employee in relation to the deemed employment under section 61N(3). 4 “The fraudulent documentation condition” is that a relevant person provided any person with a fraudulent document intended to constitute evidence— a that the case is not an engagement to which this Chapter applies, or b that none of conditions A to C in section 61N is met in the case. 5 A “relevant person” is— a the services-provider; b a person connected with the services-provider; c if the intermediary in the case is a company, an office-holder in that company; d a person in the chain who is resident in the United Kingdom or has a place of business in the United Kingdom. Prevention of double charge to tax and allowance of certain deductions 61W 1 Subsection (2) applies where— a a person (“the payee”) receives a payment or benefit (“the end-of-line remuneration”) from another person (“the paying intermediary”), b the end-of-line remuneration can reasonably be taken to represent remuneration for services of the payee to a another person (“ the client ”) , c a payment (“the deemed payment”) has been treated by section 61N(3) as made to the payee, d the underlying chain payment can reasonably be taken to be for the same services of the payee to the client , and e the recipient of the underlying chain payment has (whether by deduction from that payment or otherwise) borne the cost of any amounts due, under PAYE regulations and contributions regulations in respect of the deemed payment, from the person treated by section 61N(3) as making the deemed payment. 2 For income tax purposes, the paying intermediary and the payee may treat the amount of the end-of-line remuneration as reduced (but not below nil) by any one or more of the following— a the amount (see section 61Q) of the deemed payment; b the amount of any capital allowances in respect of expenditure incurred by the paying intermediary that could have been deducted from employment income under section 262 of CAA 2001 if the payee had been employed by the client and had incurred the expenditure; c the amount of any contributions made, in the same tax year as the end-of-line remuneration, for the benefit of the payee by the paying intermediary to a registered pension scheme that if made by an employer for the benefit of an employee would not be chargeable to income tax as income of the employee. 3 Subsection (2)(c)does not apply to— a excess contributions paid and later repaid, b contributions set under subsection (2) against another payment by the paying intermediary, or c contributions deductible at Step 5 of section 54(1) in calculating the amount of the payment (if any) treated by section 50 as made in the tax year concerned by the paying intermediary to the payee. 4 For the purposes of subsection (3)(c), the contributions to which Step 5 of section 54(1) applies in the case of the particular calculation are “deductible” at that Step so far as their amount does not exceed the result after Step 4 in that calculation. 5 In subsection (1)(d) “ the underlying chain payment ” means the chain payment whose amount is used at Step 1 of section 61Q(1) as the starting point for calculating the amount of the deemed payment. 6 Subsection (2) applies whether the end-of-line remuneration— a is earnings of the payee, b is a distribution of the paying intermediary, or c takes some other form. Anti-avoidance 61WA 1 This section applies if in any case at least one relevant person in a chain participates in a relevant avoidance arrangement. 2 An arrangement is a “relevant avoidance arrangement” if its main purpose, or one of its main purposes, is to secure a tax advantage by securing that at least one of the conditions mentioned in section 61O or 61P is not met in relation to an intermediary. 3 Section 61N(3) has effect as if the reference to the fee-payer were a reference to the participating person, but— a section 61N(4) continues to have effect as if the reference to the fee-payer were a reference to the deemed employer, and b Step 1 of section 61Q(1) continues to have effect as referring to the chain payment made by the deemed employer. 4 The participating person is— a in a case where only one relevant person participates in the arrangement, that person; b in any other case the highest relevant person in the chain who participated in the arrangement and from whom HMRC considers there is a realistic prospect of recovering, within a reasonable period, the amount of tax that would have been paid (or not repaid) in the absence of the arrangement. 5 Subsection (3) has effect even though that may involve a participating person being treated as both employer and employee in relation to the deemed employment under section 61N(3). 6 In this section— “ arrangement ” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable); “ deemed employer ” means a person who would, but for this section, be treated by section 61N(3) as making a payment to the worker; “ relevant person ” means— the worker; a person who is resident in the United Kingdom or who has a place of business in the United Kingdom; “ tax ” means income tax (and “ tax advantage ” is to be construed accordingly”); “ tax advantage ” includes— avoidance or reduction of a charge to tax or an assessment to tax, repayment or increased repayment of tax, avoidance of a possible assessment to tax, and deferral of a payment of tax or advancement of a repayment of tax. Interpretation 61X In this Chapter— “ associate ” has the meaning given by section 60; “ company ” means a body corporate or unincorporated association, and does not include a partnership; “ engagement to which Chapter 8 applies ” has the meaning given by section 49(5). Part 3 Employment income: earnings and benefits etc. treated as earnings Chapter 1 Earnings Earnings 62 1 This section explains what is meant by “earnings” in the employment income Parts. 2 In those Parts “ earnings ”, in relation to an employment, means— a any salary, wages or fee, b any gratuity or other profit or incidental benefit of any kind obtained by the employee if it is money or money’s worth, or c anything else that constitutes an emolument of the employment. 3 For the purposes of subsection (2) “ money’s worth ” means something that is— a of direct monetary value to the employee, or b capable of being converted into money or something of direct monetary value to the employee. 4 Subsection (1) does not affect the operation of statutory provisions that provide for amounts to be treated as earnings (and see section 721(7)). Chapter 2 Taxable benefits: the benefits code The benefits code The benefits code 63 1 In the employment income Parts “ the benefits code ” means— this Chapter, Chapter 3 (expenses payments), Chapter 4 (vouchers and credit-tokens), Chapter 5 (living accommodation), Chapter 6 (cars, vans and related benefits), Chapter 7 (loans), and ... ... Chapter 10 (residual liability to charge) ... 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 The benefits code has effect subject to section 554Z2(2). Relationship between earnings and benefits code 64 1 This section applies if, apart from this section, the same benefit would give rise to two amounts (“ A ” and “ B ”)— a A being an amount of earnings as defined in Chapter 1 of this Part, and b B being an amount to be treated as earnings under the benefits code. 2 In such a case— a A constitutes earnings as defined in Chapter 1 of this Part, and b the amount (if any) by which B exceeds A is to be treated as earnings under the benefits code. 3 This section does not apply in connection with living accommodation to which Chapter 5 of this Part applies. 4 In that case section 109 applies to determine the relationship between that Chapter and Chapter 1 of this Part. 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dispensations relating to benefits within provisions not applicable to lower-paid employment 65 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General definitions for benefits code Meaning of “employment” and related expressions 66 1 In the benefits code— a “ employment ” means a taxable employment under Part 2, and b “employed”, “employee” and “employer” have corresponding meanings. 2 Where a Chapter of the benefits code applies in relation to an employee— a references in that Chapter to “the employment” are to the employment of that employee, and b references in that Chapter to “the employer” are to the employer in respect of that employment. 3 For the purposes of the benefits code an employment is a “taxable employment under Part 2” in a tax year if the earnings from the employment for that year are (or would be if there were any) general earnings to which the charging provisions of Chapter 4 or 5 of Part 2 apply. 4 In subsection (3)— a the reference to an employment includes employment as a director of a company, and b “ earnings ” means earnings as defined in Chapter 1 of this Part. 5 In the benefits code “ lower-paid employment as a minister of religion ” has the same meaning as in Part 4 (see section 290D). Meaning of “director” and “full-time working director” 67 1 In the benefits code “ director ” means— a in relation to a company whose affairs are managed by a board of directors or similar body, a member of that body, b in relation to a company whose affairs are managed by a single director or similar person, that director or person, and c in relation to a company whose affairs are managed by the members themselves, a member of the company, and includes any person in accordance with whose directions or instructions the directors of the company (as defined above) are accustomed to act. 2 For the purposes of subsection (1) a person is not to be regarded as a person in accordance with whose directions or instructions the directors of the company are accustomed to act merely because the directors act on advice given by that person in a professional capacity. 3 In the benefits code “ full-time working director ” means a director who is required to devote substantially the whole of his time to the service of the company in a managerial or technical capacity. Meaning of “material interest” in a company 68 1 For the purposes of the benefits code a person has a material interest in a company if condition A or B is met. 2 Condition A is that the person (with or without one or more associates) or any associate of that person (with or without one or more other such associates ) is— a the beneficial owner of, or b able to control, directly or through the medium of other companies or by any other indirect means, more than 5% of the ordinary share capital of the company. 3 Condition B is that, in the case of a close company, the person (with or without one or more associates) or any associate of that person (with or without one or more other such associates ), possesses or is entitled to acquire, such rights as would— a in the event of the winding-up of the company, or b in any other circumstances, give an entitlement to receive more than 5% of the assets which would then be available for distribution among the participators. 4 In this section— “ associate ” has the meaning given by section 448 of CTA 2010 except that, for this purpose, “ relative ” in section 448(1) has the meaning given by subsection (5) below, and “ participator ” has the meaning given by section 454 of CTA 2010 . 5 For the purposes of this section a person (“A”) is a relative of another (“B”) if A is— a B’s spouse or civil partner , b a parent, child or remoter relation in the direct line either of B or of B’s spouse or civil partner , c a brother or sister of B or of B’s spouse or civil partner , or d the spouse or civil partner of a person falling within paragraph (b) or (c). Extended meaning of “control” 69 1 The definition of “control” in section 995 of ITA 2007 (which is applied for the purposes of this Act by section 719) is extended as follows. 2 For the purposes of the benefits code that definition applies (with the necessary modifications) in relation to an unincorporated association as it applies in relation to a body corporate. Optional remuneration arrangements 69A 1 Subsections (2) to (7) have effect for the purposes of the benefits code. 2 A benefit provided for an employee is provided under “optional remuneration arrangements” so far as it is provided under arrangements of type A or B (regardless of whether those arrangements are made before or after the beginning of the person's employment). 3 “Type A arrangements” are arrangements under which, in return for the benefit, the employee gives up the right (or a future right) to receive an amount of earnings within Chapter 1 of Part 3. 4 “Type B arrangements” are arrangements (other than type A arrangements) under which the employee agrees to be provided with the benefit rather than an amount of earnings within Chapter 1 of Part 3. 5 A benefit provided for an employee is to be regarded as provided under optional remuneration arrangements (whether of type A or type B) so far as it is just and reasonable to attribute the provision of the benefit to the arrangements in question. 6 Where a benefit is provided for an employee under any arrangements, the mere fact that under the arrangements the employee makes good, or is required to make good, any part of the cost of provision is not to be taken to show that the benefit is (to any extent) provided otherwise than under optional remuneration arrangements. 7 Where a benefit is provided for an employee partly under optional remuneration arrangements and partly otherwise than under such arrangements, the benefits code is to apply with any modifications (including provision for just and reasonable apportionments) that may be required for ensuring that the benefit is treated— a in accordance with the relevant provision in the column 2 of the table so far as it is provided under optional remuneration arrangements, and b in accordance with the relevant provision in column 1 of the table so far as it is provided otherwise than under such arrangements. Column 1 Column 2 Section Section 81(1) 81(1A)(b) 87(1) 87A(1)(a) 94(1) 94A(1)(a) 102(1A) 102(1B)(b) 120(1) 120A(1)(a) 149(1) 149A(2)(a) 154(1) 154A(1)(a) 160(1) 160A(2)(a) 175(1) 175(1A)(b) 203(1) 203A(1)(a) Optional remuneration arrangements: supplementary 69B 1 For the purposes of the benefits code “the amount foregone”— a in relation to a benefit provided for an employee under type A arrangements means the amount of earnings mentioned in section 69A(3); b in relation to a benefit provided for an employee under type B arrangements means the amount of earnings mentioned in section 69A(4); c in relation to a benefit provided for an employee partly under type A arrangements and partly under type B arrangements, means the sum of the amounts foregone under the arrangements of each type. 2 Subsection (3) applies where, in order to determine the amount foregone with respect to a particular benefit mentioned in section 69A(3) or (4), it is necessary to apportion an amount of earnings to the benefit. 3 The apportionment is to be made on a just and reasonable basis. 4 In this section and section 69A references to a benefit provided for an employee include a benefit provided for a member of an employee's family or household. 5 In this section and section 69A— “ benefit ” includes any benefit or facility, regardless of its form and the manner of providing it; “ earnings ” means earnings within Chapter 1 of Part 3 (and includes a reference to amounts which would have been such earnings if the employee had received them). Chapter 3 Taxable benefits: expenses payments Sums in respect of expenses 70 1 This Chapter applies to a sum paid to an employee in a tax year if the sum— a is paid to the employee in respect of expenses, and b is so paid by reason of the employment. 2 This Chapter applies to a sum paid away by an employee in a tax year if the sum— a was put at the employee’s disposal in respect of expenses, b was so put by reason of the employment, and c is paid away by the employee in respect of expenses. 3 For the purposes of this Chapter it does not matter whether the employment is held at the time when the sum is paid or paid away so long as it is held at some point in the tax year in which the sum is paid or paid away. 4 References in this Chapter to an employee accordingly include a prospective or former employee. 5 This Chapter does not apply to the extent that the sum constitutes earnings from the employment by virtue of any other provision. Meaning of paid or put at disposal by reason of the employment 71 1 If an employer pays a sum in respect of expenses to an employee it is to be treated as paid by reason of the employment unless— a the employer is an individual, and b the payment is made in the normal course of the employer’s domestic, family or personal relationships. 2 If an employer puts a sum at an employee’s disposal in respect of expenses it is to be treated as put at the employee’s disposal by reason of the employment unless— a the employer is an individual, and b the sum is put at the employee’s disposal in the normal course of the employer’s domestic, family or personal relationships. Sums in respect of expenses treated as earnings 72 1 If this Chapter applies to a sum, the sum is to be treated as earnings from the employment for the tax year in which it is paid or paid away. 2 Subsection (1) does not prevent the making of a deduction allowed under any of the provisions listed in subsection (3). 3 The provisions are— section 336 (deductions for expenses: the general rule); section 337 (travel in performance of duties); section 338 (travel for necessary attendance); section 340 (travel between group employments); section 340A (travel between linked employments); section 341 (travel at start or finish of overseas employment); section 342 (travel between employments where duties performed abroad); section 343 (deduction for professional membership fees); section 344 (deduction for annual subscriptions); section 346 (deduction for employee liabilities); section 351 (expenses of ministers of religion); section 353 (deductions from earnings charged on remittance). Chapter 4 Taxable benefits: vouchers and credit-tokens Cash vouchers: introduction Cash vouchers to which this Chapter applies 73 1 This Chapter applies to a cash voucher provided for an employee by reason of the employment which is received by the employee. 2 A cash voucher provided for an employee by the employer is to be regarded as provided by reason of the employment unless— a the employer is an individual, and b the provision is made in the normal course of the employer’s domestic, family or personal relationships. 3 A cash voucher provided for an employee and appropriated to the employee— a by attaching it to a card held for the employee, or b in any other way, is to be treated for the purposes of this Chapter as having been received by the employee at the time when it is appropriated. Provision for, or receipt by, member of employee’s family 74 For the purposes of this Chapter any reference to a cash voucher being provided for or received by an employee includes a reference to it being provided for or received by a member of the employee’s family. Meaning of “cash voucher” Meaning of “cash voucher” 75 1 In this Chapter “ cash voucher ” means a voucher, stamp or similar document capable of being exchanged for a sum of money which is— a greater than, b equal to, or c not substantially less than, the expense incurred by the person at whose cost the voucher, stamp or similar document is provided. 2 For the purposes of subsection (1) it does not matter whether the document— a is also capable of being exchanged for goods or services; b is capable of being exchanged singly or together with other vouchers, stamps, or documents; c is capable of being exchanged immediately or only after a time. 3 Subsection (1) is subject to section 76 (sickness benefits-related voucher). Sickness benefits-related voucher 76 1 This section applies where— a the expense incurred by the person at whose cost a voucher, stamp or similar document is provided (“the provision expense”) includes costs to that person of providing sickness benefits (“sickness benefits costs”), b the voucher, stamp or document would be a cash voucher (apart from this section) but for the fact that the sum of money for which it is capable of being exchanged (“the exchange sum”) is substantially less than the provision expense, and c the whole or part of the difference between the exchange sum and the provision expense represents the sickness benefits costs. 2 The voucher, stamp or document is a cash voucher within the meaning of this Chapter if— E = PE - D or E is not substantially less than PE - D where— E is the exchange sum, PE is the provision expense, and D is the amount of the difference between E and PE which represents the sickness benefits costs. 3 In this section “ sickness benefits ” mean benefits in connection with sickness, personal injury or death. Apportionment of cost of provision of voucher 77 If a person incurs expense in or in connection with the provision of vouchers, stamps or similar documents for two or more employees as members of a group or class, the expense incurred in respect of one of them is to be such part of that expense as is just and reasonable. Cash vouchers: exceptions Voucher made available to public generally 78 This Chapter does not apply to a cash voucher if— a it is of a kind made available to the public generally, and b it is provided to the employee or a member of the employee’s family on no more favourable terms than to the public generally. Voucher issued under approved scheme 79 1 This Chapter does not apply to a cash voucher received by an employee if— a it is issued under a scheme, and b at the time when it is received the scheme is a scheme approved by an officer of Revenue and Customs for the purposes of this section. 2 An officer of Revenue and Customs must not approve a scheme for the purposes of this section unless the officer is satisfied that it is practicable for income tax in respect of all payments made in exchange for vouchers issued under the scheme to be deducted in accordance with PAYE regulations. Vouchers where payment of sums exempt from tax 80 This Chapter does not apply to a cash voucher if it is— a a document intended to enable a person to obtain payment of a sum which would not have constituted employment income if paid to the person directly, or b a savings certificate where the accumulated interest payable in respect of it is exempt from tax (or would be so exempt if certain conditions were met). Benefit of cash voucher treated as earnings Benefit of cash voucher treated as earnings 81 1 The cash equivalent of the benefit of a cash voucher to which this Chapter applies is to be treated as earnings from the employment for the tax year in which the voucher is received by the employee. 1A Where a cash voucher to which this Chapter applies is provided pursuant to optional remuneration arrangements— a subsection (1) does not apply, and b the relevant amount is to be treated as earnings from the employment for the tax year in which the voucher is received by the employee. 1B In this section “ the relevant amount ” means— a the cash equivalent, or b if greater, the amount foregone with respect to the benefit of the voucher (see section 69B). 2 The cash equivalent is the sum of money for which the voucher is capable of being exchanged. 3 For the purposes of subsection (1B), assume that the cash equivalent is zero if the condition in subsection (4) is met. 4 The condition is that the benefit of the voucher would be exempt from income tax but for section 228A (exclusion of certain exemptions). Non-cash vouchers: introduction Non-cash vouchers to which this Chapter applies 82 1 This Chapter applies to a non-cash voucher provided for an employee by reason of the employment which is received by the employee. 2 A non-cash voucher provided for an employee by the employer is to be regarded as provided by reason of the employment unless— a the employer is an individual, and b the provision is made in the normal course of the employer’s domestic, family or personal relationships. 3 A non-cash voucher provided for an employee and appropriated to the employee— a by attaching it to a card held for the employee, or b in any other way, is to be treated for the purposes of this Chapter as having been received by the employee at the time when it is appropriated. Provision for, or receipt by, member of employee’s family 83 For the purposes of this Chapter any reference to a non-cash voucher being provided for or received by an employee includes a reference to it being provided for or received by a member of the employee’s family. Meaning of “non-cash voucher” Meaning of “non-cash voucher” 84 1 In this Chapter “ non-cash voucher ” means— a a voucher, stamp or similar document or token which is capable of being exchanged for money, goods or services, ab a childcare voucher, b a transport voucher, or c a cheque voucher, but does not include a cash voucher. 2 For the purposes of subsection (1)(a) it does not matter whether the document or token is capable of being exchanged— a singly or together with other vouchers, stamps, documents or tokens; b immediately or only after a time. 2A In this Chapter “ childcare voucher ” means a voucher, stamp or similar document or token intended to enable a person to obtain the provision of care for a child (whether or not in exchange for it). 3 In this Chapter “ transport voucher ” means a ticket, pass or other document or token intended to enable a person to obtain passenger transport services (whether or not in exchange for it). 4 In this Chapter “ cheque voucher ” means a cheque— a provided for an employee, and b intended for use by the employee wholly or mainly for payment for— i particular goods or services, or ii goods or services of one or more particular classes; and, in relation to a cheque voucher, references to a voucher being exchanged for goods or services are to be read accordingly. Non-cash voucher: exceptions Non-cash voucher made available to public generally 85 This Chapter does not apply to a non-cash voucher if— a it is of a kind made available to the public generally, and b it is provided to the employee or a member of the employee’s family on no more favourable terms than to the public generally. Transport vouchers under pre-26th March 1982 arrangements 86 1 This Chapter does not apply to a transport voucher provided for an employee of a passenger transport undertaking under arrangements in operation on 25th March 1982 which meet the condition in subsection (2). 2 The condition is that the arrangements are intended to enable the employee or a member of the employee’s family to obtain passenger transport services provided by— a the employer, b a subsidiary of the employer, c a body corporate of which the employer is a subsidiary, or d another passenger transport undertaking. 3 In this section— “ passenger transport undertaking ” means an undertaking whose business consists wholly or mainly in the carriage of passengers or a subsidiary of such an undertaking, and “ subsidiary ” means a wholly-owned subsidiary within the meaning of section 1159 of and Schedule 6 to the Companies Act 2006 . Benefit of non-cash voucher treated as earnings Benefit of non-cash voucher treated as earnings 87 1 The cash equivalent of the benefit of a non-cash voucher to which this Chapter applies is to be treated as earnings from the employment for the tax year in which the voucher is received by the employee. 2 The cash equivalent is the difference between— a the cost of provision, and b any part of that cost made good by the employee , to the person incurring it, on or before 6 July following the relevant tax year . 2A If the voucher is a non-cash voucher other than a cheque voucher, the relevant tax year is— a the tax year in which the cost of provision is incurred, or b if later, the tax year in which the employee receives the voucher. 2B If the voucher is a cheque voucher, the relevant tax year is the tax year in which the voucher is handed over in exchange for money, goods or services. 3 In this Chapter the “ cost of provision ” means, in relation to a non-cash voucher, the expense incurred in or in connection with the provision of— a the voucher, and b the money, goods or services for which it is capable of being exchanged, by the person at whose cost they are provided. 3A In the case of a childcare voucher, the reference in subsection (3)(b) to the services for which the voucher is capable of being exchanged is to the provision of care for a child which may be obtained by using it. 4 In the case of a transport voucher, the reference in subsection (3)(b) to the services for which the voucher is capable of being exchanged is to the passenger transport services which may be obtained by using it. 5 If a person incurs expense in or in connection with the provision of non-cash vouchers for two or more employees as members of a group or class, the expense incurred in respect of one of them is to be such part of that expense as is just and reasonable. 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefit of non-cash voucher treated as earnings: optional remuneration arrangements 87A 1 Where a non-cash voucher to which this Chapter applies is provided pursuant to optional remuneration arrangements— a the relevant amount is to be treated as earnings from the employment for the tax year in which the voucher is received by the employee, and b section 87(1) does not apply. 2 To find the relevant amount, first determine which (if any) is the greater of— a the cost of provision (see section 87(3)), and b the amount foregone with respect to the benefit of the voucher (see section 69B). 3 If the cost of provision is greater than or equal to the amount foregone, the “relevant amount” is the cash equivalent of the benefit of the non-cash voucher (see section 87(2)). 4 Otherwise, the “relevant amount” is the difference between— a the amount foregone, and b any part of the cost of provision that is made good by the employee, to the person incurring it, on or before 6 July following the relevant tax year. 5 If the voucher is a non-cash voucher other than a cheque voucher, the relevant tax year is— a the tax year in which the cost of provision is incurred, or b if later, the tax year in which the employee receives the voucher. 6 If the voucher is a cheque voucher, the relevant tax year is the tax year in which the voucher is handed over in exchange for money, goods or services. 7 For the purposes of subsections (2) and (3), assume that the cost of provision is zero if the condition in subsection (8) is met. 8 The condition is that the non-cash voucher would be exempt from income tax but for section 228A (exclusion of certain exemptions). Year in which earnings treated as received 88 1 In the case of a non-cash voucher other than a cheque voucher, the amount treated as earnings under section 87 or 87A is to be treated as received— a in the tax year in which the cost of provision is incurred, or b if later, in the tax year in which the voucher is received by the employee. 2 In the case of a cheque voucher, the amount treated as earnings under section 87 or 87A is to be treated as received in the tax year in which the voucher is handed over in exchange for money, goods or services. 3 For the purposes of subsection (2) and sections 87(2B) and 87A(6), Where a cheque voucher is posted it is to be treated as handed over at the time of posting. Reduction for meal vouchers 89 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Credit-tokens: introduction Credit-tokens to which this Chapter applies 90 1 This Chapter applies to a credit-token provided for an employee by reason of the employment which is used by the employee to obtain money, goods or services. 2 A credit-token provided for an employee by the employer is to be regarded as provided by reason of the employment unless— a the employer is an individual, and b the provision is made in the normal course of the employer’s domestic, family or personal relationships. Provision for, or use by, member of employee’s family 91 For the purposes of this Chapter— a any reference to a credit-token being provided for an employee includes a reference to it being provided for a member of the employee’s family, and b use of a credit-token by a member of an employee’s family is to be treated as use of the token by the employee. Meaning of “credit-token” Meaning of “credit-token” 92 1 In this Chapter “ credit-token ” means a credit card, debit card or other card, a token, a document or other object given to a person by another person (“X”) who undertakes— a on the production of it, to supply money, goods or services on credit, or b if a third party (“Y”) supplies money, goods or services on its production, to pay Y for what is supplied. 2 A card, token, document or other object can be a credit-token even if— a some other action is required in addition to its production in order for the money, goods or services to be supplied; b X in paying Y may take a discount or commission. 3 For the purposes of this section— a the use of an object given by X to operate a machine provided by X is to be treated as its production to X, and b the use of an object given by X to operate a machine provided by Y is to be treated as its production to Y. 4 A “ credit-token ” does not include a cash voucher or a non-cash voucher. Credit-tokens: exception Credit-token made available to public generally 93 This Chapter does not apply to a credit-token if— a it is of a kind made available to the public generally, and b it is provided to the employee or a member of the employee’s family on no more favourable terms than to the public generally. Benefit of credit-token treated as earnings Benefit of credit-token treated as earnings 94 1 On each occasion on which a credit-token to which this Chapter applies is used by the employee in a tax year to obtain money, goods or services, the cash equivalent of the benefit of the token is to be treated as earnings from the employment for that year. 2 The cash equivalent is the difference between— a the cost of provision, and b any part of that cost made good by the employee— i to the person incurring it, and ii on or before 6 July following the tax year which contains the occasion in question. 3 In this section the “ cost of provision ” means the expense incurred— a in or in connection with the provision of the money, goods or services obtained on the occasion in question, and b by the person at whose cost they are provided. 4 If a person incurs expense in or in connection with the provision of credit-tokens for two or more employees as members of a group or class, the expense incurred in respect of one of them is to be such part of that expense as is just and reasonable. Benefit of credit-token treated as earnings: optional remuneration arrangements 94A 1 If the conditions in subsections (2) and (3) are met in relation to any occasions on which a credit-token to which this Chapter applies is used by the employee in a tax year to obtain money, goods or services— a the relevant amount is to be treated as earnings from the employment for that year, and b section 94(1) does not apply in relation to the use of the credit-token on those occasions. 2 The condition in this subsection is that the credit-token is used pursuant to optional remuneration arrangements. 3 The condition in this subsection is that AF is greater than the relevant cost of provision for the tax year. In this section “ AF ” means so much of the amount foregone (see section 69B) as is attributable on a just and reasonable basis to the use of the credit-token by the employee in the tax year pursuant to the optional remuneration arrangements to obtain money, goods or services. 4 The “relevant amount” is the difference between— a AF, and b any part of the relevant cost of provision for the tax year that is made good by the employee, to the person incurring it, on or before 6 July following the tax year which contains the occasion of use of the credit-token to which the making good relates. 5 But the relevant amount is taken to be zero if the amount given by paragraph (b) of subsection (4) exceeds AF. 6 For the purposes of this section the “relevant cost of provision for the tax year” is determined as follows— Step 1 Find the cost of provision with respect to each occasion of use of the credit-token by the employee in the tax year pursuant to the optional remuneration arrangements to obtain money, goods or services. Step 2 The total of those amounts is the relevant cost of provision for the tax year. 7 But the relevant cost of provision for the tax year is to be taken to be zero if the condition in subsection (8) is met. 8 The condition is that use of the credit token by the employee in the tax year pursuant to the optional remuneration arrangements to obtain money, goods or services would be exempt from income tax but for section 228A (exclusion of certain exemptions). 9 In this section “ cost of provision ” has the same meaning as in section 94. General supplementary provisions Disregard for money, goods or services obtained 95 1 This section applies if the cash equivalent of the benefit of a cash voucher, a non-cash voucher or a credit-token or the relevant amount in respect of a cash voucher, a non-cash voucher or a credit-token — a is to be treated as earnings from an employee’s employment under this Chapter, ... b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Money, goods or services obtained— a by the employee or another person in exchange for the cash voucher or non-cash voucher, or b by the employee or a member of the employee’s family by use of the credit-token, are to be disregarded for the purposes of the Income Tax Acts. 3 But the goods or services are not to be disregarded for the purposes of applying sections 362 and 363 (deductions where non-cash voucher or credit-token provided). 3A In the case of a childcare voucher, the reference in subsection (2)(a) to the services obtained in exchange for the voucher is to the provision of care for a child obtained by using it. 4 In the case of a transport voucher, the reference in subsection (2)(a) to the services obtained in exchange for the voucher is to the passenger transport services obtained by using it. Dispensations relating to vouchers or credit-tokens 96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Power to exempt use of non-cash vouchers or credit-tokens to obtain exempt benefits 96A 1 The Treasury may by regulations provide for exemption from any liability that would otherwise arise by virtue of this Chapter in respect of— a non-cash vouchers which are or can be used to obtain specified exempt benefits, or which evidence an employee's entitlement to specified exempt benefits; b credit-tokens which are used to obtain specified exempt benefits. 2 In this section— “ exempt benefit ” means a benefit the direct provision of which is exempted from liability to income tax by a provision of Part 4 (employment income: exemptions), and “ specified ” means specified in the regulations. 3 Regulations under this section may operate by amending section 266 (exemption of non-cash vouchers for exempt benefits) or section 267 (exemption of credit-tokens used for exempt benefits). Chapter 5 Taxable benefits: living accommodation Living accommodation Living accommodation to which this Chapter applies 97 1 This Chapter applies to living accommodation provided for— a an employee, or b a member of an employee’s family or household, by reason of the employment. 1A Where this Chapter applies to any living accommodation— a the living accommodation is a benefit for the purposes of this Chapter (and accordingly it is immaterial whether the terms on which it is provided to any of those persons constitute a fair bargain), and b sections 102 to 108 provide for an amount in respect of the benefit of the living accommodation to be treated as earnings. 2 Living accommodation provided for any of those persons by the employer is to be regarded as provided by reason of the employment unless— a the employer is an individual, and b the provision is made in the normal course of the employer’s domestic, family or personal relationships. Exceptions Accommodation provided by local authority 98 In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation provided otherwise than pursuant to optional remuneration arrangements) does not apply to living accommodation provided for an employee if— a the employer is a local authority, b it is provided for the employee by the authority, and c the terms on which it is provided are no more favourable than those on which similar accommodation is provided by the authority for persons who are not their employees but whose circumstances are otherwise similar to those of the employee. Accommodation provided for performance of duties 99 1 In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation provided otherwise than pursuant to optional remuneration arrangements) does not apply to living accommodation provided for an employee if it is necessary for the proper performance of the employee’s duties that the employee should reside in it. 2 In section 102 (benefit of accommodation treated as earnings) subsection (1A) does not apply to living accommodation provided for an employee if— a it is provided for the better performance of the duties of the employment, and b the employment is one of the kinds of employment in the case of which it is customary for employers to provide living accommodation for employees. 3 But if the accommodation is provided by a company and the employee (“E”) is a director of the company or of an associated company, the exception in subsection (1) or (2) only applies if, in the case of each company of which E is a director— a E has no material interest in the company, and b either— i E’s employment is as a full-time working director, or ii the company is non-profit-making or is a charitable company . 4 “ Non-profit-making ” means that the company does not carry on a trade and its functions do not consist wholly or mainly in the holding of investments or other property. 5 A company is “associated” with another if— a one has control of the other, or b both are under the control of the same person. Accommodation provided as result of security threat 100 In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation provided otherwise than pursuant to optional remuneration arrangements) does not apply to living accommodation provided for an employee if— a there is a special threat to the security of the employee, b special security arrangements are in force, and c the employee resides in the accommodation as part of those arrangements. Homes outside UK owned through company etc 100A 1 In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation provided otherwise than pursuant to optional remuneration arrangements) does not apply to living accommodation outside the United Kingdom provided by a company for a director or other officer of the company (“D”) or a member of D's family or household if— a the company is wholly owned by D or D and other individuals (and no interest in the company is partnership property), and b the company has been the holding company of the property at all times after the relevant time. 2 The company is “the holding company of the property” when— a it owns a relevant interest in the property, b its main or only asset is that interest, and c the only activities undertaken by it are ones that are incidental to its ownership of that interest. 3 The company is also “the holding company of the property” when— a a company (“the subsidiary”) which is wholly owned by the company meets the conditions in paragraphs (a) to (c) of subsection (2), b the company's main or only asset is its interest in the subsidiary, and c the only activities undertaken by the company are ones that are incidental to its ownership of that interest. 4 “ Relevant interest in the property ” means an interest under the law of any territory that confers (or would but for any inferior interest confer) a right to exclusive possession of the property at all times or at certain times. 5 “The relevant time” is the time the company first owned a relevant interest in the property; but this is subject to subsection (6). 6 If— a none of D's interest in the company was acquired directly or indirectly from a person connected with D, and b the company owned a relevant interest in the property at the time D first acquired an interest in the company, “the relevant time” is the time D first acquired such an interest. Section 100A(1): exceptions 100B 1 Section 100A(1) does not apply if subsection (2), (3) or (4) applies. 2 This subsection applies if— a the company's interest in the property was acquired directly or indirectly from a connected company at an undervalue, or b the company's interest in the property derives from an interest that was so acquired. 3 This subsection applies if, at any time after the relevant time— a expenditure in respect of the property has been incurred directly or indirectly by a connected company, or b any borrowing of the company directly or indirectly from a connected company has been outstanding (but see subsection (7)). 4 This subsection applies if the living accommodation is provided in pursuance of an arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax or national insurance contributions. 5 In subsection (2) references to the acquisition of an interest include the grant of an interest. 6 For the purposes of that subsection, an interest is acquired at an undervalue if the total consideration for it is less than that which might reasonably have been expected to be obtained on a disposal of the interest on the open market; and “consideration” here means consideration provided at any time (and, for example, includes payments by way of rent). 7 For the purposes of subsection (3)(b), no account is to be taken of— a any borrowing at a commercial rate, or b any borrowing which results in D being treated under Chapter 7 (taxable benefits: loans) as receiving earnings. 8 In subsection (4) “ arrangement ” includes any scheme, agreement or understanding, whether or not enforceable. 9 In this section “ connected company ” means— a a company connected with D, with a member of D's family or with an employer of D, or b a company connected with such a company. Chevening House 101 In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation provided otherwise than pursuant to optional remuneration arrangements) does not apply to living accommodation provided for an employee if the accommodation is— a Chevening House, or b any other premises held on the trusts of the trust instrument set out in the Schedule to the Chevening Estate Act 1959 (c. 49), and the employee is a person nominated in accordance with those trusts. Benefit of living accommodation treated as earnings Benefit of living accommodation treated as earnings 102 1 This section applies if living accommodation to which this Chapter applies is provided in any period (“the taxable period”) — a which consists of the whole or part of a tax year, and b throughout which the employee holds the employment, 1A the cash equivalent of the benefit of the accommodation is to be treated as earnings from the employment for that year. 1B If the benefit of the accommodation is provided pursuant to optional remuneration arrangements— a subsection (1A) does not apply, and b the relevant amount is to be treated as earnings from the employment for that tax year. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 103 indicates how the cash equivalent is calculated. 4 Section 103A indicates how the relevant amount is determined. Calculation of cash equivalent Method of calculating cash equivalent 103 1 The cash equivalent is calculated— a under section 105 if the cost of providing the living accommodation does not exceed £75,000; and b under section 106 if the cost of providing the living accommodation exceeds £75,000. 2 Section 104 (general rule) sets out how to calculate the cost of providing living accommodation for the purpose of determining whether or not it exceeds £75,000. 3 In this Chapter— “annual value”, “person involved in providing accommodation”, and “the property”, have the meaning given by sections 110 to 113, and “ the taxable period ” has the meaning given by section 102(1) . Accommodation provided pursuant to optional remuneration arrangements: relevant amount 103A 1 To find the relevant amount, first determine which (if any) is the greater of— a the modified cash equivalent of the benefit of the accommodation (see sections 105(2A) and 106(2A)), and b the amount foregone with respect to the benefit of the accommodation (see section 69B). 2 If the amount mentioned in subsection (1)(a) is greater than or equal to the amount mentioned in subsection (1)(b), the “relevant amount” is the cash equivalent of the benefit of the accommodation (see section 103). 3 Otherwise, the “relevant amount” is the difference between— a the amount foregone with respect to the benefit of the accommodation, and b the deductible amount (see subsections (7) and (8)). 4 If the amount foregone with respect to the benefit of the accommodation does not exceed the deductible amount, the relevant amount is taken to be zero. 5 For the purposes of subsections (1) and (2), assume that the modified cash equivalent of the benefit of the accommodation is zero if the condition in subsection (6) is met. 6 The condition is that the benefit of the accommodation would be exempt from income tax but for section 228A (exclusion of certain exemptions). 7 If the cost of providing the living accommodation does not exceed £75,000, the “ deductible amount ” means any sum made good, on or before 6 July following the tax year which contains the taxable period, by the employee to the person at whose cost the accommodation is provided that is properly attributable to its provision. 8 If the cost of providing the living accommodation exceeds £75,000, the “ deductible amount ” means the total of amounts A and B where— A is equal to so much of MG as does not exceed RV ; B is the amount of any excess rent paid by the employee in respect of the taxable period; MG is the total of any sums made good, on or before 6 July following the tax year which contains the taxable period, by the employee to the person at whose cost the accommodation is provided that are properly attributable to its provision (in the taxable period); RV is the rental value of the accommodation for the taxable period as set out in section 105(3) or (4A)(b) (as applicable). 9 In subsection (8) “ excess rent ” means so much of the rent in respect of the taxable period paid— a by the employee, b in respect of the accommodation, c to the person providing it, and d on or before 6 July following the tax year which contains the taxable period, as exceeds the rental value of the accommodation. 10 Where it is necessary for the purposes of subsection (1)(b) and (3)(a) to apportion an amount of earnings to the benefit of the accommodation in the taxable period, the apportionment is to be made on a just and reasonable basis. In this subsection “earnings” is to be interpreted in accordance with section 69B(5). General rule for calculating cost of providing accommodation 104 For any tax year the cost of providing living accommodation is given by the formula— A + 1 - P where— A is any expenditure incurred in acquiring the estate or interest in the property held by a person involved in providing the accommodation, I is any expenditure incurred on improvements to the property which has been incurred before the tax year in question by a person involved in providing the accommodation, and P is so much of any payment or payments made by the employee to a person involved in providing the accommodation as represents— (a) reimbursement of A or I, or (b) consideration for the grant to the employee of a tenancy or sub-tenancy of the property. Accommodation costing £75,000 or less Cash equivalent: cost of accommodation not over £75,000 105 1 The cash equivalent or modified cash equivalent is to be calculated under this section if the cost of providing the living accommodation does not exceed £75,000. 2 The cash equivalent is the difference between— a the rental value of the accommodation for the taxable period, and b any sum made good , on or before 6 July following the tax year which contains the taxable period, by the employee to the person at whose cost the accommodation is provided that is properly attributable to its provision. 2A The modified cash equivalent is equal to the rental value of the accommodation for the taxable period. 3 The “rental value of the accommodation” for the taxable period is (subject to subsections (4) and (4A)) the rent which would have been payable for that period if the property had been let to the employee at an annual rent equal to the annual value. 4 Subsection (4A) applies where— a a rental amount is payable by the person (“P”) at whose cost the accommodation is provided in respect of the whole or part of the taxable period (“ the relevant period ”), and b the amount so payable is payable at an annual rate greater than the annual value. 4A Where this subsection applies— a subsection (3) does not apply to the relevant period, and b instead the “rental value of the accommodation” for the relevant period is the rental amount payable by P in respect of the relevant period. 4B A reference in subsection (4) or (4A) to a rental amount payable by P in respect of the relevant period is to the sum of— a any rent for the period payable by P, and b any amount attributed to the period in respect of a lease premium (see sections 105A and 105B). 5 If the rental value of the accommodation for the taxable period does not exceed any sum made good by the employee as mentioned in subsection (2)(b), the cash equivalent is nil. Lease premiums 105A 1 For the purposes of section 105(4B)(b) an amount is attributed to the relevant period “in respect of a lease premium” if— a the property consists of premises, or a part of premises, that are subject to a lease, b the premises are not mainly used by P for a purpose other than the provision of living accommodation to which this Chapter applies, c the lease is for a term of 10 years or less, and d the net amount payable by P in relation to the lease by way of lease premium is greater than zero. 2 The amount so attributed is— A C × C where— A is the relevant period (in days), B is the term of the lease (in days), and C is the net amount payable by P in relation to the lease by way of lease premium. 3 For provision about the application of this section in relation to certain leases with break clauses, see section 105B. 4 For the purposes of this section the net amount payable by P in relation to a lease by way of lease premium is— a the total amount (if any) that has been paid, or is or will become payable, by P in relation to the lease by way of lease premium, less b any amount within paragraph (a) that has been repaid or is or will become repayable. 5 In this section and section 105B “ lease premium ” means any premium payable— a under a lease, or b otherwise under the terms on which a lease is granted. 6 In the application of this section to Scotland “ premium ” includes a grassum. Lease premiums in the case of leases with break clauses 105B 1 This section applies to a lease (“the original lease”) that contains one or more relevant break clauses. 2 For the purposes of this section— a “ break clause ” means a provision of a lease that gives a person a right to terminate it so that its term is shorter than it otherwise would be, and b a break clause contained in the original lease is “relevant” if the right to terminate the lease that it confers is capable of being exercised in such a way that the term of the original lease is 10 years or less. 3 For the purposes of section 105A— a the term of the original lease, and b the net amount payable by P in relation to the lease by way of lease premium, are to be determined on the assumption that any relevant break clause is exercised in such a way that the term of the lease is as short as possible. 4 If a relevant break clause is not in fact exercised in such a way that the term of the original lease is as short as possible, the parties to the lease are treated for the purposes of section 105A as if they were parties to another lease (a “notional lease”) the term of which— a begins immediately after the time at which the term of the original lease would have ended, if that break clause had been so exercised, and b ends at the time mentioned in subsection (5). 5 The term of a notional lease ends— a at the time the term of the original lease would end, on the assumption that any relevant break clause that is exercisable only after the beginning of the term of the notional lease is exercised in such a way that the term of the original lease is as short as possible, or b if earlier, the tenth anniversary of the beginning of the term of the original lease. 6 For the purposes of section 105A the net amount payable by P in relation to a notional lease by way of lease premium is, in the case of a notional lease the term of which ends under paragraph (a) of subsection (5)— a the net amount that would be payable by P in relation to the original lease by way of lease premium on the assumption mentioned in that paragraph, less b any part of that amount that has already been attributed to a period in respect of a lease premium under section 105(4B)(b). 7 For the purposes of section 105A the net amount payable by P in relation to a notional lease by way of lease premium is, in the case of a notional lease the term of which ends under paragraph (b) of subsection (5), the relevant proportion of— a the net amount that would be payable by P in relation to the original lease by way of lease premium, on the assumption that no break clause is exercised, less b any part of that amount that has already been attributed to a period in respect of a lease premium under section 105(4B)(b). 8 In subsection (7) “ the relevant proportion ” means— D E where— D is the term of the notional lease (in days), and E is the sum of— (a) the term of the notional lease (in days), and (b) the number of days by which the term of the original lease would exceed 10 years, on the assumption that no break clause is exercised. Accommodation costing more than £75,000 Cash equivalent: cost of accommodation over £75,000 106 1 The cash equivalent or modified cash equivalent is calculated under this section if the cost of providing the living accommodation exceeds £75,000. 2 To calculate the cash equivalent— Step 1 Calculate the amount that would be the cash equivalent if section 105 applied (cash equivalent: cost of accommodation not over £75,000). Step 2 Calculate the following amount (“the additional yearly rent”)— ORI × ( C - £75,000 ) where— ORI is the official rate of interest in force for the purposes of Chapter 7 of this Part (taxable benefits: loans) on 6th April in the tax year, and C is the cost of providing the accommodation calculated— (a) in accordance with section 104 (general rule for calculating cost of accommodation), or (b) in a case where section 107 applies (special rule for calculating cost of providing accommodation), in accordance with that section instead. Step 3 Calculate the rent which would have been payable for the taxable period if the property had been let to the employee at the additional yearly rent calculated under step 2. Step 4 Calculate the cash equivalent by— a adding together the amounts calculated under steps 1 and 3, and b (if allowed by subsection (3)) subtracting from that total the excess rent paid by the employee. 2A To calculate the modified cash equivalent— a apply steps 1 to 3 in subsection (2), as if the words “cash equivalent” in step 1 were “modified cash equivalent (for the purposes of section 105)”; b calculate the modified cash equivalent by adding together the amounts calculated under steps 1 and 3 as applied by paragraph (a). 3 In step 4— a paragraph (b) only applies if, in respect of the taxable period, the rent paid— i by the employee, ii in respect of the accommodation, iii to the person providing it, and iv on or before 6 July following the tax year which contains the taxable period, exceeds the rental value of the accommodation for that period as set out in section 105(3) or (4)(b), as applicable, and b “ the excess rent ” means the total amount of that excess. Special rule for calculating cost of providing accommodation 107 1 This section contains a special rule for calculating the cost of providing living accommodation which— a operates for the purposes of step 2 of section 106(2) (calculating the additional yearly rent), and b accordingly only operates where the cost of provision for the purposes of section 106(1) (as calculated under section 104) exceeds £75,000. 2 This section applies if, throughout the period of 6 years ending with the date when the employee first occupied the accommodation (“the initial date”), an estate or interest in the property was held by a person involved in providing the accommodation. It does not matter whether it was the same estate, interest or person throughout. 3 For any tax year the cost of providing the living accommodation for the purposes mentioned in subsection (1)(a) is given by the formula— MV + I - P where— MV is the price which the property might reasonably be expected to have fetched on a sale in the open market with vacant possession as at the initial date, I is any expenditure incurred on improvements to the property which has been incurred during the period— (a) beginning with the initial date, and (b) ending with the day before the beginning of the tax year, by a person involved in providing the accommodation, and P is so much of any payment or payments made by the employee to a person involved in providing the accommodation as represents— (a) reimbursement (up to an amount not exceeding MV) of any expenditure incurred in acquiring the estate or interest in the property held on the initial date, (b) reimbursement of I, or (c) consideration for the grant to the employee of a tenancy or sub-tenancy of the property. 4 In estimating MV no reduction is to be made for an option in respect of the property held by— a the employee, b a person connected with the employee, or c a person involved in providing the accommodation. Apportionment of cash equivalent Cash equivalent: accommodation provided for more than one employee 108 1 If, for the whole or part of a tax year, the same living accommodation is provided for more than one employee at the same time, the total of the cash equivalents for all of the employees is to be limited to the amount that would be the cash equivalent if the accommodation was provided for one employee. 2 The cash equivalent for each of the employees is to be such part of that amount as is just and reasonable. Other tax implications Priority of this Chapter over Chapter 1 of this Part 109 1 This section applies if— a under this Chapter an amount is to be treated as earnings from an employee’s employment for a tax year, and b under Chapter 1 of this Part an amount would, apart from this section, constitute earnings from the employment for the year in respect of the provision of the accommodation. 2 The full amount mentioned in subsection (1)(a) is to be treated as earnings from the employment for that year under this Chapter. 3 The amount mentioned in subsection (1)(b) is to constitute earnings from the employment for the year under Chapter 1 of this Part only to the extent that it exceeds the amount mentioned in subsection (2). 4 In a case where the amount mentioned in subsection (1)(a) is nil— a subsections (2) and (3) do not apply, and b the full amount mentioned in subsection (1)(b) constitutes earnings from the employment for the year under Chapter 1. Supplementary Meaning of “annual value” 110 1 For the purposes of this Chapter the “annual value” of living accommodation is the rent which might reasonably be expected to be obtained on a letting from year to year if— a the tenant undertook to pay all taxes, rates and charges usually paid by a tenant, and b the landlord undertook to bear the costs of the repairs and insurance and the other expenses (if any) necessary for maintaining the property in a state to command that rent. 2 For the purposes of subsection (1) that rent— a is to be taken to be the amount that might reasonably be expected to be so obtained in respect of the letting of the accommodation, and b is to be calculated on the basis that the only amounts that may be deducted in respect of services provided by the landlord are amounts in respect of the cost to the landlord of providing any relevant services. 3 If living accommodation is of a kind that might reasonably be expected to be let on terms under which— a the landlord is to provide any services which are either— i relevant services, or ii the repair, insurance or maintenance of any premises which do not form part of the accommodation but belong to or are occupied by the landlord, and b amounts are payable in respect of the services in addition to the rent, the rent to be established under subsection (1) in respect of the accommodation is to be increased under subsection (4). 4 That rent is to include— a where the services are relevant services, so much of the additional amounts as exceeds the cost to the landlord of providing the services; b where the services are within subsection (3)(a)(ii), the whole of the additional amounts. 5 In this section “ relevant service ” means a service other than the repair, insurance or maintenance of the accommodation or of any other premises. Disputes as to annual value 111 1 This section applies if there is a dispute as to the amount of the annual value of living accommodation for the purposes of this Chapter. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 An application for the tribunal to determine the question is to be subject to the relevant provisions of Part 5 of TMA 1970 (see, in particular, section 48(2)(b) of that Act), and each of the persons concerned is entitled to be a party to the proceedings on the application. Meaning of “person involved in providing the accommodation” 112 For the purposes of this Chapter “ person involved in providing the accommodation ” means any of the following— a the person providing the accommodation; b the employee’s employer (if not within paragraph (a)); c any person, other than the employee, who is connected with a person within paragraph (a) or (b). Meaning of “the property” 113 For the purposes of this Chapter “ the property ”, in relation to living accommodation, means the property consisting of that accommodation. Chapter 6 Taxable benefits: cars, vans and related benefits General Cars, vans and related benefits 114 1 This Chapter applies to a car or a van in relation to a particular tax year if in that year the car or van— a is made available (without any transfer of the property in it) to an employee or a member of the employee’s family or household, b is so made available by reason of the employment (see section 117), and c is available for the employee’s or member’s private use (see section 118). 1A Where this Chapter applies to a car or van, the car or van is a benefit for the purposes of this Chapter (and accordingly it is immaterial whether the terms on which it is made available to the employee or member constitute a fair bargain). 2 Where this Chapter applies to a car or van— a sections 120 to 148 provide for an amount in respect of the benefit of the car to be treated as earnings, b sections 149 to 153 provide for an amount in respect of the benefit of any fuel provided for the car to be treated as earnings, ... c sections 154 to 159 provide for an amount in respect of the benefit of the van to be treated as earnings ; and d sections 160 to 164 provide for an amount in respect of the benefit of any fuel provided for the van to be treated as earnings in certain circumstances. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3A This Chapter does not apply to a van in relation to a tax year if the private use of the van during the tax year by the employee or member of the employee’s family or household is insignificant. 4 The following provisions of this Chapter provide for further exceptions— section 167 (pooled cars); section 168 (pooled vans); section 169 (car available to more than one member of family or household employed by same employer). section 169A (van available to more than one member of family or household employed by same employer). Meaning of “car” and “van” 115 1 In this Chapter— “ car ” means a mechanically propelled road vehicle which is not— a goods vehicle, a motor cycle, an invalid carriage, or a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used; “ van ” means a mechanically propelled road vehicle which— is a goods vehicle, and has a design weight not exceeding 3,500 kilograms, and which is not a motor cycle. 2 For the purposes of subsection (1)— “ design weight ” means the weight which a vehicle is designed or adapted not to exceed when in normal use and travelling on a road laden; “ goods vehicle ” means a vehicle of a construction primarily suited for the conveyance of goods or burden of any description; “ invalid carriage ” has the meaning given by section 185(1) of the Road Traffic Act 1988 (c. 52); “ motor cycle ” has the meaning given by section 185(1) of the Road Traffic Act 1988. Meaning of when car or van is available to employee 116 1 For the purposes of this Chapter a car or van is available to an employee at a particular time if it is then made available, by reason of the employment and without any transfer of the property in it, to the employee or a member of the employee’s family or household. 2 References in this Chapter to— a the time when a car or van is first made available to an employee are to the earliest time when the car or van is made available as mentioned in subsection (1), and b the last day in a year on which a car or van is available to an employee are to the last day in the year on which the car or van is made available as mentioned in subsection (1). 3 This section does not apply to section 124A or 138 (automatic car or van for a disabled employee). Meaning of car or van made available by reason of employment 117 1 For the purposes of this Chapter a car or van made available by an employer to an employee or member of an employee's family or household is to be regarded as made available by reason of the employment unless subsection (2) or (3) excludes the application of this subsection. 2 Subsection (1) does not apply where— a the employer is an individual, and b the car or van in question is made available in the normal course of the employer's domestic, family or personal relationships. 3 Subsection (1) does not apply where— a the employer carries on a vehicle hire business under which cars or vans of the same kind are made available to members of the public for hire, b the car or van in question is hired to the employee or member in the normal course of that business, and c in hiring that car or van the employee or member is acting as an ordinary member of the public. Availability for private use 118 1 For the purposes of this Chapter a car or van made available in a tax year to an employee or a member of the employee’s family or household is to be treated as available for the employee’s or member’s private use unless in that year— a the terms on which it is made available prohibit such use, and b it is not so used. 2 In this Chapter “ private use ”, in relation to a car or van made available to an employee or a member of the employee’s family or household, means any use other than for the employee’s business travel (see section 171(1)). Where alternative to benefit of low emission car or van offered 119 1 This section applies where in a tax year— a a car is made available as mentioned in section 114(1), b the car's CO 2 emissions figure (see sections 133 to 138) does not exceed 75 grams per kilometre, and c an alternative to the benefit of the car is offered. 2 The mere fact that the alternative is offered does not result in an amount in respect of the benefit constituting earnings by virtue of Chapter 1 of this Part (earnings). Cars: benefit treated as earnings Benefit of car treated as earnings 120 1 If this Chapter applies to a car in relation to a particular tax year, the cash equivalent of the benefit of the car is to be treated as earnings from the employment for that year. 2 In such a case (including a case where the cash equivalent of the benefit of the car is nil) the employee is referred to in this Chapter as being chargeable to tax in respect of the car in that year. 3 Any reference in this Act to a case where the cash equivalent of the benefit of a car is treated as the employee's earnings for a year by virtue of this section includes a case where the cash equivalent is nil. 4 This section is subject to section 120A. Benefit of car treated as earnings: optional remuneration arrangements 120A 1 Where this Chapter applies to a car in relation to a particular tax year and the conditions in subsection (3) are met— a the relevant amount (see section 121A) is to be treated as earnings from the employment for that tax year, and b section 120(1) does not apply. 2 In such a case (including a case where the relevant amount is nil) the employee is referred to in this Chapter as being chargeable to tax in respect of the car in the tax year. 3 The conditions are that— a the car is made available to the employee or member of the employee's household pursuant to optional remuneration arrangements, b the total foregone amount in connection with the car for the tax year is is greater than the modified cash equivalent of the benefit of the car for the tax year (see section 121B), and c the car's CO 2 emissions figure (see sections 133 to 138) exceeds 75 grams per kilometre. 4 In this section, and in section 121A, the total foregone amount in connection with the car for a tax year is the total of— a the amount foregone (see section 69B) with respect to the benefit of the car for that year, and b the amount foregone (see section 69B) with respect to each other benefit that— i is connected with the car, ii is provided in that year for the employee, or a member of the employee's household, pursuant to optional remuneration arrangements, and iii is neither the provision of a driver nor the provision of fuel. Method of calculating the cash equivalent of the benefit of a car 121 1 The cash equivalent of the benefit of a car for a tax year is calculated as follows— Step 1 Find the price of the car in accordance with sections 122 to 124A . Step 2 Add the price of any accessories which fall to be taken into account in accordance with sections 125 to 131. Step 3 Make any deduction under section 132 for capital contributions made by the employee to the cost of the car or accessories. The resulting amount is the interim sum. Step 4 ... Step 5 Find the appropriate percentage for the car for the year in accordance with sections 133 to 142. Step 6 Multiply the interim sum by the appropriate percentage for the car for the year. Step 7 Make any deduction under section 143 for any periods when the car was unavailable. The resulting amount is the provisional sum. Step 8 Make any deduction from the provisional sum under section 144 in respect of payments by the employee for the private use of the car. The result is the cash equivalent of the benefit of the car for the year. 2 The method of calculation set out in subsection (1) is modified in the special cases dealt with in— section 146 (cars that run on road fuel gas), and section 147 (classic cars: 15 years of age or more). 3 Where the car is shared the cash equivalent is calculated under this section in accordance with section 148. Optional remuneration arrangements: method of calculating relevant amount 121A 1 To find the relevant amount for the purposes of section 120A, take the following steps— Step 1 Take the total foregone amount in connection with the car for the tax year (see section 120A(4)). . Step 2 Make any deduction under section 132A in respect of capital contributions made by the employee to the cost of the car or accessories. The resulting amount is the provisional sum. Step 3 Make any deduction from the provisional sum under section 144 in respect of payments by the employee for the private use of the car. The result is the “ relevant amount ” for the purposes of section 120A. 2 Where it is necessary, for the purpose of determining the “ total foregone amount ” for the purposes of step 1 of subsection (1), to apportion an amount of earnings to a benefit mentioned in section 120A(4)(a) or (b) for the tax year, the apportionment is to be made on a just and reasonable basis. In this subsection “earnings” is to be interpreted in accordance with section 69B(5). Meaning of “modified cash equivalent” 121B 1 The “modified cash equivalent” of the benefit of a car for a tax year is calculated in accordance with the following steps (which must be read with subsections (2) to (4))— Step 1 Find the price of the car in accordance with sections 122 to 124A. Step 2 Add the price of any accessories which fall to be taken into account in accordance with sections 125 to 131. The resulting amount is the interim sum. Step 3 Find the appropriate percentage for the car for the year in accordance with sections 133 to 142. Step 4 Multiply the interim sum by the appropriate percentage for the car for the year. Step 5 Make any deduction under section 143 for any periods when the car was unavailable. The resulting amount is the modified cash equivalent of the benefit of the car for the year. 2 Where the car is shared the modified cash equivalent is calculated under this section in accordance with section 148. 3 The modified cash equivalent of the benefit of a car for a tax year is to be taken to be zero if the condition in subsection (4) is met. 4 The condition is that the benefit of the car for the tax year would be exempt from income tax but for section 228A (exclusion of certain exemptions). 5 The method of calculation set out in subsection (1) is modified in the special cases dealt with in— a section 146 (cars that run on road fuel gas), and b section 147A (classic cars: optional remuneration arrangements). Cars: the price of a car The price of the car 122 1 For the purposes of this Chapter the price of a car means— This is subject to section 124A (automatic car for a disabled employee). a its list price, if it has one, or b its notional price, if it has no list price. 2 This is subject to section 124A (automatic car for a disabled employee). The list price of a car 123 1 In this Chapter a car’s “ list price ” means the price published by the car’s manufacturer, importer or distributor (as the case may be) as the inclusive price appropriate for a car of that kind if sold— a in the United Kingdom, b singly, c in a retail sale, d in the open market, and e on the day immediately before the date of the car’s first registration. 2 The “ inclusive price ” means the price inclusive of— a any charge for delivery by the manufacturer, importer or distributor to the seller’s place of business, and b any relevant taxes (see section 171(1)). The notional price of a car with no list price 124 1 In this Chapter a car’s “ notional price ” means the price which might reasonably have been expected to be its list price if its manufacturer, importer or distributor (as the case may be) had published a price as the inclusive price appropriate for a sale of a car of the same kind sold— a in the United Kingdom, b singly, c in a retail sale, d in the open market, e on the day immediately before the date of the car’s first registration, and f with accessories equivalent to the qualifying accessories (see section 125) available with the car at the time when it was first made available to the employee. 2 In this section “ inclusive price ” has the same meaning as in section 123. Automatic car for a disabled employee 124A 1 This section applies where— a a car has automatic transmission (“the automatic car”), b at any time in the year when the automatic car is available to the employee (“E”), E holds a disabled person's badge, and c by reason of E's disability, E must, in the event of wanting to drive a car, drive a car which has automatic transmission. 2 If, under section 122 to 124, the price of the automatic car is more than it would have been if the automatic car had been an equivalent manual car, the price of the automatic car is to be the price of an equivalent manual car. 3 In subsection (2) “ an equivalent manual car ” means a car which— a is first registered at or about the same time as the automatic car, and b does not have automatic transmission, but otherwise is the closest variant available of the make and model of the automatic car. 4 For the purposes of this section a car has automatic transmission if— a the driver of the car is not provided with any means by which the driver may vary the gear ratio between the engine and the road wheels independently of the accelerator and the brakes, or b the driver is provided with such means, but they do not include— i a clutch pedal, or ii a lever which the driver may operate manually. 5 For the purposes of this section a car is available to an employee at a particular time if it is then made available, by reason of the employment and without any transfer of the property in it, to the employee. Cars: treatment of accessories Meaning of “accessory” and related terms 125 1 In this Chapter “ qualifying accessory ” means an accessory which— a is made available for use with the car without any transfer of the property in the accessory, b is made available by reason of the employment, and c is attached to the car (whether permanently or not). 2 For the purposes of this Chapter “ accessory ” includes any kind of equipment but does not include— a equipment necessarily provided for use in the performance of the duties of the employment; b equipment by means of which a car is capable of running on road fuel gas; c equipment to enable a disabled person to use a car (see section 172); d a mobile telephone (within the meaning given in section 319(2)). 3 But subsection (2)(b) does not apply in relation to a car to which section 137 (different CO 2 emissions figure for bi-fuel cars) applies. 3A Subsection (2) needs to be read with section 125A (security features not to be regarded as accessories). 4 In this Chapter— “ standard accessory ” means an accessory equivalent to an accessory assumed to be available with cars of the same kind as the car in question in arriving at the list price, and “ non-standard accessory ” means any other accessory. Security features not to be regarded as accessories 125A 1 This section applies where a car made available to an employee has a relevant security feature. 2 The relevant security feature is not an accessory for the purposes of this Chapter if it is provided in order to meet a threat to the employee's personal physical security which arises wholly or mainly because of the nature of the employee's employment. 3 In this section “ relevant security feature ” means— a armour designed to protect the car's occupants from explosions or gunfire, b bullet-resistant glass, c any modification to the car's fuel tank designed to protect the tank's contents from explosions or gunfire (including by making the tank self-sealing), and d any modification made to the car in consequence of anything which is a relevant security feature by virtue of paragraph (a), (b) or (c). 4 The Treasury may by regulations amend the definition of “relevant security feature” in subsection (3). Amounts taken into account in respect of accessories 126 1 The price of the following accessories is to be taken into account under step 2 of section 121(1) and step 2 of section 121B(1) — a in the case of a car with a list price, the price of any initial extra accessory, and b in the case of any car, the price of any later accessory. 2 In this Chapter an “ initial extra accessory ” means a qualifying accessory which— a is a non-standard accessory, b is available with the car at the time when it is first made available to the employee, and c if it is an accessory in relation to which there is no published price of the manufacturer, importer or distributor of the car (see section 128), is available with the car in the tax year in question. 3 In this Chapter a “ later accessory ” means a qualifying accessory which— a is available with the car in the tax year in question, b was not available with the car at the time when it was first made available to the employee, c was not made available with the car before 1st August 1993, and d has a price of at least £100. 4 In this section references to the price of an accessory are to— a its list price, if it has one, or b its notional price, if it has no list price. 5 This section is subject to section 131 (replacement accessories). The list price of an accessory 127 1 For the purposes of this Chapter the list price of an initial extra accessory is— a the published price of the manufacturer, importer or distributor of the car (see section 128), or b if there is no such price, the published price of the manufacturer, importer or distributor of the accessory (see section 129). 2 For the purposes of this Chapter the list price of a later accessory is the published price of the manufacturer, importer or distributor of the accessory (see section 129). Accessory: published price of the car manufacturer etc. 128 1 In this Chapter the “ published price of the manufacturer, importer or distributor of the car ” in relation to an accessory means the price published by the car’s manufacturer, importer or distributor (as the case may be) as the inclusive price appropriate for an equivalent accessory if sold with a car of the same kind— a in the United Kingdom, b singly, c in a retail sale, d in the open market, and e on the day immediately before the date of the car’s first registration. 2 The “ inclusive price ” means the price inclusive of— a any charge for delivery by the manufacturer, importer or distributor to the seller’s place of business, b any relevant taxes other than car tax (see section 171(1)), and c any charge for fitting the accessory. Accessory: published price of the accessory manufacturer etc. 129 1 In this Chapter the “ published price of the manufacturer, importer or distributor of the accessory ” in relation to an accessory means the price published by or on behalf of the manufacturer, importer or distributor of the accessory (as the case may be) as the inclusive price appropriate for such an accessory if sold— a in the United Kingdom, b singly, c in a retail sale, d in the open market, and e at the time immediately before the accessory concerned is first made available for use with the car. 2 The “ inclusive price ” means the price inclusive of— a any charge for delivery by the manufacturer, importer or distributor to the seller’s place of business, b any relevant taxes other than car tax (see section 171(1)), and c in the case of an accessory permanently attached to the car, the price which the seller would charge for attaching it. 3 In the case of an initial extra accessory, the time referred to in subsection (1)(e) may be a time before the car is first made available to the employee. The notional price of an accessory 130 1 In this Chapter the “notional price” of an accessory means the inclusive price which it might reasonably have been expected to fetch if sold— a in the United Kingdom, b singly, c in a retail sale, d in the open market, and e at the time immediately before the accessory concerned is first made available for use with the car. 2 The “ inclusive price ” means the price inclusive of— a any charge for delivery by the manufacturer, importer or distributor to the seller’s place of business, b any relevant taxes other than car tax (see section 171(1)), and c in the case of an accessory permanently attached to the car, the price which the seller would charge for attaching it. 3 In the case of an initial extra accessory, the time referred to in subsection (1)(e) may be a time before the car is first made available to the employee. Replacement accessories 131 1 This section applies for the purposes of sections 121(1) and 121B(1) where— a a later accessory is available with the car in the tax year in question, b that accessory (“the new accessory”) replaced another qualifying accessory (“the old accessory”) in that year or an earlier tax year, and c the new accessory is of the same kind as the old accessory. 1A In the application of this section for the purposes of section 121B(1)— a references to the cash equivalent of the benefit of the car for the tax year are to be read as references to the modified cash equivalent of the benefit of the car for the tax year, and b references to step 2 of section 121(1) are to be read as references to step 2 of section 121B(1). 2 If the new accessory is not superior to the old accessory, the cash equivalent of the benefit of the car for the tax year is to be calculated under step 2 of section 121(1) as if— a the replacement has not been made, and b the new accessory is a continuation of the old accessory. 3 If the new accessory is superior to the old accessory and the conditions in subsection (4) are met, the cash equivalent of the benefit of the car for the tax year is to be calculated under step 2 of section 121(1)— a as if the old accessory was not available with the car in that tax year, or b where the price of the old accessory would (apart from this section) be added to the price of the car under step 2 of section 121(1) as an initial extra accessory, as if it was not available with the car at the time when the car was first made available to the employee. 4 The conditions mentioned in subsection (3) are that— a the old accessory was a non-standard accessory, and b both the old and the new accessory would (apart from this section) be taken into account under step 2 of section 121(1) in calculating the cash equivalent of the benefit of the car for the year. 5 For the purposes of this section a new accessory is superior to an old accessory if the price of the new accessory exceeds whichever is the greater of— a the price of the old accessory, and b the price of an accessory equivalent to the old accessory at the time immediately before the new accessory is first made available for use with the car. 6 In this section references to the price of an accessory are to— a its list price, if it has one, or b its notional price, if it has no list price. Cars: capital contributions by employee Capital contributions by employee 132 1 This section applies for the purposes of section 121(1) if the employee contributes a capital sum to expenditure on the provision of— a the car, or b any qualifying accessory which is taken into account in calculating the cash equivalent of the benefit of the car. 2 A deduction is to be made from the amount carried forward from step 2 of section 121(1)— a for the tax year in which the contribution is made, and b for all subsequent years in which the employee is chargeable to tax in respect of the car by virtue of section 120. 3 The amount of the deduction allowed in any tax year is the lesser of— a the total of the capital sums contributed by the employee in that year and any earlier years to expenditure on the provision of— i the car, or ii any qualifying accessory which is taken into account in calculating the cash equivalent of the benefit of the car for the tax year in question, and b £5,000. Capital contributions by employee: optional remuneration arrangements 132A 1 This section applies for the purposes of section 121A(1) if the employee contributes a capital sum to expenditure on the provision of— a the car, or b any qualifying accessory which is taken into account in calculating under section 121B the modified cash equivalent of the benefit of the car. 2 A deduction is to be made from the amount carried forward from step 1 of section 121A(1)— a for the tax year in which the contribution is made, and b for all subsequent tax years in which the employee is chargeable to tax in respect of the car by virtue of section 120A. 3 The amount of the deduction allowed in any tax year is found by— a first multiplying the capped amount by the appropriate percentage, and b then multiplying the result by the availability factor. 4 In subsection (3) the reference to “the appropriate percentage” is to the appropriate percentage for the car for the tax year (determined in accordance with sections 133 to 142). 4A For the purposes of subsection (3), “the availability factor” is given by the formula— Y − U Y where— Y is the number of days in the tax year, and U is the number of days in the tax year on which the car is unavailable. 4B For the purposes of subsection (4A), the car is unavailable on any day if the day— a falls before the first day on which the car is available to the employee, b falls after the last day on which the car is available to the employee, or c falls within a period of 30 days or more throughout which the car is not available to the employee. 5 In this section “ the capped amount ” means the lesser of— a the total of the capital sums contributed by the employee in that year and any earlier years to expenditure on the provision of— i the car, or ii any qualifying accessory which is taken into account in calculating under section 121B the modified cash equivalent of the benefit of the car for the tax year in question, and b £5,000. 6 This section is modified by section 147A (classic cars: optional remuneration arrangements). Cars: the appropriate percentage How to determine the “appropriate percentage” 133 1 The “appropriate percentage” for a car for a year depends upon when the car was first registered. 2 If the car was first registered on or after 1st January 1998, the “appropriate percentage” depends upon whether the car— a is a car with a CO 2 emissions figure (see section 134(1)), b is a car without a CO 2 emissions figure (see section 134(2)), or c is a diesel car to which section 141 applies, and is determined under sections 139 to 141. 3 If the car was first registered before 1st January 1998, the “appropriate percentage” is determined under section 142. Meaning of car with or without a CO 2 emissions figure 134 1 In this Chapter a “ car with a CO 2 emissions figure ” means— a a car first registered on or after 1st January 1998 but before 1st October 1999 to which section 135 applies, b a car first registered on or after 1st October 1999 but before IP completion day to which section 136 (registration from 1st October 1999 to IP completion day) applies, ... ba a car first registered on or after IP completion day to which section 136A (registration on or after IP completion day) applies, c a car first registered on or after 1st January 2000 but before IP completion day which is a car to which section 137 (bi-fuel cars : registration from 1st January 2000 to IP completion day ) applies , or d a car first registered on or after IP completion day to which section 137A (bi-fuel cars: registration on or after IP completion day) applies. 2 In this Chapter a “ car without a CO 2 emissions figure ” means any other car first registered on or after 1st January 1998. Cars: appropriate percentage: first registered on or after 1st January 1998 Car with a CO 2 emissions figure: pre-October 1999 registration 135 1 This section applies to a car first registered on or after 1st January 1998 but before 1st October 1999 if when it was so registered— a it conformed to a vehicle type with an EC type-approval certificate (see section 171(1)), or b it had a UK approval certificate (see section 171(1)), which specifies a CO 2 emissions figure in terms of grams per kilometre driven. 2 The car’s CO 2 emissions figure is that specified figure. 3 This is subject to section 138 (automatic car for a disabled employee). Car with a CO 2 emissions figure: registration from 1st October 1999 to IP completion day 136 1 This section applies to a car first registered on or after 1st October 1999 but before IP completion day if it is so registered on the basis of— a an EC certificate of conformity (see section 171(1)), or b a UK approval certificate (see section 171(1)), which specifies a CO 2 emissions figure in terms of grams per kilometre driven. 2 The car’s CO 2 emissions figure is that specified figure unless more than one figure is specified, in which case the car’s CO 2 emissions figure is the figure specified as the CO 2 emissions (combined) figure. 2A For the purpose of determining the car's CO 2 emissions figure in a case where the car is first registered before 6 April 2020 , ignore any WLTP (worldwide harmonised light vehicles test procedures) values specified in the EC certificate of conformity or UK approval certificate . 2B For the purpose of determining the car's CO 2 emissions figure in a case where the car is first registered on or after 6 April 2020, ignore any values specified in the EC certificate of conformity or UK approval certificate that are not WLTP (worldwide harmonised light vehicle test procedures) values. 3 Subsection (2) is subject to— a section 137 (bi-fuel cars : registration from 1st January 2000 to IP completion day ), and b section 138 (automatic car for a disabled employee). Car with a CO 2 emissions figure: registration on or after IP completion day 136A 1 This section applies to a car first registered on or after IP completion day if it is so registered on the basis of a qualifying emissions certificate. 2 The car’s CO 2 emissions figure is the figure specified in the qualifying emissions certificate unless more than one figure is specified, in which case the car’s CO 2 emissions figure is the figure specified as the CO 2 emissions (combined) figure. 3 For the purpose of determining the car’s CO 2 emissions figure ignore any values specified in the qualifying emissions certificate that are not WLTP (worldwide harmonised light vehicles test procedures) values. 4 Subsection (2) is subject to— a section 137A (bi-fuel cars registered after IP completion day), and b section 138 (automatic car for a disabled employee). Car with a CO 2 emissions figure: bi-fuel cars : registration from 1st January 2000 to IP completion day 137 1 This section applies to a car first registered on or after 1st January 2000 but before IP completion day if it is so registered on the basis of— a an EC certificate of conformity (see section 171(1)), or b a UK approval certificate (see section 171(1)), which specifies separate CO 2 emissions figures in terms of grams per kilometre driven for different fuels. 2 The car’s CO 2 emissions figure is— a the lowest figure specified, or b if there is more than one figure specified in relation to each fuel, the lowest CO 2 emissions (combined) figure specified. 2A For the purpose of determining the car's CO 2 emissions figure in a case where the car is first registered before 6 April 2020 , ignore any WLTP (worldwide harmonised light vehicles test procedures) values specified in the EC certificate of conformity or UK approval certificate . 2B For the purpose of determining the car's CO 2 emissions figure in a case where the car is first registered on or after 6 April 2020, ignore any values specified in the EC certificate of conformity or UK approval certificate that are not WLTP (worldwide harmonised light vehicle test procedures) values. 3 Subsection (2) is subject to section 138 (automatic car for a disabled employee). Car with a CO 2 emissions figure: bi-fuel cars registered on or after IP completion day 137A 1 This section applies to a car first registered on or after IP completion day if it is so registered on the basis of a qualifying emissions certificate which specifies separate CO 2 emissions figures in terms of grams per kilometre driven for different fuels. 2 The car’s CO 2 emissions figure is— a the lowest figure specified, or b if there is more than one figure specified in relation to each fuel, the lowest CO 2 emissions (combined) figure specified. 3 For the purpose of determining the car’s CO 2 emissions figure ignore any values specified in the qualifying emissions certificate that are not WLTP (worldwide harmonised light vehicles test procedures) values. 4 Subsection (2) is subject to section 138 (automatic car for a disabled employee). Car with a CO 2 emissions figure: automatic car for a disabled employee 138 1 This section applies where— a a car with a CO 2 emissions figure has automatic transmission (“the automatic car”), b at any time in the year when the automatic car is available to the employee (“E”), E holds a disabled person’s badge, and c by reason of E’s disability, E must, in the event of wanting to drive a car, drive a car which has automatic transmission. 2 If, under sections 135 to 137, the automatic car’s CO 2 emissions figure is more than it would have been if the automatic car had been an equivalent manual car, the CO 2 emissions figure for the automatic car is to be the CO 2 emissions figure for an equivalent manual car. 3 In subsection (2) “ an equivalent manual car ” means a car which— a is first registered at or about the same time as the automatic car, and b does not have automatic transmission, but otherwise is the closest variant available of the make and model of the automatic car. 4 For the purposes of this section a car has automatic transmission if— a the driver of the car is not provided with any means by which the driver may vary the gear ratio between the engine and the road wheels independently of the accelerator and the brakes, or b the driver is provided with such means, but they do not include— i a clutch pedal, or ii a lever which the driver may operate manually. 5 For the purposes of this section a car is available to an employee at a particular time if it is then made available, by reason of the employment and without any transfer of the property in it, to the employee. Cars with a CO 2 emissions figure: the appropriate percentage 139 1 The appropriate percentage for a year for a car with a CO 2 emissions figure of less than 75 is determined in accordance with the following table. Car Appropriate percentage Car with CO 2 emissions figure of 0 3% Car with CO 2 emissions figure of 1–50 As follows Car with electric range figure of 130 or more 3% Car with electric range figure of 70–129 6% Car with electric range figure of 40–69 9% Car with electric range figure of 30–39 13% Car with electric range figure of less than 30 15% Car with CO 2 emissions figure of 51–54 16% Car with CO 2 emissions figure of 55–59 17% Car with CO 2 emissions figure of 60–64 18% Car with CO 2 emissions figure of 65–69 19% Car with CO 2 emissions figure of 70–74 20% 2 For the purposes of subsection (1) and the table— a if a CO 2 emissions figure is not a whole number, round it down to the nearest whole number, and b if an electric range figure is not a whole number, round it up to the nearest whole number. 3 The appropriate percentage for a year for a car with a CO 2 emissions figure of 75 or more is whichever is the lesser of— a 21% plus one percentage point for each 5 grams per kilometre driven by which the CO 2 emissions figure exceeds 75, and b 37%. 4 For the purposes of subsection (3), if a CO 2 emissions figure is not a multiple of 5, round it down to the nearest multiple of 5. 5 In this section, an “electric range figure” is the number of miles which is the equivalent of the number of kilometres specified in an EC certificate of conformity, an EC type-approval certificate or a UK approval certificate on the basis of which a car is registered, as being the maximum distance for which the car can be driven in electric mode without recharging the battery. 5A For the purpose of determining the electric range figure for a car first registered before 6 April 2020, ignore any WLTP (worldwide harmonised light vehicle test procedures) values specified in an EC certificate of conformity, an EC type-approval certificate or a UK approval certificate. 5B For the purpose of determining the electric range figure for a car first registered on or after 6 April 2020, ignore any values specified in an EC certificate of conformity, an EC type-approval certificate or a UK approval certificate that are not WLTP (worldwide harmonised light vehicle test procedures) values. 7 This section is subject to— a section 141 (diesel cars), and b any regulations made by the Treasury under section 170(4) (power to reduce the appropriate percentage). Car without a CO 2 emissions figure: the appropriate percentage 140 1 The appropriate percentage for a year for a car without a CO 2 emissions figure is determined under this section. 2 If the car has an internal combustion engine with one or more reciprocating pistons, the appropriate percentage for the year is— Table Cylinder capacity of car in cubic centimetres Appropriate percentage 1,400 or less 18% 20% 24% More than 1,400 but not more than 2,000 29% 31% 35% More than 2,000 37% For this purpose a car’s cylinder capacity is the capacity of its engine as calculated for the purposes of VERA 1994. 3 If subsection (2) does not apply, the appropriate percentage for the year is— a 9% 13% 16% 2% if the car cannot in any circumstances emit CO2 by being driven, and b 37% in any other case. 3A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 This section is subject to— a section 141 (diesel cars), and b any regulations made by the Treasury under section 170(4) (power to reduce the appropriate percentage). Diesel cars: the appropriate percentage 141 1 This section applies to a diesel car first registered on or after 1 January 1998 but before 1 September 2017. 1A This section applies to a diesel car first registered on or after 1 September 2017 if it does not meet the Euro 6d emissions standard. 2 To determine the appropriate percentage for the car for a year— Step 1 Determine whether the car is a car with a CO 2 emissions figure or a car without a CO 2 emissions figure (see section 134). Step 2 Take what would be the appropriate percentage for the car for the year under section 139 or 140 as appropriate. Step 3 The appropriate percentage for the car for the year is whichever is the smaller of— a the figure resulting from the addition of 4 percentage points to the figure found under step 2, and b 35%. 2A A vehicle meets the Euro 6d emissions standard only if it is first registered on the basis of an EC certificate of conformity which indicates that the exhaust emission level is Euro 6d (and it does not meet that standard if it is first registered on the basis of an EC certificate of conformity which indicates that that level is Euro 6d-TEMP). 3 In this section “ diesel car ” means a car which is propelled solely by diesel. 4 This section is subject to any regulations made by the Treasury under section 170(4) (power to reduce the appropriate percentage). Cars: appropriate percentage: first registered before 1st January 1998 Car first registered before 1st January 1998: the appropriate percentage 142 1 The appropriate percentage for a car first registered before 1st January 1998 is determined under this section. 2 If the car has an internal combustion engine with one or more reciprocating pistons, the appropriate percentage for the year is— Table Cylinder capacity of car in cubic centimetres Appropriate percentage 1,400 or less 24% More than 1,400 but not more than 2,000 35% More than 2,000 37% For this purpose a car’s cylinder capacity is the capacity of its engine as calculated for the purposes of VERA 1994. 3 If subsection (2) does not apply, the appropriate percentage for the year is 37% . 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cars: unavailability or payments for private use Deduction for periods when car unavailable 143 A1 This section has effect for the purposes of— a section 121(1) (method of calculating the cash equivalent of the benefit of a car), and b section 121B(1) (optional remuneration arrangements: meaning of “modified cash equivalent”). 1 A deduction is to be made from the amount carried forward from step 6 of section 121(1) or (as the case may be) step 4 of section 121B(1) if the car has been unavailable on any day during the tax year in question. 2 For the purposes of this section a car is unavailable on any day if the day— a falls before the first day on which the car is available to the employee, b falls after the last day on which the car is available to the employee, or c falls within a period of 30 days or more throughout which the car is not available to the employee. 3 The amount of the deduction is given by the formula— U Y × A where— U is the number of days in the year on which the car is unavailable, Y is the number of days in that year, and A is the amount carried forward from step 6 of section 121(1) or (as the case may be) step 4 of section 121B(1) . 4 This section is subject to section 145 (modification where car temporarily replaced). Deduction for payments for private use 144 1 A deduction is to be made from the provisional sum (see subsection (1A)) if, as a condition of the car being available for the employee’s private use, the employee— a is required in the tax year in question to pay (whether by way of deduction from earnings or otherwise) an amount of money for that use, and b pays that amount on or before 6 July following that year. 1A In this section “ the provisional sum ” means the provisional sum calculated under— a step 7 of section 121(1) (method of calculating the cash equivalent of the benefit of a car), or b step 2 of section 121A(1) (optional remuneration arrangements: method of calculating relevant amount). 2 If the amount paid as mentioned in subsection (1)(b) by the employee in respect of that year is equal to or exceeds the provisional sum, the provisional sum is reduced so that— a in a case within subsection (1A)(a), the cash equivalent of the benefit of the car for the year is nil, or b in a case within subsection (1A)(b), the relevant amount for the purposes of section 120A is nil. 3 Where subsection (2) does not apply, the amount paid as mentioned in subsection (1)(b) by the employee in respect of the year is deducted from the provisional sum in order to give— a in a case within subsection (1A)(a), the cash equivalent of the benefit of the car for the year, or b in a case within subsection (1A)(b), the relevant amount for the purposes of section 120A. 4 In this section the reference to the car being available for the employee’s private use includes a reference to the car being available for the private use of a member of the employee’s family or household. 5 This section is subject to section 145 (modification where car temporarily replaced). Modification of provisions where car temporarily replaced 145 1 This section applies if— a the car normally available to an employee (“the normal car”) is not available to the employee for a period of less than 30 days, b another car (“the replacement car”) is made available to the employee in order to replace the normal car for the whole or part of that period, c the employee is chargeable to tax— i in respect of both the normal car and the replacement car by virtue of section 120, or ii in respect of both the normal car and the replacement car by virtue of section 120A, and”. d the replacement car meets condition A or B. 2 Condition A is met if the replacement car is not materially better than the normal car. 3 Condition B is met if the replacement car is not made available to the employee under an arrangement of which the main purpose, or one of the main purposes, is to provide the employee with the benefit of a car which is materially better than the normal car. 4 If this section applies— a section 143 (deduction for periods when car unavailable) applies so that the replacement car is to be treated as unavailable on the days of the period during which it replaces the normal car, and b section 144 (deduction for payments for private use) applies as if the replacement had not been made and the replacement car were a continuation of the normal car. 5 A replacement car is regarded as materially better than the normal car if— a it is materially better in quality, or b when calculating the cash equivalent of the benefit of the replacement car, the interim sum calculated under step 3 of section 121(1) is materially higher than the interim sum calculated in relation to the normal car. 6 Where this section applies by virtue of subsection (1)(c)(ii), the condition in subsection (5)(b) is to be taken to be met if it would be met on the assumption that the cash equivalent of the benefit of the cars in question is to be calculated under section 121(1). Cars: special cases Cars that run on road fuel gas 146 1 This section applies for the purposes of sections 121 and 121B if the car— a has been manufactured so as to be capable of running on road fuel gas, and b is not a car to which section 137 (different CO 2 emissions figure for bi-fuel cars) applies. 2 The price of the car found under step 1 of section 121(1) or (as the case may be) step 1 of section 121B(1) is to be reduced by so much of that price as it is reasonable to attribute to the car being manufactured in such a way as to be capable of running on road fuel gas rather than in such a way as to be capable of running only on petrol. Classic cars: 15 years of age or more 147 1 This section applies in calculating the cash equivalent of the benefit of a car for a tax year if— a the age of the car at the end of the year is 15 years or more, b the market value of the car for the year is £15,000 or more, and c that market value exceeds the interim sum calculated under step 3 of section 121(1). 2 For the interim sum calculated under step 3 substitute the market value of the car for the tax year in question less any deductions under subsection (6). 3 The market value of a car for a tax year is the price which the car might reasonably have been expected to fetch on a sale in the open market on— a the last day of that year, or b the last day in that year on which the car is available to the employee if that is earlier. 4 It is assumed that any qualifying accessories available with the car on that day are included in the sale. 5 Subsection (6) applies if the employee contributes a capital sum to expenditure on the provision of— a the car, or b any qualifying accessory which is taken into account in determining the market value of the car. 6 A deduction is to be made from the market value of the car— a for the tax year in which the contribution is made, and b for all subsequent years in which the employee is chargeable to tax in respect of the car by virtue of section 120. 7 The amount of the deduction allowed in any tax year is the lesser of— a the total of the capital sums contributed by the employee in that year and any earlier years to expenditure on the provision of— i the car, or ii any qualifying accessory which is taken into account in determining the market value of the car for the tax year in question, and b £5,000. Classic cars: optional remuneration arrangements 147A 1 This section applies in calculating the relevant amount in respect of a car for a tax year for the purposes of section 120A (benefit of car treated as earnings: optional remuneration arrangements) if— a the age of the car at the end of the year is 15 years or more, b the market value of the car for the year is £15,000 or more, and c that market value exceeds the specified amount (see subsection (4)). 2 In calculating the modified cash equivalent of the benefit of the car, for the interim sum calculated under step 2 of section 121B(1) substitute the market value of the car for the tax year in question. 3 Section 132A (capital contributions by employee: optional remuneration arrangements) has effect as if— a in subsection (1)(b) the reference to calculating under section 121B the modified cash equivalent of the benefit of the car were to determining the market value of the car, and b in subsection (5)(a)(ii) the reference to calculating under section 121B the modified cash equivalent of the benefit of the car for the tax year in question were to determining the market value of the car for the tax year in question. 4 The “specified amount” is found as follows. Step 1 Find what would be the interim sum under step 2 of section 121B(1) (if subsection (2) of this section did not have effect). Step 2 (Assuming for this purpose that the reference in section 132(2) to step 2 of section 121(1) includes a reference to step 1 of this subsection) make any deduction under section 132 for capital contributions made by the employee to the cost of the car or accessories. The resulting amount is the specified amount. 5 The market value of a car for a tax year is to be determined in accordance with section 147(3) and (4). Cars: reduction where shared car Reduction of cash equivalent where car is shared 148 1 This section applies for the purposes of sections 121 and 121B if in a tax year a car— a is available to more than one employee concurrently, b is so made available by the same employer, and c is available concurrently for each employee’s private use, and two or more of those employees are chargeable to tax in respect of the car in that year by virtue of sections 120 and 120A . 2 The amount to be treated as earnings in respect of the benefit of the car is to be calculated separately for each of those employees for that tax year (whether under section 120 or section 120A). 2A In the case of an employee chargeable to tax in respect of the car by virtue of section 120 The provisional sum calculated under step 7 in section 121(1) is to be reduced on a just and reasonable basis before making any deduction under step 8. 2B In the case of an employee chargeable to tax in respect of the car by virtue of section 120A, the modified cash equivalent (as determined under section 121B(1)) is to be reduced on a just and reasonable basis. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 In this section the reference to the car being available for each employee’s private use includes a reference to the car being available for the private use of a member of the employee’s family or household. Car fuel: benefit treated as earnings Benefit of car fuel treated as earnings 149 1 If in a tax year— a fuel is provided for a car by reason of an employee’s employment, and b that person is chargeable to tax in respect of the car by virtue of section 120 or 120A , the cash equivalent of the benefit of the fuel is to be treated as earnings from the employment for that year. 2 The cash equivalent of the benefit of the fuel is calculated in accordance with sections 150 to 153. 3 Fuel is to be treated as provided for a car, in addition to any other way in which it may be provided, if— a any liability in respect of the provision of fuel for the car is discharged, b a non-cash voucher or a credit-token is used to obtain fuel for the car, c a non-cash voucher or a credit-token is used to obtain money which is spent on fuel for the car, or d any sum is paid in respect of expenses incurred in providing fuel for the car. 4 References in this section to fuel do not include any facility or means for supplying electrical energy or any energy for a car which cannot in any circumstances emit CO 2 by being driven . Benefit of car fuel treated as earnings: optional remuneration arrangements 149A 1 This section applies if— a fuel is provided for a car in a tax year by reason of an employee's employment, b the employee is chargeable to tax in respect of the car in the tax year by virtue of section 120 or 120A, and c the fuel is provided pursuant to optional remuneration arrangements. 2 If the condition in subsection (3) is met— a the amount foregone with respect to the benefit of the fuel (see section 69B) is to be treated as earnings from the employment for the tax year, and b section 149(1) does not apply. 3 The condition mentioned in subsection (2) is that the amount foregone with respect to the benefit of the fuel is greater than the cash equivalent of the benefit of the fuel. 4 For the purposes of subsection (3), assume that the cash equivalent of the benefit of the fuel is zero if the condition in subsection (5) is met. 5 The condition mentioned in subsection (4) is that the benefit of the fuel would be exempt from income tax but for section 228A (exclusion of certain exemptions). 6 References in this section to fuel do not include any facility or means for supplying electrical energy or any energy for a car which cannot in any circumstances emit CO 2 by being driven. 7 Where it is necessary for the purposes of subsections (2)(a) and (3) to apportion an amount of earnings to the benefit of the fuel in the tax year, the apportionment is to be made on a just and reasonable basis. In this subsection “earnings” is to be interpreted in accordance with section 69B(5). Car fuel: calculating the cash equivalent 150 1 The cash equivalent of the benefit of the fuel is the appropriate percentage of £28,200 . 2 The “ appropriate percentage ” means the appropriate percentage determined in accordance with sections 133 to 142 for the purpose of calculating the cash equivalent of the benefit of the car for which the fuel is provided. 3 But the cash equivalent may be— a nil where either of the conditions in section 151 is met; b proportionately reduced under section 152; c reduced under section 153. Car fuel: nil cash equivalent 151 1 The cash equivalent of the benefit of the fuel is nil if condition A or B is met. 2 Condition A is met if ...— a in the tax year in question, the employee is required to make good to the person providing the fuel the whole of the expense incurred by that person in connection with the provision of the fuel for the employee’s private use, and b the employee does make good that expense on or before 6 July following that tax year . 3 Condition B is met if in the tax year in question the fuel is made available only for business travel (see section 171(1)). Car fuel: proportionate reduction of cash equivalent 152 1 The cash equivalent of the benefit of the fuel is to be proportionately reduced if for any part of the tax year in question the car for which the fuel is provided is unavailable (within the meaning of section 143 (deduction for periods when car unavailable)). 2 The cash equivalent of the benefit of the fuel is also to be proportionately reduced if ...— a for any part of the tax year in question, the facility for the provision of fuel as mentioned in section 149(1) is not available, b for any part of the tax year in question, the fuel is made available only for business travel (see section 171(1)), or c the employee — i for any part of the tax year in question, is required to make good to the person providing the fuel the whole of the expense incurred by that person in connection with the provision of the fuel for the employee’s private use , and ii the employee does make good that expense on or before 6 July following that tax year 3 The fact that any of the conditions specified in subsection (2) is met for part of a tax year is to be disregarded if there is a time later in that year when none of those conditions is met. 4 Where the cash equivalent is to be proportionately reduced under subsection (1) or (2) (or under both those subsections), the reduced amount is given by the formula— CE × Y - D Y where— CE is the amount of the cash equivalent before any reduction, Y is the number of days in the tax year in question, and D is the total number of days in that year on which either the car is unavailable or one or more of the conditions in subsection (2) is met. Car fuel: reduction of cash equivalent 153 If a reduction of the cash equivalent of the benefit of the car for which the fuel is provided is made under section 148 (reduction of cash equivalent where car is shared), a corresponding reduction is to be made in relation to the cash equivalent of the benefit of the fuel. Vans: benefit treated as earnings Benefit of van treated as earnings 154 1 If this Chapter applies to a van in relation to a particular tax year, the cash equivalent of the benefit of the van is to be treated as earnings from the employment for that year. 2 In such a case (including a case where the cash equivalent of the benefit of the van is nil) the employee is referred to in this Chapter as being chargeable to tax in respect of the van for that year. 3 Any reference in this Act to a case where the cash equivalent of the benefit of a van is treated as the employee's earnings for a year by virtue of this section includes a case where the cash equivalent is nil. 4 This section is subject to section 154A. Benefit of van treated as earnings: optional remuneration arrangements 154A 1 Where this Chapter applies to a van in relation to a particular tax year and the conditions in subsection (2) are met— a the relevant amount is to be treated as earnings from the employment for that tax year, and b section 154(1) does not apply. In such a case (including a case where the relevant amount is nil) the employee is referred to in this Chapter as being chargeable to tax in respect of the van in the tax year. 2 The conditions are that— a the van is made available to the employee or member of the employee's household pursuant to optional remuneration arrangements, and b the total foregone amount in connection with the van is greater than the modified cash equivalent of the benefit of the van. 3 To find the relevant amount for the purposes of this section take the following steps— Step 1 Take the total foregone amount in connection with the van for the tax year. Step 2 Make any deduction under section 158A in respect of payments by the employee for the private use of the van. The result is the “relevant amount”. 4 In subsection (2) the reference to the “ modified cash equivalent ” is to the amount which would be the cash equivalent of the benefit of the van (after any reductions under section 156 or 157) if this Chapter had effect the following modifications— a omit paragraph (c) of section 155(8); b omit section 158; c in section 159(2)(b), for “155, 157 and 158” substitute “ 155 and 157 ” . 5 For the purposes of subsection (2) assume that the modified cash equivalent of the benefit of the van is zero if the condition in subsection (6) is met. 6 The condition is that the benefit of the van would be exempt from income tax but for section 228A (exclusion of certain exemptions). 7 Where it is necessary for the purposes of subsection (2)(b) and step 1 of subsection (3) to apportion an amount of earnings to a benefit mentioned in subsection (8)(a) or (b) in the tax year, the apportionment is to be made on a just and reasonable basis. In this subsection “earnings” is to be interpreted in accordance with section 69B(5). 8 In this section the total foregone amount in connection with the van for a tax year is the total of— a the amount foregone (see section 69B) with respect to the benefit of the van for that year, and b the amount foregone (see section 69B) with respect to each other benefit that— i is connected with the van, ii is provided in that year for the employee, or a member of the employee's household, pursuant to optional remuneration arrangements, and iii is neither the provision of a driver nor the provision of fuel. Cash equivalent of the benefit of a van 155 1 The cash equivalent of the benefit of a van for a tax year is calculated as follows. 1A If the restricted private use condition is met in relation to the van for the tax year, the cash equivalent is nil. 1B If that condition is not met in relation to the van for the tax year— a if the van cannot in any circumstances emit CO 2 by being driven and the tax year is any of the tax years 2015-16 to 2020-21 , the cash equivalent is the appropriate percentage of £3,500 ... aa if the van cannot in any circumstances emit CO 2 by being driven and the tax year is 2021-22 or a subsequent tax year, the cash equivalent is nil, and b in any other case, the cash equivalent is £4,020 . 1C The appropriate percentage for the purposes of subsection (1B)(a) is— a 20% for the tax year 2015-16, b 20% for the tax year 2016-17; c 60% for the tax year 2017-18, d 80% for the tax year 2018-19, and e 90% for the tax year 2019-20. f 80% for the tax year 2020-21; g . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 The restricted private use condition is met in relation to a van for a tax year if— a the commuter use requirement is satisfied throughout the year (or the part of the year on which it is available to the employee) or the extent to which it is not satisfied during that period is insignificant, and b the business travel requirement is satisfied throughout the year (or the part of the year on which it is available to the employee). 5 The commuter use requirement is satisfied at any time if— a the terms on which the van is available to the employee at the time prohibit its private use otherwise than for the purposes of ordinary commuting or travel between two places that is for practical purposes substantially ordinary commuting, and b neither the employee nor a member of the employee’s family or household makes private use of the van at the time otherwise than for those purposes. 6 In subsection (5) “ ordinary commuting ” has the same meaning as in section 338 (travel for necessary attendance) (see subsection (3) of that section). 7 The business travel requirement is satisfied at a time if the van is available to the employee at the time mainly for use for the purposes of the employee’s business travel (see section 171(1)). 8 The cash equivalent of the van may be reduced— a under section 156 for any periods when the van is unavailable, b under section 157 where the van is shared, and c under section 158 in respect of payments by the employee for the private use of the van. Vans: reductions of cash equivalent Meaning of “shared van” 156 1 The cash equivalent of the benefit of a van for a tax year under section 155 is to be reduced if the van has been unavailable on any day during the year. 2 For the purposes of this section a van is unavailable on any day if the day— a falls before the first day on which the van is available to the employee, b falls after the last day on which the van is available to the employee, or c falls within a period of 30 days or more throughout which the van is not available to the employee. 3 The amount of the reduction is given by the formula— U Y × CE where— U is the number of days in the year on which the van is unavailable, Y is the number of days in the year, and CE is the amount of the cash equivalent before any reduction. Reduction of cash equivalent where van is shared Reduction of cash equivalent where van is shared 157 1 This section applies if in a tax year a van— a is available to more than one employee concurrently, b is so made available by the same employer, and c is available concurrently for each employee’s private use. 2 The cash equivalent of the benefit of the van to each of those employees for that year— a is to be calculated separately under sections 155 and 156, and b is then to be reduced on a just and reasonable basis. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 In this section the reference to the van being available for each employee’s private use includes a reference to the van being available for the private use of a member of the employee’s family or household. Reduction for payments for private use Reduction for payments for private use 158 1 The cash equivalent of the benefit of a van for a tax year under section 155 (after any reduction under sections 156 and 157) is to be reduced if, as a condition of the van being available for the employee’s private use, the employee— a is required in that year to pay (whether by way of deduction from earnings or otherwise) an amount of money for that use, and b pays that amount on or before 6 July following that year. 2 If the amount paid as mentioned in subsection (1)(b) by the employee in respect of that year is equal to or exceeds that cash equivalent, it is reduced to nil. 3 In any other case that cash equivalent is reduced by the amount paid as mentioned in subsection (1)(b) by the employee. 4 In this section the reference to the van being available for the employee’s private use includes a reference to the van being available for the private use of a member of the employee’s family or household. Van provided pursuant to optional remuneration arrangements: private use 158A 1 In calculating the relevant amount under section 154A in relation to a van and a tax year, a deduction is to be made under step 2 of subsection (3) of that section if, as a condition of the van being available for the employee's private use, the employee— a is required in that year to pay (whether by way of deduction from earnings or otherwise) an amount of money for that use, and b pays that amount on or before 6 July following that year. 2 The amount of the deduction is— a the amount paid as mentioned in subsection (1)(b) by the employee in respect of the year, or b if less, the amount that would reduce the relevant amount to nil. 3 In this section the reference to the van being available for the employee's private use includes a reference to the van being available for the private use of a member of the employee's family or household. Modification of provisions where van temporarily replaced Modification of provisions where van temporarily replaced 159 1 This section applies if— a the van normally available to an employee (“the normal van”) is not available to the employee for a period of less than 30 days, b another van (“the replacement van”) is made available to the employee in order to replace the normal van for the whole or part of that period, and c the employee is chargeable to tax in respect of both the normal van and the replacement van by virtue of section 154. 2 If this section applies— a section 156 applies so that the replacement van is to be treated as unavailable on the days during the period on which it replaces the normal van, and b sections 155, 157 and 158 apply as if the replacement van were the normal van. Van fuel: benefit treated as earnings Benefit of van fuel treated as earnings 160 1 If in a tax year— a fuel is provided for a van by reason of an employee’s employment, b that person is chargeable to tax in respect of the van by virtue of section 154 or 154A , and c the cash equivalent of the van for that year is that under section 155(1B)(b) , the cash equivalent of the benefit of the fuel is to be treated as earnings from the employment for that year. 2 The cash equivalent of the benefit of the fuel is calculated in accordance with sections 161 to 164. 3 Fuel is to be treated as provided for a van, in addition to any other way in which it may be provided, if— a any liability in respect of the provision of fuel for the van is discharged, b a non-cash voucher or a credit-token is used to obtain fuel for the van, c a non-cash voucher or a credit-token is used to obtain money which is spent on fuel for the van, or d any sum is paid in respect of expenses incurred in providing fuel for the van. 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 This section is subject to section 160A. Benefit of van fuel treated as earnings: optional remuneration arrangements 160A 1 This section applies if— a fuel is provided for a van in a tax year by reason of an employee's employment, b the benefit of the fuel is provided pursuant to optional remuneration arrangements, and c the employee is chargeable to tax in respect of the van in the tax year by virtue of section 154 or 154A. 2 If the condition in subsection (3) is met— a the amount foregone with respect to the benefit of the fuel (see section 69B) is to be treated as earnings from the employment for that year, and b section 160(1) does not apply. 3 The condition mentioned in subsection (2) is that the amount foregone with respect to the benefit of the fuel is greater than the cash equivalent of the benefit of the fuel. 4 For the purposes of subsection (3), assume that the cash equivalent of the benefit of the fuel is zero if the condition mentioned in subsection (5) is met. 5 The condition mentioned in subsection (4) is that the benefit of the fuel would be exempt from income tax but for section 228A (exclusion of certain exemptions). 6 Where it is necessary for the purposes of subsections (2)(a) and (3) to apportion an amount of earnings to the benefit of the fuel in the tax year, the apportionment is to be made on a just and reasonable basis. In this subsection “earnings” is to be interpreted in accordance with section 69B(5). Van fuel: the cash equivalent 161 The cash equivalent of the benefit of the fuel is— a where the tax year is the tax year 2005-06 or 2006-07, nil, and b where the tax year is a later tax year, £769 . Van fuel: nil cash equivalent 162 1 The cash equivalent of the benefit of the fuel is nil if condition A or B is met. 2 Condition A is met if ... — a in the tax year in question, the employee is required to make good to the person providing the fuel the whole of the expense incurred by that person in connection with the provision of the fuel for the employee’s private use, and b the employee does make good that expense on or before 6 July following that tax year . 3 Condition B is met if in the tax year in question the fuel is made available only for business travel (see section 171(1)). Van fuel: proportionate reduction of cash equivalent 163 1 The cash equivalent of the benefit of the fuel is to be proportionately reduced if for any part of the tax year in question the van for which the fuel is provided is unavailable (within the meaning of section 156 (reduction for periods when van unavailable)). 2 But if section 159 (van temporarily replaced) applies— a section 160 applies as if the replacement van were the normal van, and b for the purposes of subsection (1) the replacement van is to be treated as unavailable on the days during the period on which it replaces the normal van. 3 The cash equivalent of the benefit of the fuel is also to be proportionately reduced if ... — a for any part of the tax year in question, the facility for the provision of fuel as mentioned in section 160 (1) is not available, b for any part of the tax year in question, the fuel is made available only for business travel (see section 171(1)), or c the employee — i for any part of the tax year in question,is required to make good to the person providing the fuel the whole of the expense incurred by that person in connection with the provision of the fuel for the employee’s private use , and ii the employee does make good that expense on or before 6 July following that tax year 4 The fact that any of the conditions specified in subsection (3) is met for part of a tax year is to be disregarded if there is a time later in that year when none of those conditions is met. 5 Where the cash equivalent is to be proportionately reduced under subsection (1) or (3) (or under both those subsections), the reduced amount is given by the formula— CE × Y - D Y where— CE is the amount of the cash equivalent before any reduction, Y is the number of days in the tax year in question, and D is the total number of days in the tax year on which either the van is unavailable or one or more of the conditions in subsection (3) is met. Van fuel: reduction of cash equivalent 164 If a reduction of the cash equivalent of the benefit of the van for which the fuel is provided is made under section 157 (reduction of cash equivalent where van is shared), a corresponding reduction is to be made in relation to the cash equivalent of the benefit of the fuel. Cars and vans: exceptions Pooled cars 167 1 This section applies to a car in relation to a particular tax year if for that year the car has been included in a car pool for the use of the employees of one or more employers. 2 For that tax year the car— a is to be treated under section 114(1) (cars to which this Chapter applies) as not having been available for the private use of any of the employees concerned, and b is not to be treated in relation to the employees concerned as an employment-related benefit within the meaning of Chapter 10 of this Part (taxable benefits: residual liability to charge) (see section 201). 3 In relation to a particular tax year, a car is included in a car pool for the use of the employees of one or more employers if in that year— a the car was made available to, and actually used by, more than one of those employees, b the car was made available, in the case of each of those employees, by reason of the employee’s employment, c the car was not ordinarily used by one of those employees to the exclusion of the others, d in the case of each of those employees, any private use of the car made by the employee was merely incidental to the employee’s other use of the car in that year, and e the car was not normally kept overnight on or in the vicinity of any residential premises where any of the employees was residing, except while being kept overnight on premises occupied by the person making the car available to them. Pooled vans 168 1 This section applies to a van in relation to a particular tax year if for that year the van has been included in a van pool for the use of the employees of one or more employers. 2 For that tax year the van— a is to be treated under section 114(1) (vans to which this Chapter applies) as not having been available for the private use of any of the employees concerned, and b is not to be treated in relation to the employees concerned as an employment-related benefit within the meaning of Chapter 10 of this Part (taxable benefits: residual liability to charge) (see section 201). 3 In relation to a particular tax year, a van is included in a van pool for the use of the employees of one or more employers if in that year— a the van was made available to, and actually used by, more than one of those employees, b the van was made available, in the case of each of those employees, by reason of the employee’s employment, c the van was not ordinarily used by one of those employees to the exclusion of the others, d in the case of each of those employees, any private use of the van made by the employee was merely incidental to the employee’s other use of the van in that year, and e the van was not normally kept overnight on or in the vicinity of any residential premises where any of the employees was residing, except while being kept overnight on premises occupied by the person making the van available to them. Car available to more than one member of family or household employed by same employer 169 1 This section applies where— a an employee (“E”) and a member of the employee’s family or household (“M”) are employed by the same employer, and b as a result of a car being made available to M in a tax year, E would (apart from this section) be chargeable to tax in respect of the car in that year by virtue of section 120. 2 The cash equivalent of the benefit of the car and of any fuel provided for the car by reason of E’s employment is not to be treated as E’s earnings for that year if— a M is chargeable to tax in respect of the car in that year by virtue of section 120, or b M's employment is lower-paid employment as a minister of religion. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Van available to more than one member of family or household employed by same employer 169A 1 This section applies where— a an employee (“E”) and a member of the employee’s family or household (“M”) are employed by the same employer, and b as a result of a van being made available to M in a tax year, E would (apart from this section) be chargeable to tax in respect of the van in that year by virtue of section 154. 2 The cash equivalent of the benefit of the van and of any fuel provided for the van by reason of E’s employment is not to be treated as E’s earnings for that year if— a M is chargeable to tax in respect of the van in that year by virtue of section 154, or b M's employment is lower-paid employment as a minister of religion. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Orders Orders etc. relating to this Chapter 170 1 The Treasury may by order substitute a greater amount for that for the time being specified in— a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b section 126(3)(d) (car: minimum price of later accessory), c section 132(3)(b) (car: maximum contributions deduction), ca section 132A(5)(b) (corresponding provision with respect to optional remuneration arrangements), d section 147(1)(b) (classic car: minimum value), ... e section 147(7)(b) (classic car: maximum contributions deduction) , or f section 147A(1)(b) (classic car: minimum value: optional remuneration arrangements). 1A The Treasury may by order substitute a different amount for the amount for the time being specified in— a section 155(1A) (cash equivalent where van subject only to restricted private use by employee), b section 155(1B)(a) (cash equivalent for zero-emission van in tax years 2015-16 to 2020-21 ), ... ba section 155(1B)(aa) (cash equivalent for zero-emissions vans in tax year 2021-22 and subsequent tax years), and c section 155(1B)(b) (cash equivalent in other cases). 2 An order under subsection (1) or (1A) must specify the tax years to which it applies. 2A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 The Treasury may by regulations provide for the value of the appropriate percentage as determined under sections 139 to 141 to be reduced— a by such amount, b in such circumstances, and c subject to such conditions, as may be prescribed in the regulations. 5 The Treasury may by order substitute a different amount for that specified in section 150(1) (car fuel: cash equivalent) or section 161(b) (van fuel: cash equivalent) . 6 An order under subsection (5) must specify the tax years to which it applies, being tax years beginning after that in which it is made. Supplementary Minor definitions: general 171 1 In this Chapter— “ business travel ”, in relation to any employee, means travelling the expenses of which, if incurred and paid by the employee, would (if Chapter 2 of Part 4 did not apply) be deductible under sections 337 to 342, section 353 or under Chapter 5 of Part 5 (other than section 377); “ diesel ” means any diesel fuel within the definition in Article 2 of Directive 98/70/EC of the European Parliament and of the Council; “EC certificate of conformity” means a certificate of conformity within the meaning of— Council Directive 70/156/EEC , Directive 2007/46/EC of the European Parliament and of the Council of 5 September 2007, or Regulation (EU) 2018/858 of the European Parliament and of the Council of 30 May 2018 on the approval and market surveillance of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles; “EC type-approval certificate” means— a type-approval certificate issued under any provision of the law of a Member State implementing Council Directive 70/156/EEC , an EC type-approval certificate within the meaning of Council Directive 2007/46/EC , or an EU type-approval certificate within the meaning of Regulation (EU) 2018/858 of the European Parliament and of the Council of 30 May 2018 on the approval and market surveillance of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles; “ qualifying emissions certificate ” has the same meaning as in CAA 2001 (see section 268C(1) of that Act); “ relevant taxes ” means any car tax, any value added tax, any customs or excise duty and any tax chargeable as if it were a customs duty; “ road fuel gas ” means any substance which is gaseous at a temperature of 15°C and under a pressure of 1013.25 millibars, and which is for use as fuel in road vehicles; “ UK approval certificate ” means— a certificate issued under— section 58(1) or (4) of the Road Traffic Act 1988, or Article 31A(4) or (5) of the Road Traffic (Northern Ireland) Order 1981 ( S.I. 1981/154 (N.I. 1) ), or any other certificate or document issued in the United Kingdom on the basis of which a vehicle is first registered, other than an EC certificate of conformity or an EC type-approval certificate. 2 In this Chapter references to the date of first registration in relation to a car ... are to the date on which the vehicle was first registered under VERA 1994 or under corresponding legislation of any country or territory. 3 In this Chapter references to the age of a car ... at any time are to the interval between the date of first registration of the vehicle and that time. 4 In this Chapter “ disabled person’s badge ” means a badge— a which is issued to a disabled person under section 21 of the Chronically Sick and Disabled Persons Act 1970 (c. 44) or section 14 of the Chronically Sick and Disabled Persons (Northern Ireland) Act 1978 (c. 53), or has effect as if it had been issued under one of those provisions, and b which is not required to be returned to the issuing authority under or by virtue of the provision referred to in paragraph (a). Minor definitions: equipment to enable a disabled person to use a car 172 1 In section 125(2)(c) “ equipment to enable a disabled person to use a car ” means equipment— a which is designed solely for use by a chronically sick or disabled person, or b which is made available for use with the car because it enables a disabled employee to use the car in spite of the disability. 2 In this section— “ disabled employee ” means an employee who, at the time when the car is first made available to the employee, holds a disabled person’s badge, and “ the disability ” means the disability entitling the disabled employee to hold the disabled person’s badge. Chapter 7 Taxable benefits: loans Introduction Loans to which this Chapter applies 173 1 This Chapter applies to a loan if it is an employment-related loan. 1A Where this Chapter applies to a loan— a the loan is a benefit for the purposes of this Chapter (and accordingly it is immaterial whether the terms of the loan constitute a fair bargain), and b sections 175 to 183 make provision about amounts which, in the case of a taxable cheap loan, are to be treated as earnings in certain circumstances . 2 In this Chapter— a “ loan ” includes any form of credit, and b references to making a loan (and related expressions) include arranging, guaranteeing or in any way facilitating a loan. 3 Sections 288 and 289 make provision for exemption and relief for certain bridging loans connected with employment moves. Alternative finance arrangements 173A 1 For the purposes of this Chapter a reference to a loan includes a reference to arrangements— a to which section 564C of ITA 2007 or section 503 of CTA 2009 (purchase and resale arrangements) applies (or would apply assuming one of the parties were a financial institution), or b to which section 564D of ITA 2007 or section 504 of CTA 2009 (diminishing shared ownership arrangements) applies (or would apply on that assumption). 2 In the application of this Chapter as a result of this section, a reference to interest is to be treated as including alternative finance return (or anything that would be such return on that assumption). 3 In the application of this Chapter as a result of this section, a reference to the amount outstanding is to be taken— a in the case of arrangements within subsection (1)(a), as a reference to the purchase price minus such part of the aggregate payments made as does not represent alternative finance return (or anything that would be such return on that assumption), b in the case of arrangements to which section 564D of ITA 2007 or section 504 of CTA 2009 applies, as a reference to the amount of the first owner’s original beneficial interest minus such part of the aggregate payments made as does not represent alternative finance return, and c in the case of arrangements to which section 564D of ITA 2007 or section 504 of CTA 2009 would apply assuming one of the parties were a first owner , as a reference to the amount of that party's original beneficial interest minus such part of the aggregate payments made as does not represent anything that would be alternative finance return on that assumption. 4 In this section— “ alternative finance return ” has the meaning given in sections 564I to 564L of ITA 2007 or sections 511 to 513 of CTA 2009, ... “ financial institution ” has the meaning given in section 564B of ITA 2007 or section 502 of CTA 2009 , and “ first owner ” is to be construed in accordance with section 564D of ITA 2007 or section 504 of CTA 2009. 5 This section does not apply to arrangements entered into before 22 March 2006. Employment-related loans 174 1 For the purposes of this Chapter an employment-related loan is a loan— a made to an employee or a relative of an employee, and b of a class described in subsection (2). 2 For the purposes of this Chapter the classes of employment-related loan are— A A loan made by the employee’s employer. B A loan made by a company or partnership over which the employee’s employer had control. C A loan made by a company or partnership by which the employer (being a company or partnership) was controlled. D A loan made by a company or partnership which was controlled by a person by whom the employer (being a company or partnership) was controlled. E A loan made by a person having a material interest in— a a close company which was the employer, had control over the employer or was controlled by the employer, or b a company or partnership controlling that close company. 3 In this section— “ employee ” includes a prospective employee, and “ employer ” includes a prospective employer. 4 References in this section to a loan being made by a person extend to a person who— a assumes the rights and liabilities of the person who originally made the loan, or b arranges, guarantees or in any way facilitates the continuation of a loan already in existence. 5 A loan is not an employment-related loan if— a it is made by an individual in the normal course of the individual’s domestic, family or personal relationships, or b it is made to a relative of the employee and the employee derives no benefit from it. 6 For the purposes of this section a person (“X”) is a relative of another (“Y”) if X is— a Y’s spouse or civil partner , b a parent, child or remoter relation in the direct line either of Y or of Y’s spouse or civil partner , c a brother or sister of Y or of Y’s spouse or civil partner , or d the spouse or civil partner of a person falling within paragraph (b) or (c). Benefit of taxable cheap loan treated as earnings Benefit of taxable cheap loan treated as earnings 175 A1 This section applies where an employment-related loan is a taxable cheap loan in relation to a tax year. 1 The cash equivalent of the benefit of the loan is to be treated as earnings from the employee's employment for the tax year. 1A If the benefit of the loan is provided pursuant to optional remuneration arrangements and the condition in subsection (1B) is met— a subsection (1) does not apply, and b the relevant amount (see section 175A) is to be treated as earnings from the employee's employment for the tax year. 1B The condition is that the amount foregone with respect to the benefit of the loan for the tax year (see section 69B) is greater than the modified cash equivalent of the benefit of the loan for the tax year (see section 175A). 2 For the purposes of this Chapter an employment-related loan is a “ taxable cheap loan ” in relation to a particular tax year if— a there is a period consisting of the whole or part of that year during which the loan is outstanding and the employee holds the employment, b no interest is paid on it for that year, or the amount of interest paid on it for that year is less than the interest that would have been payable at the official rate, and c none of the exceptions in sections 176 to 179 apply. 3 The cash equivalent of the benefit of an employment-related loan for a tax year is the difference between— a the amount of interest that would have been payable on the loan for that year at the official rate, and b the amount of interest (if any) actually paid on the loan for that year. 4 If there are two or more employment-related loans, this section applies to each separately. 5 This section is subject to— section 180 (threshold for benefit of loan to be treated as earnings); section 186 (replacement loans). Optional remuneration arrangements: “relevant amount” and “modified cash equivalent” 175A 1 In section 175(1A) “ the relevant amount ”, in relation to a loan the benefit of which is provided pursuant to optional remuneration arrangements, means the difference between— a the amount foregone (see section 69B) with respect to the benefit of the loan, and b the amount of interest (if any) actually paid on the loan for the tax year. 2 For the purposes of section 175 the “modified cash equivalent” of the benefit of an employment-related loan for a tax year is the amount which would be the cash equivalent if section 175(3) had effect with the following modifications— a in the opening words, omit “the difference between”; b omit paragraph (b) and the “and” before it. 3 But the modified cash equivalent of the benefit of the loan is to be taken to be zero if the condition in subsection (4) is met. 4 The condition is that the benefit of the loan for the tax year would be exempt from income tax but for section 228A (exclusion of certain exemptions). 5 For the purpose of calculating the modified cash equivalent of the benefit of an employment-related loan, assume that section 186(2) (replacement loans: aggregation) and section 187(3) (aggregation of loans by close company to a director) do not have effect. 6 Where it is necessary for the purposes of section 175(1B) and subsection (1) of this section to apportion an amount of earnings to the benefit of the loan for the tax year, the apportionment is to be made on a just and reasonable basis. In this subsection “earnings” is to be interpreted in accordance with section 69B(5). Exception for loans on ordinary commercial terms 176 1 A loan on ordinary commercial terms is not a taxable cheap loan. 2 In this section a “ loan on ordinary commercial terms ” means a loan— a made by a person (“ the lender ”) in the ordinary course of a business carried on by the lender which includes— i the lending of money, or ii the supplying of goods or services on credit, and b in relation to which condition A, B or C is met. 3 Condition A is met if— a at the time the loan was made comparable loans were available to all those who might be expected to avail themselves of the services provided by the lender in the course of the lender’s business, b a substantial proportion of the loans (consisting of the loan in question and the comparable loans) made by the lender at or about the time the loan in question was made were made to members of the public, c the loan in question is held on the same terms as comparable loans generally made by the lender to members of the public at or about the time the loan in question was made, and d where those terms differ from the terms applicable immediately after the loan in question was first made, they were imposed in the ordinary course of the lender’s business. 4 For the purposes of condition A a loan is comparable to another loan if it is made for the same or similar purposes and on the same terms and conditions. 5 Condition B is met if— a the loan has been varied before 6th April 2000, b a substantial proportion of the relevant loans were made to members of the public, c the loan in question is held on the same terms as relevant loans generally made by the lender to members of the public at or about the relevant time, and d where those terms differ from the terms applicable immediately after the relevant time, they were imposed in the ordinary course of the lender’s business. 6 Condition C is met if— a the loan has been varied on or after 6th April 2000, b a substantial proportion of the relevant loans were made to members of the public, c at the relevant time members of the public who had loans from the lender for similar purposes had a right to vary their loans on the same terms and conditions as applied in relation to the variation of the loan in question, d the loan in question as varied is held on the same terms as any existing loans so varied, and e where those terms differ from the terms applicable immediately after the relevant time, they were imposed in the ordinary course of the lender’s business. 7 For the purposes of condition B and C— a the “relevant time” is the time of the variation of the loan in question, and b the “relevant loans” are— i the loan in question, ii any existing loans which were varied at or about the relevant time so as to be held on the same terms as the loan in question after it was varied, and iii any new loans which were made by the lender at or about that time and are held on those terms. 8 No account is to be taken of amounts which are incurred on fees, commission or other incidental expenses by the person to whom a loan is made for the purpose of obtaining the loan— a in determining for the purposes of condition A whether loans made by a lender before 1st June 1994 are made or held on the same terms or conditions, or b in determining for the purposes of condition B or C whether rights to vary loans are exercisable on the same terms and conditions or loans are held on the same terms. 9 No account is to be taken of amounts which are incurred on penalties, interest or similar amounts by the person to whom a loan is made as a result of varying the loan in determining for the purposes of condition B or C whether rights to vary loans are exercisable on the same terms and conditions or loans are held on the same terms. 10 For the purposes of this section a “ member of the public ” means a member of the public at large with whom the lender deals at arm’s length. Exceptions for loans at fixed rate of interest 177 1 A fixed rate loan made on or after 6th April 1978 is not a taxable cheap loan by reason only of an increase in the official rate of interest since the year in which the loan was made if the condition in subsection (2) is met. 2 The condition in this subsection is met if the amount of interest paid on the loan for the tax year in which it was made was equal to or greater than the interest that would have been payable at the official rate for that year. 3 A fixed rate loan made before 6th April 1978 is not a taxable cheap loan if the condition in subsection (4) is met. 4 The condition in this subsection is met if the rate of interest for the loan is equal to or greater than the rate which could have been expected to apply to a loan made— a at the same time as the loan in question, b on the same terms (other than as to the rate of interest), and c between persons not connected with each other dealing at arm’s length. 5 In this section a “ fixed rate loan ” means a loan— a made for a fixed period which cannot be changed, and b made at a fixed rate of interest which cannot be changed during that period. Exception for loans where interest qualifies for tax relief 178 A loan is not a taxable cheap loan in relation to a particular tax year if, assuming interest is paid on the loan for that year (whether or not it is in fact paid), the whole of that interest— a is eligible for relief under section 353 of ICTA or section 383 of ITA 2007 (relief for interest payments) , b would be eligible for relief under section 353 of ICTA but for the fact that it is a payment of relevant loan interest to which section 369 of ICTA applies (mortgage interest payable under deduction of tax), c is deductible in computing the amount of the profits to be charged to tax in respect of a trade, profession or vocation carried on wholly or partly in the United Kingdom by the person to whom the loan is made, or d is deductible in computing the amount of the profits to be charged to tax in respect of a UK property business (within the meaning of Chapter 2 of Part 3 of ITTOIA 2005 or Chapter 2 of Part 4 of CTA 2009) carried on by that person. Exception for certain advances for necessary expenses 179 1 An advance by an employer to an employee for the purpose of paying for— a necessary expenses, or b incidental overnight expenses, is not a taxable cheap loan in relation to a particular tax year if the following conditions are met. 2 The conditions are— a that at all times in the tax year in question the amount outstanding on such advances made by the employer to the employee does not exceed £1,000, b that the advance is spent within 6 months after the date on which it is made, and c that the employee accounts to the employer at regular intervals for the expenditure of the amount advanced. 3 If, on an application made by the employer, an officer of Revenue and Customs is satisfied that there is good reason to do so in the case of a particular advance, the officer may authorise that either or both of the following limits are increased in relation to that advance— a the sum of money specified in subsection (2)(a); b the time limit specified in subsection (2)(b). 4 An application under subsection (3)— a must be in writing, and b must contain such particulars and be supported by such evidence as an officer of Revenue and Customs may require. 5 In this section “necessary expenses” are expenses (including travel expenses) which— a the employee is obliged to incur and pay as holder of the employment, and b are necessarily incurred in the performance of the duties of the employment. 6 In this section “incidental overnight expenses” are expenses which— a are incidental to the employee’s absence from the place where the employee normally lives, b relate to a continuous period of such absence in relation to which the overnight stay conditions are met, and c would not be deductible under Part 5 if the employee incurred and paid them and Chapter 2 of Part 4 (mileage allowances and passenger payments) did not apply. 7 In subsection (6)(b) “ the overnight stay conditions ” has the same meaning as in section 240 (exemption for incidental overnight expenses) (see section 240(4)). Threshold for benefit of loan to be treated as earnings 180 1 Section 175 does not have effect in relation to an employee and a tax year— a if the normal £10,000 threshold is not exceeded, or b where the loan is a non-qualifying loan and that threshold is exceeded, if the £10,000 threshold for non-qualifying loans is not exceeded. 2 The normal £10,000 threshold is not exceeded if at all times in the year the amount outstanding on the loan (or, if two or more employment-related loans which are taxable cheap loans are outstanding in the year, the aggregate of the amount outstanding on them) does not exceed £10,000 . 3 The £10,000 threshold for non-qualifying loans is not exceeded if at all times in the year the amount outstanding on the loan (or if two or more employment-related loans which are non-qualifying loans are outstanding in the year, the aggregate of the amounts outstanding on them) does not exceed £10,000 . 4 In this section a “ non-qualifying loan ” means a taxable cheap loan which is not a qualifying loan. 5 For the purposes of this section a loan is a “ qualifying loan ” in relation to a particular tax year if, assuming interest is paid on the loan for that year (whether or not it is in fact paid), the whole or part of that interest— a is eligible for relief under section 353 of ICTA or section 383 of ITA 2007 (relief for interest payments) , b would be eligible for relief under section 353 of ICTA but for the fact that it is a payment of relevant loan interest to which section 369 of ICTA applies (mortgage interest payable under deduction of tax), c is deductible in computing the amount of the profits to be charged to tax in respect of a trade, profession or vocation carried on wholly or partly in the United Kingdom by the person to whom the loan is made, or d is deductible in computing the amount of the profits to be charged to tax in respect of a UK property business (within the meaning of Chapter 2 of Part 3 of ITTOIA 2005 or Chapter 2 of Part 4 of CTA 2009) carried on by that person. Calculation of amount of interest at official rate The official rate of interest 181 1 “ The official rate of interest ” for the purposes of this Chapter means the rate applicable under section 178 of FA 1989 (general power of Treasury to specify rates of interest). 2 Regulations under that section may make different provision in relation to a loan if— a it was made in the currency of a country or territory outside the United Kingdom, and b the employee normally lives in that country or territory, and has actually lived there at some time in the period of 6 years ending with the tax year in question. 3 Subsection (2) does not affect the general power under section 178(3) of FA 1989 to make different provision for different purposes. Normal method of calculation: averaging 182 The normal method of calculating for the purposes of this Chapter the amount of interest that would be payable on a loan for a tax year at the official rate is as follows. Step 1 Calculate the average amount of the loan outstanding during the tax year— 1. Find the maximum amount of the loan outstanding on 5th April preceding the tax year or, if the loan was made in the tax year, on the date it was made. 2. Find the maximum amount outstanding on 5th April of the tax year or, if the loan was discharged in the tax year, on the date of discharge. 3. Add these amounts together and divide the result by 2. Step 2 If the official rate of interest changed during the period in the tax year when the loan was outstanding, calculate the average official rate of interest for that period as follows— 1. Multiply each official rate of interest in force during the period by the number of days when it is in force. 2. Add these products together. 3. Divide the result by the number of days in the period. Step 3 Calculate the amount of interest that would be payable on the loan for the tax year at the official rate as follows— A × I × M 12 where— A is the average amount of the loan outstanding during the tax year obtained from step 1, I is the official rate of interest in force during the period in the tax year when the loan was outstanding or, if the official rate changed, the average official rate of interest obtained from step 2, and M is the number of whole months during which the loan was outstanding in the year. For this purpose a month begins on the sixth day of the calendar month. Alternative method of calculation 183 1 The alternative method of calculating for the purposes of this Chapter the amount of interest that would be payable on a loan for a tax year at the official rate applies for a tax year— a if an officer of Revenue and Customs so requires , by notice to the employee, or b if the employee so elects, by notice to an officer of Revenue and Customs . 2 Notice may be given on or before the first anniversary of the normal self-assessment filing date for the tax year in relation to which the question arises whether the loan is a taxable cheap loan. 3 The alternative method is as follows— Step 1 Find for each day in the tax year in question the maximum amount of the loan outstanding on that day and multiply it by the official rate of interest in force on that day. Step 2 Add together each of the amounts obtained under step 1. Step 3 Divide the result by the number of days in the tax year. 4 Where in any tax year the cash equivalent of the benefit of the same taxable cheap loan is to be treated as earnings of two or more employees then, for the purposes of determining the cash equivalent of the benefit of the loan, the alternative method applies if— a the notice under subsection (1)(a) is given to all those employees, or b the notice under subsection (1)(b) is given by all those employees. Supplementary provisions relating to taxable cheap loans Interest treated as paid 184 1 This section applies where — a the cash equivalent of the benefit of a taxable cheap loan is treated as earnings from an employee's employment for a tax year under section 175(1), or b the relevant amount in respect of the benefit of a taxable cheap loan is treated as earnings from an employee's employment for a tax year under section 175(1A). 2 The employee is to be treated for the purposes of the Tax Acts as having paid interest on the loan in that year equal to the cash equivalent. 3 But the employee is not to be treated as having paid that interest for the purposes of this Chapter or of any of the following Chapters of this Part— Chapter 3 (taxable benefits: expenses payments); Chapter 6 (taxable benefits: cars, vans and related benefits); Chapter 10 (taxable benefits: residual liability to charge). 4 The interest is to be treated— a as accruing during the period in the tax year during which the employee holds the employment and the loan is outstanding, and b as paid by the employee at the end of the period. 5 The interest is not to be treated— a as income of the person making the loan, or b as relevant loan interest to which section 369 of ICTA applies (mortgage interest payable under deduction of tax). Apportionment of cash equivalent in case of joint loan etc. 185 Where in any tax year the cash equivalent of the benefit of the same taxable cheap loan is to be treated as earnings of two or more employees— a the cash equivalent of the benefit of the loan (determined in accordance with the provisions of this Chapter) is to be apportioned between them in a just and reasonable manner, and b the portion allocated to each employee is to be treated as the cash equivalent of the benefit of the loan so far as that employee is concerned. Replacement loans 186 1 This section applies where an employment-related loan (“the original loan”) is replaced, directly or indirectly, by— a a further employment-related loan, or b a loan which is not an employment-related loan but which in turn is, in the same tax year or within 40 days after the end of the tax year, replaced, directly or indirectly, by a further employment-related loan. 2 In such a case, for the purposes of calculating the cash equivalent of the benefit of the original loan under section 175(3), section 182 (normal method of calculating interest at the official rate) applies as if the replacement loan, or each of the replacement loans, were the same loan as the original loan. 3 Where section 182 is applied as modified by subsection (2) then for the purposes of section 175(3)(b) the amount of interest actually paid on the loan for the tax year in question is the total of— a the amount of interest actually paid on the original loan for that year, and b the amount of interest actually paid on the replacement loan or on each of the replacement loans for that year. 4 In this section a “ further employment-related loan ” means a loan which is an employment-related loan made in relation to— a the same or other employment with the person who is the employer in relation to the original loan, or b employment with a person who is connected with that employer. Aggregation of loans by close company to director 187 1 This section applies where, in relation to any tax year, there are employment-related loans between the same lender and borrower which are aggregable with each other. 2 The lender may elect for aggregation to apply for that tax year in the case of the borrower. 3 The effect of the election is that all the aggregable loans are to be treated as a single loan for the purposes of— section 175 (benefit of taxable cheap loan treated as earnings), the provisions of this Chapter relating to the calculation of the cash equivalent of the benefit of a taxable cheap loan, and section 184 (interest treated as paid). 4 For this purpose loans are aggregable for any tax year if they are made in the same currency and all the following conditions are met in relation to each of them— a there is a time in the tax year when— i the loan is outstanding, ii the lender is a close company, and iii the borrower is a director of that company; b at all times in the tax year the rate of interest on the loan is less than the official rate applying at that time; c the loan is not a qualifying loan within the meaning of section 180 (see section 180(5)). 5 An election under this section must be made by the lender in a notice given— a to an officer of Revenue and Customs , and b before 7th July after the end of the tax year to which the election relates. Loan released or written off Loan released or written off: amount treated as earnings 188 1 If— a the whole or part of an employment-related loan is released or written off in a tax year, and b at the time when it is released or written off the employee holds the employment in relation to which the loan is an employment-related loan (“employment E”), the amount released or written off is to be treated as earnings from the employment for that year. 2 But if the employment has terminated or become lower-paid employment as a minister of religion and there was a time when— a the whole or part of the loan was outstanding, b the employee held the employment, and c it was not lower-paid employment as a minister of religion , subsection (1) applies as if the employment had not terminated or become lower-paid employment as a minister of religion . 3 Where subsection (2) applies, any loan which replaces directly or indirectly the employment-related loan is to be treated as an employment-related loan in relation to employment E if— a it would, if employment E had not terminated or become lower-paid employment as a minister of religion , have been an employment-related loan in relation to employment E, and b it is not an employment-related loan in relation to other employment. 4 This section is subject to section 189 (exception where double charge). Exception where double charge 189 1 Section 188 (loan released or written off: amount treated as earnings) does not apply if, by virtue of any other provision of the Income Tax Acts, the amount released or written off— a is employment income of the employee, or b is or is treated as income of the employee (or of the employee as a borrower) which is not employment income and upon which that person is liable to pay income tax. This is subject to subsections (2) and (3). 2 If, as a result of subsection (1), Chapter 3 of Part 6 (payments and benefits on termination of employment etc.) would be the only provision by virtue of which the amount released or written off would be income of the employee— a section 188 does apply, and b accordingly Chapter 3 of Part 6 does not apply. 3 If— a an amount is treated as the employee’s income under section 633 of ITTOIA 2005 (capital sums paid to settlor by trustees of settlement) in respect of a capital sum paid in relation to the release or writing-off of the loan, and b the amount released or written off exceeds the amount so treated as income, section 188 does apply but only the amount of the excess is to be treated as earnings from the employment for the tax year in question under that section. General supplementary provisions Exclusion of charge after death of employee 190 1 On the employee’s death a taxable cheap loan is to be treated— a for the purposes of this Chapter as ceasing to be outstanding, and b for the purposes of section 182 (normal method of calculating interest at the official rate) as being discharged on the date of death. 2 Section 188 (loan released or written off: amount treated as earnings) does not apply in relation to a release or writing off which takes effect on or after the death of the employee. Claim for relief to take account of event after assessment 191 1 A claim may be made for relief in the following cases. 2 The first case is where— a the tax payable by an employee for a tax year in respect of a loan has been decided on the basis that, for the purposes of section 175 (benefit of taxable cheap loan treated as earnings), the whole or part of the interest payable on the loan for that year was not paid, and b it is subsequently paid. 3 The second case is where— a the tax payable by an employee for a tax year in respect of a loan has been decided on that basis that, for the purposes of section 188 (loan released or written off: amount treated as earnings), the loan has been released or written off in that year, and b the whole or part of the loan is subsequently repaid. 4 The third case is where— a the tax payable by an employee for a tax year in respect of a loan has been decided on the basis that— i section 288 (limited exemption of certain bridging loans connected with employment moves), and ii section 289 (relief for certain bridging loans not qualifying for exemption under section 288), will not apply because the condition in section 288(1)(b) (which requires that the limit on the exemption under section 287(1) has not been reached) will not be met, and b that condition is met. 5 Where a claim is made under this section the tax payable is to be adjusted accordingly. Chapter 8 Taxable benefits: notional loans in respect of acquisitions of shares Introduction Application of this Chapter 192 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition of shares for less than market value Notional loan where acquisition for less than market value 193 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The amount of the notional loan 194 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discharge of notional loan: amount treated as earnings 195 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supplementary provisions Effects on other income tax charges 196 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minor definitions 197 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 9 Taxable benefits: disposals of shares for more than market value Shares to which this Chapter applies 198 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Disposal for more than market value: amount treated as earnings 199 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minor definitions 200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 10 Taxable benefits: residual liability to charge Introduction Employment-related benefits 201 1 This Chapter applies to employment-related benefits. 2 In this Chapter— “ benefit ” means a benefit or facility of any kind; “ employment-related benefit ” means a benefit, other than an excluded benefit, which is provided in a tax year— for an employee, or for a member of an employee’s family or household, by reason of the employment. For the definition of “excluded benefit” see section 202. 3 A benefit provided by an employer is to be regarded as provided by reason of the employment unless— a the employer is an individual, and b the provision is made in the normal course of the employer’s domestic, family or personal relationships. 4 For the purposes of this Chapter it does not matter whether the employment is held at the time when the benefit is provided so long as it is held at some point in the tax year in which the benefit is provided. 5 References in this Chapter to an employee accordingly include a prospective or former employee. Excluded benefits 202 1 A benefit is an “ excluded benefit ” for the purposes of this Chapter if— a any of Chapters 3 to 9 of the benefits code applies to the benefit, b any of those Chapters would apply to the benefit but for an exception, or c the benefit consists in the right to receive, or the prospect of receiving, sums treated as earnings under section 221 (payments where employee absent because of sickness or disability). 1A But a benefit provided to an employee or member of an employee's family or household is to be taken not to be an excluded benefit by virtue of subsection (1)(c) so far as it is provided under optional remuneration arrangements. 2 In this section “ exception ”, in relation to the application of a Chapter of the benefits code to a benefit, means any enactment in the Chapter which provides that the Chapter does not apply to the benefit. But for this purpose section 86 (transport vouchers under pre-26th March 1982 arrangements) is not an exception. Cash equivalent of benefit treated as earnings Cash equivalent of benefit treated as earnings 203 1 The cash equivalent of an employment-related benefit is to be treated as earnings from the employment for the tax year in which it is provided. 2 The cash equivalent of an employment-related benefit is the cost of the benefit less any part of that cost made good by the employee , to the persons providing the benefit, on or before 6 July following the tax year in which it is provided . 3 The cost of an employment-related benefit is determined in accordance with section 204 unless— a section 205 provides that the cost is to be determined in accordance with that section, or b section 206 provides that the cost is to be determined in accordance with that section. Employment-related benefit provided under optional remuneration arrangements 203A 1 Where an employment-related benefit is provided pursuant to optional remuneration arrangements— a the relevant amount is to be treated as earnings from the employment for the tax year in which the benefit is provided, and b section 203(1) does not apply. 2 To find the relevant amount, first determine which (if any) is the greater of— a the cost of the employment-related benefit, and b the amount foregone with respect to the benefit (see section 69B). 3 If the cost of the employment-related benefit is greater than or equal to the amount foregone, the “relevant amount” is the cash equivalent (see section 203(2)). 4 Otherwise, the “relevant amount” is— a the amount foregone with respect to the employment-related benefit, less b any part of the cost of the benefit made good by the employee, to the persons providing the benefit, on or before 6 July following the tax year in which it is provided. 5 For the purposes of subsections (2) and (3), assume that the cost of the employment-related benefit is zero if the condition in subsection (6) is met. 6 The condition is that the employment-related benefit would be exempt from income tax but for section 228A (exclusion of certain exemptions). 7 Where it is necessary for the purposes of subsections (2)(b) and (4) to apportion an amount of earnings to the benefit provided in the tax year, the apportionment is to be made on a just and reasonable basis. In this subsection “earnings” is to be interpreted in accordance with section 69B(5). Determination of the cost of the benefit Cost of the benefit: basic rule 204 The cost of an employment-related benefit is the expense incurred in or in connection with provision of the benefit (including a proper proportion of any expense relating partly to provision of the benefit and partly to other matters). Cost of the benefit: asset made available without transfer 205 1 The cost of an employment-related benefit (“the taxable benefit”) is determined in accordance with this section if— a the benefit consists in an asset being made available for private use, and b there is no transfer of the property in the asset. 1A In this section and section 205A, “ private use ” means private use by the employee or a member of the employee's family or household. 1B For the purposes of subsection (1) and sections 205A and 205B, an asset made available in a tax year for use by the employee or a member of the employee's family or household is to be treated as made available throughout the year for private use unless— a at all times in the year when it is available for use by the employee or a member of the employee's family or household, the terms under which it is made available prohibit private use, and b no private use is made of it in the year. 1C The cost of the taxable benefit is— a the annual cost of the benefit determined in accordance with subsection (2), less b any amount required to be deducted by section 205A (deduction for periods when asset unavailable for private use). 1D In certain cases, the cost of the taxable benefit is calculated under this section in accordance with section 205B (reduction of cost of taxable benefit where asset is shared). 2 The annual cost of the benefit is the higher of— a the annual value of the use of the asset, and b the annual amount of the sums, if any, paid by those providing the benefit by way of rent or hire charge for the asset, together with the amount of any additional expense. 3 For the purposes of subsection (2), the annual value of the use of an asset is— a in the case of land, its annual rental value; b in any other case, 20% of the market value of the asset at the time when those providing the taxable benefit first applied the asset in the provision of an employment-related benefit (whether or not the person provided with that benefit is also the person provided with the taxable benefit). If those providing the taxable benefit first applied the asset in the provision of an employment-related benefit before 6th April 1980, paragraph (b) is to be read as if the reference to 20% were a reference to 10%. 4 In this section “ additional expense ” means the expense incurred in or in connection with provision of the taxable benefit (including a proper proportion of any expense relating partly to provision of the benefit and partly to other matters), other than— a the expense of acquiring or producing the asset incurred by the person to whom the asset belongs, and b any rent or hire charge payable for the asset by those providing the asset. 5 Where the asset is an emergency vehicle, the expense of providing fuel for it in a tax year is not an additional expense by virtue of subsection (4) so long as— a the person incurring that expense incurs no expense in that tax year in the provision of fuel for the vehicle which is used for the employee's private travel (“private fuel expense”), or b all private fuel expense that the person does incur in that tax year is made good by the employee on or before 6 July following the tax year. 6 For the purposes of this section— “ emergency vehicle ” has the same meaning as in section 248A; “ fuel ” includes electrical energy; “ private travel ” means travelling the expenses of which, if incurred and paid by the employee, would not be deductible under Chapter 2 or 5 of Part 5. Deduction for periods when asset unavailable for private use 205A 1 A deduction is to be made under section 205(1C)(b) if the asset mentioned in section 205(1) has been unavailable for private use on any day during the tax year concerned. 2 For the purposes of this section an asset is “unavailable” for private use on any day if— a that day falls before the day on which the asset is first available to the employee, b that day falls after the day on which the asset is last available to the employee, c for more than 12 hours during that day the asset— i is not in a condition fit for use, ii is undergoing repair or maintenance, iii could not lawfully be used, iv is in the possession of a person who has a lien over it and who is not the employer, not a person connected with the employer, not the employee, not a member of the employee's family and not a member of the employee's household, or v is used in a way that is neither use by, nor use at the direction of, the employee or a member of the employee's family or household, or d on that day the employee— i uses the asset in the performance of the duties of the employment, and ii does not use the asset otherwise than in the performance of the duties of the employment. 3 The amount of the deduction is given by— U Y × A where— U is the number of days, in the tax year concerned, on which the asset is unavailable for private use, Y is the number of days in that year, and A is the annual cost of the benefit of the asset determined under section 205(2). 4 The reference in subsection (2)(a) to the time when the asset is first available to the employee is to the earliest time when the asset is made available, by reason of the employment and without any transfer of the property in it, for private use. 5 The reference in subsection (2)(b) to the time when the asset is last available to the employee is to the last time when the asset is made available, by reason of the employment and without any transfer of the property in it, for private use. Reduction of cost of taxable benefit where asset is shared 205B 1 This section applies where the cost of an employment-related benefit (“the taxable benefit”) is to be determined under section 205. 2 If, for the whole or part of the tax year concerned, the same asset is available for more than one employee's private use at the same time, the total of the amounts which are the cost of the taxable benefit for each of those employees is to be limited to the annual cost of the benefit of the asset determined in accordance with section 205(2). 3 The cost of the taxable benefit for each employee is determined by taking the amount given by section 205(1C) and then reducing that amount on a just and reasonable basis. 4 For the purposes of this section, an asset is available for an employee's private use if it is available for private use by the employee or a member of the employee's family or household. Cost of the benefit: transfer of used or depreciated asset 206 1 The cost of an employment-related benefit is determined in accordance with this section if— a the benefit consists in the transfer of an asset, and b the asset has been used, or has depreciated, since the person transferring the asset (“ the transferor ”) acquired or produced it. 2 The cost of the benefit is the market value of the asset at the time of the transfer. 3 But the cost of the benefit (“the current benefit”) is the higher of the market value of the asset at the time of the transfer and the amount calculated in accordance with subsection (5) if— a the asset is not an excluded asset (see subsection (6)) , b the asset has previously been applied in the provision of a relevant employment-related benefit (whether or not the person provided with that benefit is also the transferee), and c the transferor first applied the asset in the provision of an employment-related benefit after 5th April 1980. 4 In this section “ relevant employment-related benefit ” means an employment-related benefit the cost of which was to be determined in accordance with section 205. 5 The amount referred to in subsection (3) is calculated in accordance with the following steps— Step 1 Determine the tax years in which the asset was applied in the provision of a relevant employment-related benefit (including, if appropriate, the current tax year). Step 2 Determine the cost of the benefit for each of those tax years in accordance with section 205. Step 3 Calculate the total of the amounts determined under step 2. Step 4 Calculate the market value of the asset at the time when the transferor first applied it in the provision of an employment-related benefit. Step 5 Deduct the total calculated under step 3 from the market value calculated under step 4. The result is the amount referred to in subsection (3). 6 An excluded asset is— a a car (within the meaning of Chapter 6), b computer equipment that has previously been applied as mentioned in subsection (3)(b) in circumstances in which the conditions set out in section 320 were met, or c a cycle or cyclist's safety equipment that has previously been so applied in circumstances in which the conditions set out in section 244 were met. Supplementary provisions Meaning of “annual rental value” 207 1 For the purposes of this Chapter the “annual rental value” of land is the rent which might reasonably be expected to be obtained on a letting from year to year if— a the tenant undertook to pay all taxes, rates and charges usually paid by a tenant, and b the landlord undertook to bear the costs of the repairs and insurance and other expenses (if any) necessary for maintaining the land in a state to command the rent. 2 For the purposes of subsection (1) that rent— a is to be taken to be the amount that might reasonably be expected to be so obtained in respect of the letting, and b is to be calculated on the basis that the only amounts that may be deducted in respect of services provided by the landlord are amounts in respect of the cost to the landlord of providing any relevant services. 3 If the land is of a kind that might reasonably be expected to be let on terms under which— a the landlord is to provide any services which are either— i relevant services, or ii the repair, insurance or maintenance of any premises which do not form part of the land but belong to or are occupied by the landlord, and b amounts are payable in respect of the services in addition to the rent, the rent to be established under subsection (1) in respect of the land is to be increased under subsection (4). 4 That rent is to include— a where the services are relevant services, so much of the additional amounts as exceeds the cost to the landlord of providing the services; b where the services are within subsection (3)(a)(ii), the whole of the additional amounts. 5 In this section “ relevant service ” means a service other than the repair, insurance or maintenance of the land or of any other land. Meaning of “ market value ” 208 For the purposes of this Chapter the market value of an asset at any time is the price which the asset might reasonably be expected to fetch on a sale in the open market at that time. Meaning of “ persons providing benefit ” 209 For the purposes of this Chapter the persons providing a benefit are the person or persons at whose cost the benefit is provided. Power to exempt minor benefits 210 1 The Treasury may make provision by regulations for exempting from the application of this Chapter such minor benefits as may be specified in the regulations. 2 An exemption conferred by such regulations is conditional on the benefit being made available to the employer’s employees generally on similar terms. Special rules for scholarships Special rules for scholarships: introduction 211 1 Sections 212 to 214 supplement the preceding provisions of this Chapter in the following ways— section 212 provides for certain scholarships provided under arrangements entered into by an employer or a connected person to be regarded as provided by reason of an employment; section 213 provides that this Chapter does not apply to certain scholarships provided under a trust fund or a scheme; section 214 provides a different method of determining the cost of an employment-related benefit if it consists in the provision of a scholarship from a trust fund. 2 Section 215 limits the extent to which section 776(1) of ITTOIA 2005 (exemption for scholarship income) applies to a scholarship whose provision constitutes an employment-related benefit. 3 In this section and sections 212 to 215 “ scholarship ” includes a bursary, exhibition or other similar educational endowment. Scholarships provided under arrangements entered into by employer or connected person 212 1 A scholarship which is provided for a member of an employee’s family or household is to be regarded for the purposes of this Chapter as provided by reason of the employment if it is provided under arrangements entered into by— a the employer, or b a person connected with the employer. 2 Subsection (1) applies whether or not the arrangements require the employer or the connected person to contribute directly or indirectly to the cost of providing the scholarship. 3 A scholarship is not to be regarded as provided by reason of an employment by virtue of subsection (1) if— a the employer is an individual, and b the arrangements are made in the normal course of the employer’s domestic, family or personal relationships. 4 This section is without prejudice to section 201(3). Exception for certain scholarships under trusts or schemes 213 1 This Chapter does not apply to an employment-related benefit consisting in the provision of a scholarship if conditions A, B, C and D are met. 2 Condition A is that the scholarship would not be regarded as provided by reason of the employment if section 201(3) and section 212 were disregarded. 3 Condition B is that the holder of the scholarship is a full-time student. 4 Condition C is that the scholarship is provided from a trust fund or under a scheme. 5 Condition D is that, in the tax year in which the scholarship is provided, not more than 25% of the total amount of relevant payments is attributable to scholarships provided by reason of a person’s employment. 6 For the purposes of conditions B and D “ full-time student ” means a person who is in full-time education at a university, college, school or other educational establishment. 7 For the purposes of condition D— “ employment ” includes any employment within the meaning of the employment income Parts (see section 4), whether or not it is a taxable employment under Part 2; “ relevant payments ” means the payments made from the fund or scheme mentioned in condition C in respect of scholarships held by full-time students. Scholarships: cost of the benefit 214 If an employment-related benefit consists in the provision of a scholarship from a trust fund— a section 204 does not apply, and b the cost of the benefit is the total of the payments made from the fund to the person holding the scholarship. Limitation of exemption for scholarship income in section 776(1) of ITTOIA 2005 215 If an employment-related benefit consists in the provision of a scholarship, section 776(1) of ITTOIA 2005 (exemption for scholarship income) applies only in relation to the holder of the scholarship. Chapter 11 Taxable benefits: exclusion of lower-paid employments from parts of benefits code Introduction Provisions not applicable to lower-paid employments 216 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . What is lower-paid employment Meaning of “ lower-paid employment ” 217 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Calculation of earnings rate for a tax year 218 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Extra amounts to be added in connection with a car 219 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Treatment of related employments Related employments 220 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 12 Other amounts treated as earnings Payments Payments where employee absent because of sickness or disability 221 1 This section applies if— a an employee is absent from work because of sickness or disability, and b a qualifying sickness payment is made in respect of the employee’s absence from work. 2 But this section does not apply if the qualifying sickness payment constitutes earnings from the employment by virtue of any other provision. 3 The qualifying sickness payment is to be treated as earnings from the employment in respect of the period of absence. 4 If the qualifying sickness payment is made from funds to which the employer and the employer’s employees have made contributions, only the amount of the payment which it is just and reasonable to attribute to the employer’s contributions is treated as earnings under this section. 5 In this section “ qualifying sickness payment ” means a payment which meets conditions A and B. 6 Condition A is that the payment is made— a to the employee or to a member of the employee’s family, b to the order of such a person, or c to the benefit of such a person. 7 Condition B is that the payment is made— a by reason of the employment, and b as a result of arrangements entered into by the employer. Payments by employer on account of tax where deduction not possible 222 1 This section applies if— a an employer is treated by virtue of sections 687, 687A, 689 , 689A and 693 to 700 as having made a payment of income of an employee (“the notional payment”), b the employer is required by virtue of section 710(4) to account to an officer of Revenue and Customs for an amount of income tax (“the due amount”) in respect of the notional payment, and c the employee does not, before the end of the period of 90 days after the end of the tax year in which the relevant date falls , make good the due amount to the employer. 2 The due amount is to be treated as earnings from the employment for the tax year in which the relevant date falls. 3 In this section “ employer ”, in relation to any provision of sections 687, 687A, 689, 693 to 700 or 710, means the person taken to be the employer for the purposes of that provision. It also includes a person who is treated as making a payment of PAYE income by virtue of section 689(2) (payments by person for whom employee works but who is not the employer) or section 689A(3) (deemed payments of PAYE income of continental shelf workers by person other than employer) . 4 In this section “ the relevant date ” means— a if the employer is treated by virtue of any Act as making the notional payment before the date on which the Act is passed, that date, and b in any other case, the date on which the employer is treated as making the notional payment. Payments on account of director’s tax other than by the director 223 1 This section applies if in a tax year— a a person (“P”) makes a payment to another person who is employed as the director of a company, b the payment is of, or on account of, earnings from the director’s employment, c PAYE regulations require P to deduct an amount of income tax (“the deductible tax”), d P deducts none, or only some, of the deductible tax, and e either or both of the following occur— i P accounts to the Commissioners for Her Majesty’s Revenue and Customs for some or all of the deductible tax (whether or not P has actually deducted the amount accounted for); ii one or more persons other than P (apart from the director) account to the Commissioners for Her Majesty’s Revenue and Customs for some or all of the deductible tax. 2 For the purposes of this section it does not matter whether the director’s employment is held at the time when P makes the payment mentioned in subsection (1)(a) so long as it is held at some point in the tax year in which the payment is made. 3 References in this section to employment as a director accordingly include prospective or past employment as a director. 4 The deductible tax accounted for to the Commissioners for Her Majesty’s Revenue and Customs is to be treated as earnings of the director from the director’s employment for the tax year in which it is accounted for. 5 But if— a the deductible tax is accounted for after the director’s employment has ceased, and b the employment ceased in a tax year before the one in which the deductible tax is accounted for, the deductible tax is treated as earnings for the tax year in which the director’s employment ceased. 6 The following rules apply to the calculation of the amount to be treated as earnings under this section— a any amount accounted for after the death of the director is to be disregarded; b if P deducts some of the deductible tax, the amount treated as earnings is reduced by the amount deducted; c if the director makes good to P or to another person some or all of the deductible tax which P or the other person accounts for, the amount treated as earnings is reduced by the amount made good. 7 This section does not apply if the director has no material interest in the company and either— a the director is employed as a full-time working director of the company, or b the company is— i non-profit-making, or ii a charitable company . 8 In this section— “ director ” has the same meaning as in the benefits code (see section 67); “ director’s employment ”, in relation to a person who is employed as a director, means that employment; “ full-time working director ” has the same meaning as in the benefits code (see section 67); “ material interest ” has the same meaning as in the benefits code (see section 68); “ non-profit-making ”, in relation to a company, means that— the company does not carry on a trade, and its functions do not consist wholly or mainly in the holding of investments or other property. Payments to non-approved personal pension arrangements 224 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments for restrictive undertakings 225 1 This section applies where— a an individual gives a restrictive undertaking in connection with the individual’s current, future or past employment, and b a payment is made in respect of— i the giving of the undertaking, or ii the total or partial fulfilment of the undertaking. 2 It does not matter to whom the payment is made. 3 The payment is to be treated as earnings from the employment for the tax year in which it is made. 4 Subsection (3) does not apply if the payment constitutes earnings from the employment by virtue of any other provision. 5 A payment made after the death of the individual who gave the undertaking is treated for the purposes of this section as having been made immediately before the death. 6 This section only applies where— a if there are general earnings from the employment that are earned in, or otherwise in respect of, the tax year mentioned in subsection (3), subsection (7) applies to any of those general earnings, or b it is reasonable to assume that, if there were such general earnings, subsection (7) would apply to any of those general earnings. 7 This subsection applies to general earnings if either— a section 15 applies to the general earnings and the general earnings are not— i qualifying foreign general earnings within the meaning of section 41T (qualifying foreign general earnings), or ii general earnings to which section 22 or section 26 would apply if the individual made a claim under section 809B of ITA 2007 (claim for the remittance basis) for the tax year mentioned in section 22(1) or 26(1) (being a tax year before tax year 2025-26), or b section 27 applies to the general earnings. 8 In this section “ restrictive undertaking ” means an undertaking which restricts the individual’s conduct or activities. For this purpose it does not matter whether or not the undertaking is legally enforceable or is qualified. Valuable consideration given for restrictive undertakings 226 1 In a case where— a an individual gives a restrictive undertaking in connection with the individual’s current, future or past employment, and b valuable consideration that is not in the form of money is provided in respect of— i the giving of the undertaking, or ii the total or partial fulfilment of the undertaking, section 225 applies as it would if a payment of an amount equal to the value of the consideration had been made instead. 2 For this purpose— a merely assuming an obligation to make over or provide valuable property, rights or advantages is not valuable consideration, but b wholly or partially discharging such an obligation is. Shares of employee shareholders Amount treated as earnings 226A 1 This section applies if shares having a market value of no less than £2000 are acquired by an employee in consideration of an employee shareholder agreement. 2 An amount equal to the market value of the shares is to be treated as earnings from the employment, in respect of the acquisition of the shares, for the tax year in which they are acquired. But this is subject to subsection (4). 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 If the shares are acquired pursuant to an employment-related securities option, subsection (2) does not apply. 5 If subsection (2) applies, nothing else constitutes earnings under this Part from the employment in respect of the acquisition of the shares. 6 For the purposes of this section ...— shares are “acquired” by an employee if the employee becomes beneficially entitled to them (and they are acquired at the time when the employee becomes so entitled); “ employee shareholder agreement ” means an agreement by virtue of which an employee is an employee shareholder (see section 205A(1)(a) to (d) of the Employment Rights Act 1996); “ employee shareholder share ” means a share acquired by an employee in consideration of an employee shareholder agreement; “employee” and “ employer company ”, in relation to an employee shareholder agreement, mean the individual and the company which enter into the agreement; “ employment-related securities option ” has the same meaning as in Chapter 5 of Part 7 (see section 471(5)); “ market value ” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act; and the market value of shares is their market value on the day on which they are acquired (but see also subsection (7)). 7 For the purposes of subsection (1) (but not subsection (2)) , the market value of the shares is to be determined ignoring— a any election under section 431 (election for market value of restricted shares to be calculated as if not restricted), and b section 437 (market value of convertible securities to be determined as if not convertible). Deemed payment for employee shareholder shares 226B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Only one payment deemed to be made under associated agreements 226C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shareholder or connected person having material interest in company 226D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sporting testimonial payments Sporting testimonial payments 226E 1 This section applies in relation to an individual who is or has been employed as a professional sportsperson (“S”). 2 In this section “ sporting testimonial ” means— a a series of relevant events or activities which each have the same controller, or b a single relevant event or activity not forming part of such a series. 3 An event or activity is (subject to subsection (4)(b)) a relevant event or activity if— a its purpose (or one of its purposes) is to raise money for or for the benefit of S, and b the only or main reason for doing that is to recognise S's service as a professional sportsperson who is or has been employed as such. 4 An activity that meets the conditions in subsection (3)(a) and (b) and consists solely of inviting and collecting donations for or for the benefit of S— a is a relevant activity if it is one of a series of relevant events or activities for the purposes of subsection (2)(a), but b is not a relevant activity for the purposes of subsection (2)(b) so long as both conditions in subsection (5) are met while the activity takes place. 5 The conditions are— a that any person who is responsible (alone or with others) for collecting the donations or who is the controller (or a member of a committee which is the controller) of the activity is not— i S, ii a person who is (or has been) the controller of any other relevant event or activity for or for the benefit of S, iii a person connected with S or a person mentioned in sub-paragraph (ii), iv a person acting for or on behalf of a person mentioned in sub-paragraphs (i) to (iii), and b that the donations collected do not include any sums paid (directly or indirectly) out of money raised by any other relevant event or activity. 6 A “sporting testimonial payment” is a payment made by (or on behalf of) the controller of a sporting testimonial out of money raised for or for the benefit of S which— a is made to S, to a member of S's family or household, to a prescribed person, to S's order or otherwise for S's benefit, and b does not (apart from this section) constitute earnings from an employment. 7 A sporting testimonial payment is to be treated as earnings of S from the employment or former employment to which the sporting testimonial is most closely linked. 8 For the purposes of this section if at any material time S is dead— a anything done for or for the benefit of S's estate is to be regarded as done for or for the benefit of S; and b a payment made to S's personal representatives or to their order is to be treated as a payment to S or to S's order. 9 In this section— “ controller ”, in relation to an event or activity which meets the conditions in subsection (3)(a) and (b), means the person who controls the disbursement of any money raised for or for the benefit of S from that event or activity, “ money ” includes money's worth and “ payment ” includes the transfer of money's worth or the provision of any benefit, “ prescribed person ” means a person prescribed in regulations made by the Treasury. 10 Section 993 of ITA 2007 (meaning of “connected” persons) has effect for the purposes of this section. Part 4 Employment income: exemptions Chapter 1 Exemptions: general Scope of Part 4 227 1 This Part contains— a earnings-only exemptions, and b employment income exemptions. 2 In this Act “ earnings-only exemption ” means an exemption from income tax which— a prevents liability to tax arising in respect of earnings, either by virtue of one or more particular provisions (such as a Chapter of the benefits code) or at all, and b does not prevent liability to tax arising in respect of other employment income. 3 In this Act “ employment income exemption ” means an exemption from income tax which prevents liability to tax arising in respect of employment income of any kind at all. 4 The following provisions in Part 7 also confer exemption from liability to income tax in respect of earnings— za section 418(1A) (acquisition of, and chargeable events occurring in relation to, employment-related securities options); a section 425 (restricted securities: no charge in respect of acquisition in certain circumstances), b section 475 (no charge in respect of acquisition of securities option), c sections 489 to 493 and sections 496 to 499 ( ... share incentive plans), d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e section 519 ( ... SAYE option schemes: no charge in respect of exercise of option), f . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . g section 524 ( ... CSOP schemes: no charge in respect of exercise of option), h . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i section 542 (priority share allocations: exemption where offer made to public and employees), and j section 544 (priority share allocations: exemption where different offers made to public and employees). 5 In relation to the interaction between this Part and Part 7A, see section 554P(1). Effect of exemptions on liability under provisions outside Part 2 228 1 The exemptions conferred by the provisions specified in subsection (2) prevent liability to income tax arising under any enactment, but the other exemptions in this Part only affect liability to income tax under Part 2 of this Act. 2 The provisions referred to in subsection (1) are— a section 245 (travelling and subsistence during public transport strikes), b section 248 (transport home: late night working and failure of car-sharing arrangements), c section 264 (annual parties and functions), d Chapter 8 of this Part (exemptions for special kinds of employees) except for sections 290, 290C to 291 and 306A , da section 308B (independent advice in respect of conversions and transfers of pension scheme benefits), db section 308C (provision of pensions advice), e section 323 (long service awards), f section 324 (small gifts from third parties), and g section 326 (expenses incidental to transfer of a kind not normally met by transferor). General exclusion from exemptions: optional remuneration arrangements 228A 1 A relevant exemption does not apply (whether to prevent liability to income tax from arising or to reduce liability to income tax) in respect of a benefit or facility so far as the benefit or facility is provided pursuant to optional remuneration arrangements. 2 For the purposes of subsection (1) it does not matter whether the relevant exemption would (apart from that subsection) have effect as an employment income exemption or an earnings-only exemption. 3 For the purposes of this section an exemption conferred by this Part is a “relevant exemption” unless it is— a a special case exemption (see subsection (4)), or b an excluded exemption (see subsection (5)). 4 “ Special case exemption ” means an exemption conferred by any of the following provisions— a section 289A (exemption for paid or reimbursed expenses); b section 289D (exemption for other benefits); c section 308B (independent advice in respect of conversions and transfers of pension scheme benefits); d section 312A (limited exemption for qualifying bonus payments); e section 317 (subsidised meals); f section 320C (recommended medical treatment); g section 323A (trivial benefits provided by employers). 5 “ Excluded exemption ” means an exemption conferred by any of the following provisions— a section 239 (payments and benefits connected with taxable cars and vans and exempt heavy goods vehicles); b section 244 (cycles and cyclist's safety equipment); c section 266(2)(c) (non-cash voucher regarding entitlement to exemption within section 244); d section 270A (limited exemption for qualifying childcare vouchers); e section 307 (death or retirement provision), so far as relating to provision made for retirement benefits; f section 308 (exemption of contribution to registered pension scheme); g section 308A (exemption of contributions to overseas pension scheme); h section 308C (provision of pensions advice); i section 309 (limited exemptions for statutory redundancy payments); j section 310 (counselling and other outplacement services); k section 311 (retraining courses); l section 318 (childcare: exemption for employer-provided care); m section 318A (childcare: limited exemption for other care). 6 In subsection (5) “ retirement benefit ” has the meaning that would be given by subsection (2) of section 307 if “or death” were omitted in both places where it occurs in that subsection. 7 In this section “ benefit or facility ” includes anything which constitutes employment income or in respect of which employment income is treated as arising to the employee (regardless of its form and the manner of providing it). 8 In this section “ optional remuneration arrangements ” has the same meaning as in the benefits code (see section 69A). 9 The Treasury may by order amend subsections (4) and (5) by adding or removing an exemption conferred by Part 4. Chapter 2 Exemptions: mileage allowances and passenger payments Mileage allowances Mileage allowance payments 229 1 No liability to income tax arises in respect of approved mileage allowance payments for a vehicle to which this Chapter applies (see section 235). 2 Mileage allowance payments are amounts, other than passenger payments (see section 233), paid to an employee for expenses related to the employee’s use of such a vehicle for business travel (see sections 235A and 236(1)) . 3 Mileage allowance payments are approved if, or to the extent that, for a tax year, the total amount of all such payments made to the employee for the kind of vehicle in question does not exceed the approved amount for such payments applicable to that kind of vehicle (see section 230). 4 Subsection (1) does not apply if— a the employee is a passenger in the vehicle, or b the vehicle is a company vehicle (see section 236(2)). The approved amount for mileage allowance payments 230 1 The approved amount for mileage allowance payments that is applicable to a kind of vehicle is— M × R where— M is the number of miles of business travel by the employee (other than as a passenger) using that kind of vehicle in the tax year in question; R is the rate applicable to that kind of vehicle. 2 The rates applicable are as follows— Table Kind of vehicle Rate per mile Car or van 45p for the first 10,000 miles 25p after that Motor cycle 24p Cycle 20p 3 The reference in subsection (2) to “the first 10,000 miles” is to the total number of miles of business travel in relation to the employment, or any associated employment, by car or van in the tax year in question. 4 One employment is associated with another if— a the employer is the same; b the employers are partnerships or bodies and an individual or another partnership or body has control over both of them; or c the employers are associated companies within the meaning given by section 449 of CTA 2010 . 5 In subsection (4)(b)— a “ control ”, in relation to a body corporate or partnership, has the meaning given by section 995 of ITA 2007 (in accordance with section 719 of this Act), and b the definition of “control” in that section of that Act applies (with the necessary modifications) in relation to an unincorporated association as it applies in relation to a body corporate. 6 The Treasury may by regulations amend subsection (2) so as to alter the rates or rate bands. Mileage allowance relief 231 1 An employee is entitled to mileage allowance relief for a tax year— a if the employee uses a vehicle to which this Chapter applies for business travel, and b the total amount of all mileage allowance payments, if any, made to the employee for the kind of vehicle in question for the tax year is less than the approved amount for such payments applicable to that kind of vehicle. 2 The amount of mileage allowance relief to which an employee is entitled for a tax year is the difference between— a the total amount of all mileage allowance payments, if any, made to the employee for the kind of vehicle in question, and b the approved amount for such payments applicable to that kind of vehicle. 3 Subsection (1) does not apply if— a the employee is a passenger in the vehicle, or b the vehicle is a company vehicle. Giving effect to mileage allowance relief 232 1 A deduction is allowed for mileage allowance relief to which an employee is entitled for a tax year. 2 If any of the employee’s earnings— a are taxable earnings in the tax year in which the employee receives them, and b are not also taxable earnings in that year that fall within subsection (3), the relief is allowed as a deduction from those earnings in calculating net taxable earnings in the year. 3 If any of the employee’s earnings are taxable earnings in the tax year in which the employee remits them to the United Kingdom, there may be deducted from those earnings the amount of any mileage allowance relief— a for that tax year, and b for any earlier tax year in which the employee was resident in the United Kingdom, which, on the assumptions mentioned in subsection (4), would have been deductible under subsection (2). 4 The assumptions are— a that subsection (2)(b) does not apply, and b where applicable, that the earnings constitute taxable earnings in the tax year in which the employee receives them. 5 Subsection (3) applies only to the extent that the mileage allowance relief cannot be deducted under subsection (2). 6 A deduction shall not be made twice, whether under subsection (2) or (3), in respect of the same mileage allowance relief. 6A If the earnings from which a deduction allowed under this section is deductible include earnings that are “excluded” within the meaning of section 15(1A)— a the amount of the deduction allowed is a proportion of the amount that would be allowed under this section if the tax year were not a split year, and b that proportion is equal to the proportion that the part of the earnings that is not “excluded” bears to the total earnings. 7 In this section “taxable earnings” or “ net taxable earnings ” means taxable earnings or net taxable earnings from the employment for the purposes of Part 2. Passenger payments Passenger payments 233 1 No liability to income tax arises in respect of approved passenger payments made to an employee for the use of a car or van (whether or not it is a company vehicle) if— a the employee receives mileage allowance payments for the use of the car or van, and b the cash equivalent of the benefit of the car or van is treated as earnings from the employment by virtue of section 120 or 154 (cars and vans as benefits). This is subject to subsection (2). 2 The condition in subsection (1)(b) needs to be met only if the car or van is made available to the employee by reason of the employment. 3 Passenger payments are amounts paid to an employee because, while using a car or van for business travel, the employee carries in it one or more passengers who are also employees for whom the travel is business travel. 4 Passenger payments are approved if, or to the extent that, for a tax year, the total amount of all such payments made to the employee does not exceed the approved amount for such payments (see section 234). 5 Section 117 (when cars and vans are made available by reason of employment) applies for the purposes of subsection (2). The approved amount for passenger payments 234 1 The approved amount for passenger payments is— M × R where— M is the number of miles of business travel by the employee by car or van— (a) for which the employee carries in the tax year in question one or more passengers who are also employees for whom the travel is business travel, and (b) in respect of which passenger payments are made; R is a rate of 5p per mile. 2 If the employee carries for all or part of the tax year two or more passengers who are also employees for whom the travel is business travel, the approved amount for passenger payments is the total of the amounts calculated separately under subsection (1) in respect of each of those passengers. 3 The Treasury may by regulations amend subsection (1) so as to alter the rate. Supplementary Vehicles to which this Chapter applies 235 1 This Chapter applies to cars, vans, motor cycles and cycles. 2 “ Car ” means a mechanically propelled road vehicle which is not— a a goods vehicle, b a motor cycle, or c a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used. 3 “ Van ” means a mechanically propelled road vehicle which— a is a goods vehicle, and b has a design weight not exceeding 3,500 kilograms, and which is not a motor cycle. 4 “ Motor cycle ” has the meaning given by section 185(1) of the Road Traffic Act 1988 (c. 52). 5 “ Cycle ” has the meaning given by section 192(1) of that Act. 6 In this section— “ design weight ” means the weight which a vehicle is designed or adapted not to exceed when in normal use and travelling on a road laden; “ goods vehicle ” means a vehicle of a construction primarily suited for the conveyance of goods or burden of any description. Journeys made by members of local authorities etc 235A 1 Subject to subsections (2) and (3), a qualifying journey made by a member of a relevant authority is to be treated as business travel for the purposes of this Chapter if a qualifying payment is made by the authority— a to the member for expenses related to the member's use for the journey of a vehicle to which this Chapter applies, or b to another member of the authority for carrying the member as a passenger on the journey in a car or van. 2 A qualifying journey is not to be treated as business travel— a for the purposes of section 231, or b when calculating for the purposes of that section the mileage allowance payments paid to the member in respect of the journey and the approved amount for such payments. 3 If a journey made by a member of a relevant authority is a qualifying journey and a qualifying payment is made to the member for carrying a passenger on the journey, the member's journey is not to be treated as business travel in respect of that passenger for the purposes of sections 233 and 234 unless the passenger is also a member of the authority. 4 A journey made by a member of a relevant authority is a “ qualifying journey ” for the purposes of this section if— a it is a journey between the member's home and permanent workplace, and b the member's home is situated in the area of the authority, or no more than 20 miles outside the boundary of the area. 5 In this section “ permanent workplace ” has the same meaning as in Part 5 (see section 339). 6 The Treasury may by regulations— a provide for bodies specified in the regulations (which must be local authorities or bodies that have similar or related functions or purposes) to be relevant authorities for the purposes of this section, b provide for references in this section to a member of a relevant authority to be read as references to a member of a description prescribed in the regulations, and c define what is meant by “ qualifying payment ” for the purposes of this section. 7 The regulations may contain transitional provision and savings. Interpretation of this Chapter 236 1 In this Chapter— “ business travel ” means travelling the expenses of which, if incurred and paid by the employee in question, would (if this Chapter did not apply) be deductible under sections 337 to 342; “ mileage allowance payments ” has the meaning given by section 229(2); “ passenger payments ” has the meaning given by section 233(3). 1A For journeys that are treated as business travel for the purposes of certain provisions of this Chapter, see section 235A (journeys made by members of local authorities etc ). 2 For the purposes of this Chapter a vehicle is a “company vehicle” in a tax year if in that year— a the vehicle is made available to the employee by reason of the employment and is not available for the employee’s private use, or b an amount in respect of the benefit of the vehicle is to be treated as the employee’s earnings for the tax year by virtue of— i section 120 or 120A (benefit of car treated as earnings), ii section 154 or 154A (benefit of van treated as earnings), or iii section 203 or 203A (residual liability to charge: benefit treated as earnings), or c in the case of a car or van, an amount in respect of the benefit of the car or van would be required to be so treated if sections 167 and 168 (exceptions for pooled cars and vans) and section 248A (emergency vehicles) did not apply, or d in the case of a cycle, the cash equivalent of the benefit of the cycle would be required to be treated as the employee’s earnings for the tax year under Chapter 10 of Part 3 (taxable benefits: residual liability to charge) if section 244(1) (exception for cycles made available) did not apply. 3 Sections 117 and 118 (when cars and vans are made available by reason of employment and are made available for private use) apply for the purposes of subsection (2). Chapter 3 Exemptions: other transport, travel and subsistence Parking provision and expenses 237 1 No liability to income tax arises in respect of the provision of workplace parking for an employee. 2 No liability to income tax arises by virtue of the payment or reimbursement of expenses incurred in connection with the provision for or the use by an employee of workplace parking. 3 In this section “ workplace parking ” means— a a parking space for a car or van , b a motor cycle parking space, or c facilities for parking a cycle other than a motor cycle, at or near the employee’s workplace. Vehicle-battery charging 237A 1 No liability to income tax arises in respect of the provision, at or near an employee's workplace, of facilities for charging a battery of a vehicle used by the employee (including a vehicle used by the employee as a passenger). 2 Subsection (1) applies only if the facilities are made available generally to the employer's employees at that workplace. 3 In this section— “facilities”— includes electricity, but does not include workplace parking, “ taxable ”, in relation to a car or van, has the meaning given by section 239(6), “ vehicle ” means a vehicle— to which Chapter 2 applies (see section 235), and which is neither a taxable car nor a taxable van, and “ workplace parking ” has the meaning given by section 237(3). Modest private use of heavy goods vehicles 238 1 No liability to income tax arises where a heavy goods vehicle is made available to an employee for the employee’s private use if conditions A and B are met. 2 Condition A is that there is no transfer of the property in the vehicle to the employee. 3 Condition B is that the employee’s use of the vehicle in the tax year is not wholly or mainly private use. 4 In this section— “ heavy goods vehicle ” means a mechanically propelled road vehicle which— is of a construction primarily suited for the conveyance of goods or burden of any kind, and is designed or adapted to have a maximum weight exceeding 3,500 kilograms when in normal use and travelling on a road laden, and “ private use ” means use other than for travel which the employee is necessarily obliged to do in the performance of the duties of the employment. Payments and benefits connected with taxable cars and vans and exempt heavy goods vehicles 239 1 No liability to income tax arises in respect of the discharge of any liability of an employee in connection with a taxable car or van or an exempt heavy goods vehicle. 2 No liability to income tax arises in respect of a payment to an employee in respect of expenses incurred by the employee in connection with a taxable car or van or an exempt heavy goods vehicle. 3 Subsections (1) and (2) do not apply to liability arising by virtue of section 120A (optional remuneration arrangements: benefit of a car), section 149 or 149A (benefit of car fuel treated as earnings) , section 154A (optional remuneration arrangements: benefit of a van) or section 160 or 160A (benefit of van fuel treated as earnings). 4 No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of a benefit connected with a taxable car or van or an exempt heavy goods vehicle. 5 Subsection (4) does not apply to the provision of a driver. 6 For the purposes of this section a car or van is “taxable” if under Chapter 6 of Part 3 an amount (whether the cash equivalent or the relevant amount) in respect of the benefit of it is to be treated as the employee’s earnings for the tax year. 7 For the purposes of this section— a “ heavy goods vehicle ” has the same meaning as in section 238(4) (modest private use of heavy goods vehicles), and b a heavy goods vehicle is “exempt” if it is made available in the tax year to the employee in such circumstances that section 238 applies. 8 For the purposes of subsections (1) and (2), a heavy goods vehicle is also “exempt” if it is so made available in such circumstances that section 238 would apply if the employee were not in lower-paid employment as a minister of religion (see section 290D) . 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Incidental overnight expenses and benefits 240 1 No liability to income tax arises in respect of a sum if or to the extent that it is paid wholly and exclusively for the purpose of paying or reimbursing expenses which— a are incidental to the employee’s absence from the place where the employee normally lives, b relate to a continuous period of such absence in relation to which the overnight stay conditions are met (a “qualifying period”), and c would not be deductible under Part 5 if the employee incurred and paid them and Chapter 2 of this Part (mileage allowances and passenger payments) did not apply. 2 No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of a benefit provided for an employee if— a its provision is incidental to such an absence during a qualifying period, and b no amount would be deductible in respect of it under Part 5. 3 Subsections (1) and (2) are subject to section 241 (incidental overnight expenses and benefits: overall exemption limit). 4 The overnight stay conditions are that— a the employee is obliged to stay away from the place where the employee normally lives throughout the period, b the period includes at least one overnight stay away from that place, and c each such overnight stay during the period is at a place the expenses of travelling to which meet condition A or B. 5 Condition A is that the expenses are deductible under Part 5 (otherwise than under any of the excepted foreign travel provisions) or would be if the employee incurred and paid them and Chapter 2 of this Part did not apply. 6 Condition B is that the expenses are within section 250 or 255 (exemption of work-related and individual learning account training provision) or would be if the employer paid or reimbursed them. 7 In this section “ excepted foreign travel provisions ” means— a section 371 (travel costs and expenses where duties performed abroad: visiting spouse’s civil partner's or child’s travel), b section 374 (non-domiciled employee’s spouse’s civil partner's or child’s travel costs and expenses where duties performed in UK), and c section 376 (foreign accommodation and subsistence costs and expenses (overseas employments)). Incidental overnight expenses and benefits: overall exemption limit 241 1 Section 240(1) and (2) do not apply if the exemption provisions total in respect of the qualifying period in question exceeds the permitted amount. 2 In this section “the exemption provisions total”, in respect of a period, means the aggregate of— a the amounts that would be exempted under section 240(1) and (2) in respect of the period, apart from this section, and b the amounts that would be exempted under section 268 (exemption of vouchers and tokens for incidental overnight expenses) in respect of the period, apart from the condition in section 268(5). 3 In this section “ the permitted amount ”, in respect of a period, means the aggregate of the following amounts— a £5 for each night during the period spent wholly in the United Kingdom, and b £10 for each night during the period spent wholly or partly outside the United Kingdom. Travel by unpaid directors of not-for-profit companies 241A 1 No liability to income tax arises in respect of a sum if or to the extent that it is paid wholly and exclusively for the purpose of paying or reimbursing travel expenses in respect of which conditions A to C are met. 2 Condition A is that— a the employee is obliged to incur the expenses as holder of the employment, and b the expenses are attributable to the employee’s necessary attendance at any place in the performance of the duties of the employment. 3 Condition B is that the employment is employment as a director of a not-for-profit company. 4 Condition C is that the employment is one from which the employee receives no employment income other than sums to which Chapter 3 of Part 3 applies (expenses payments). 5 In this section— a “director” has the same meaning as in the benefits code (see section 67), and b “not-for-profit company” means a company that does not carry on activities for the purpose of making profits for distribution to its members or others. Travel where directorship held as part of trade or profession 241B 1 No liability to income tax arises in respect of a sum if or to the extent that it is paid wholly and exclusively for the purpose of paying or reimbursing travel expenses in respect of which conditions A to D are met. 2 Condition A is that the employee is obliged to incur the expenses as holder of the employment. 3 Condition B is that the employment is employment as a director of a company. 4 Condition C is that the employee carries on a trade, profession or vocation (alone or in partnership). 5 Condition D is that, in calculating the profits of that trade, profession or vocation for income tax purposes, a deduction is allowed under ITTOIA 2005 for the expenses, but no such deduction is to be made. 6 In this section “director” has the same meaning as in the benefits code (see section 67). Works transport services 242 1 No liability to income tax arises in respect of the provision for employees of a works transport service if— a the service is available generally to employees of the employer (or each employer) concerned, b the main use of the service is for qualifying journeys by those employees, and c the service— i is used only by the employees for whom it is provided or their children, or ii is substantially used only by those employees or children. 2 In this section— “ children ” includes stepchildren and illegitimate children but does not include children aged 18 or over, and “ works transport service ” means a service which is provided by means of a bus or a minibus for conveying employees of one or more employers on qualifying journeys. 3 For the purposes of this section— a “ bus ” means a road passenger vehicle which has a seating capacity of 12 or more, and b “ minibus ” means a vehicle constructed or adapted for the carriage of passengers which has a seating capacity of 9, 10 or 11. 4 But a vehicle which falls within the definition in subsection (3)(b) is not a minibus for the purposes of this section if— a it has one or more disqualified seats, and b excluding the disqualified seats, it has a seating capacity of 8 or less. 5 For the purposes of subsections (3) and (4) the seating capacity of a vehicle is determined in the same way as for the purposes of Part 3 of Schedule 1 to VERA 1994 (vehicle excise duty on buses). This applies whether or not the vehicle is a bus within the meaning of that Part of that Schedule. 6 For the purposes of subsection (4) a seat is disqualified if relevant construction and use requirements are not met in relation to it. In this subsection “ construction and use requirements ” has the same meaning as in Part 2 of the Road Traffic Act 1988 (c. 52) or, in Northern Ireland, Part III of the Road Traffic (Northern Ireland) Order 1995 (S.I. 1995/2994 (N.I. 18)). Support for public bus services 243 1 No liability to income tax arises in respect of the provision of financial or other support for a public transport road service if— a in the case of a local bus service, conditions A and B are met, or b in any other case, conditions A to C are met. 2 Condition A is that the service is used by employees of one or more employers for qualifying journeys. 3 Condition B is that the service is available generally to employees of the employer (or each employer) concerned. 4 Condition C is that the terms on which the service is available to the employees of the employer (or each employer) concerned are not more favourable than those available to other passengers. 5 In this section— “ local bus service ” means a local service (as defined in section 2 of the Transport Act 1985 (c. 67)), and “ public transport road service ” means a public passenger transport service provided by means of a road vehicle. Cycles and cyclist’s safety equipment 244 1 No liability to income tax arises in respect of the provision for an employee of a cycle or cyclist’s safety equipment if conditions A to C are met. 2 Condition A is that there is no transfer of the property in the cycle or equipment in question. 3 Condition B is that the employee uses the cycle or equipment in question mainly for qualifying journeys. 4 Condition C is that cycles are available generally to employees of the employer concerned or, as the case may be, cyclist’s safety equipment is so available to them. 5 In this section “ cycle ” has the meaning given by section 192(1) of the Road Traffic Act 1988 (c. 52), and “ cyclist ” has a corresponding meaning. Travelling and subsistence during public transport strikes 245 1 No liability to income tax arises in respect of the following benefits and payments where a strike or other industrial action disrupts a public transport service normally used by an employee. 2 They are— a the provision for the employee of overnight accommodation at or near the employee’s permanent workplace, b a payment to the employee in respect of expenses incurred by the employee in connection with such accommodation, c the provision for the employee of transport for the purpose of ordinary commuting or travel between any two places that is for practical purposes substantially ordinary commuting, and d a payment to the employee in respect of expenses incurred on such transport. Transport between work and home for disabled employees: general 246 1 No liability to income tax arises in respect of— a the provision of transport for a disabled employee, or b the payment or reimbursement of expenses incurred on such transport, if the condition in subsection (2) is met. 2 The condition is that the transport is provided or the expenses are incurred for the purpose of ordinary commuting or travel between any two places that is for practical purposes substantially ordinary commuting. 3 Subsection (1) does not apply in a case where a car is made available to a disabled employee (but see section 247). 4 In this section “ disabled employee ” means an employee who has a physical or mental impairment with a substantial and long-term adverse effect on the employee’s ability to carry out normal day to day activities. Provision of cars for disabled employees 247 1 This section applies where a car is made available to a disabled employee without any transfer of the property in it. 2 No liability to income tax arises by virtue of Chapter 6 or 10 of Part 3 (taxable benefits: cars, vans etc. and residual liability to charge) in respect of the benefit if conditions A to C are met. 3 No liability to income tax arises in respect of— a the provision of fuel for the car, or b the payment or reimbursement of expenses incurred in connection with it, if conditions A to C are met. 4 Condition A is that the car has been adapted for the employee’s special needs or, in the case of an employee who because of disability can only drive a car that has automatic transmission, it is such a car. 5 Condition B is that the car is made available on terms prohibiting its use otherwise than for— a the employee’s business travel, or b transport for the employee for the purpose of— i ordinary commuting or travel between any two places that is for practical purposes substantially ordinary commuting, or ii travel to a place the expenses of travelling to which would be within one of the training exemption provisions if the employer paid them. 6 Condition C is that in the tax year the car is only used in accordance with those terms. 7 In this section— “ business travel ” has the same meaning as in Chapter 6 of Part 3 (taxable benefits: cars, vans and related benefits) (see section 171(1)), “ disabled employee ” has the same meaning as in section 246 (see subsection (4)), and “ the training exemption provisions ” means— section 250 (exemption of work-related training provision), section 255 (exemption for contributions to individual learning account training), and section 311 (retraining courses). 8 Section 138(4) (when a car has automatic transmission) applies for the purposes of this section as it applies for the purposes of section 138. Transport home: late night working and failure of car-sharing arrangements 248 1 No liability to income tax arises in respect of the provision of transport or the payment or reimbursement of expenses incurred on transport if— a the transport is for a journey from the employee’s workplace to the employee’s home, b the late working conditions or the car-sharing failure conditions are met, and c the number of previous occasions in the tax year on which the provision of transport within this section or the payment or reimbursement of expenses within this section has occurred is lower than 60. 2 The late working conditions are that— a the journey is made on an occasion when the employee is required to work later than usual and until at least 9 p.m., b such occasions occur irregularly, c by the time when the employee ceases work— i public transport has ceased to be available for the journey, or ii it would not be reasonable to expect the employee to use it, and d the transport is by taxi or similar private road transport. 3 The car-sharing failure conditions are that— a the employee regularly travels to work in a car with one or more other employees of the employee’s employer under arrangements for the sharing of the car with them, and b the journey is made on an occasion when the employee is unable to use the car because of unforeseen and exceptional circumstances. Emergency vehicles 248A 1 This section applies where— a an emergency vehicle is made available to a person employed in an emergency service mainly for use for the person's business travel , b the terms on which it is made available prohibit its private use otherwise than when the person is on call or ... commuting, and c the person does not make private use of it otherwise than in such circumstances. 2 No liability to income tax arises by virtue of Chapter 6 or 10 of Part 3 (taxable benefits: cars, vans etc. and residual liability to charge) in respect of the benefit. 3 “ Emergency vehicle ” means a vehicle which is used to respond to emergencies and which either— a has fixed to it a lamp designed to emit a flashing light for use in emergencies, or b would have such a lamp fixed to it but for the fact that (if it did) a special threat to the personal physical security of those using it would arise by reason of it being apparent that they were employed in an emergency service. 4 The following are “ employed in an emergency service ”— a constables and other persons employed for police purposes, b persons employed for the purposes of a fire, or fire and rescue, service, and c persons employed in the provision of ambulance or paramedic services. 5 The Treasury may by order amend subsection (4). 6 “ Private use ”, in relation to a person, means any use other than for the person’s business travel; and “ business travel ” has the same meaning as in Chapter 6 of Part 3 (see section 171(1)). 7 A person to whom an emergency vehicle is made available is on call when liable, as part of normal duties, to be called on to use the emergency vehicle to respond to emergencies. 8 A person to whom an emergency vehicle is made available is ... commuting when the person— a is using the vehicle for ordinary commuting or for travel between two places that is for practical purposes substantially ordinary commuting, and b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interpretation of this Chapter 249 In this Chapter— “ car ” and “ van ” have the same meaning as in Chapter 6 of Part 3 (taxable benefits: cars, vans and related benefits) (see section 115), except that for the purposes of sections 246 and 247 (transport for the disabled) any adaptation of a car for the employee’s special needs is to be disregarded, “ ordinary commuting ” has the same meaning as in section 338 (travel for necessary attendance) (see subsection (3)), “ qualifying journey ”, in relation to an employee, means the whole or part of a journey— between the employee’s home and workplace, between one workplace and another, in connection with the performance of the duties of the employment, and “workplace” and “permanent workplace” have the meaning given by section 339. Chapter 4 Exemptions: education and training Work-related training Exemption of work-related training provision 250 1 No liability to income tax arises by virtue of— a the provision for an employee of work-related training or any benefit incidental to such training, or b the payment or reimbursement to or in respect of an employee of— i the cost of work-related training or of any benefit incidental to such training, or ii any costs of a kind specified in subsection (2) in respect of such training. 2 The costs are— a costs which are incidental to the employee undertaking the training, b expenses incurred in connection with an examination or other assessment of what the employee has gained from the training, and c the cost of obtaining any qualification, registration or award to which the employee becomes or may become entitled as a result of the training or such an examination or other assessment. Meaning of “work-related training” 251 1 In this Chapter “ work-related training ”, in relation to an employee, means a training course or other activity designed to impart, instil, improve or reinforce any knowledge, skills or personal qualities which— a are likely to prove useful to the employee when performing the duties of the employment or a related employment, or b will qualify or better qualify the employee— i to perform those duties, or ii to participate in any charitable or voluntary activities that are available to be performed in association with the employment or a related employment. 2 For this purpose “ related employment ”, in relation to an employee, means another employment with the same employer, or with a person connected with the employer, which the employee— a is to hold, b has a serious opportunity of holding, or c can realistically expect to have a serious opportunity of holding in due course. Exception for non-deductible travel expenses 252 1 Where travel or subsistence is provided or the costs of travel or subsistence are paid or reimbursed, section 250 does not apply except to the extent that the travel meets condition A or B or the subsistence meets condition B. 2 Condition A is that, on the assumptions in subsection (4), mileage allowance relief under Chapter 2 of this Part would be available for the travel if no mileage allowance payments had been made. 3 Condition B is that, on those assumptions, the expenses of the travel or subsistence would be deductible under Part 5. 4 The assumptions are— a that the employee undertook the training as one of the duties of the employment, and b that the employee incurred and paid the expenses. 5 In this section— “ mileage allowance payments ” has the meaning given by section 229(2), and “ subsistence ” includes food, drink and temporary living accommodation. Exception where provision for excluded purposes 253 1 Section 250 does not apply if or to the extent that the facilities or other benefits that are provided or the costs of which are paid or reimbursed are provided to the employee for one or more of the following purposes. 2 They are— a enabling the employee to enjoy the facilities or benefits for entertainment or recreational purposes which are unconnected, b providing the employee with an unconnected inducement to remain in or accept an employment with the employer or a person connected with the employer, and c rewarding the employee for performing duties of the employment or performing them in a particular way. 3 In subsection (2)(a) the reference to enjoying facilities or benefits for entertainment or recreational purposes includes a reference to enjoying them in the course of a leisure activity. 4 In subsection (2)(a) and (b) “ unconnected ” means unconnected with imparting, instilling, improving or reinforcing knowledge, skills or personal qualities within section 251(1). Exception where unrelated assets are provided 254 1 Section 250 does not apply if the benefit that is provided or the cost of which is paid or reimbursed is, or is the use of, an asset that is not a training-related asset. 2 “ Training-related asset ”, in relation to work-related training provided to an employee, means— a an asset provided for use only— i in the course of the training, or ii in the course of the training and in the performance of the duties of the employee’s employment, b training materials provided in the course of the training, or c something made by the employee in the course of the training or incorporated into something so made. 3 For this purpose, “ training materials ” includes stationery, books or other written material, audio or video tapes, compact disks or floppy disks. Persons leaving local authority care Apprenticeship bursaries paid to persons leaving local authority care 254A 1 No liability to income tax arises in respect of a care leaver's apprenticeship bursary payment. 2 A care leaver's apprenticeship bursary payment is a payment— a payable out of the public revenue, b to a care leaver (see subsection (3)), c made in connection with the person's employment as an apprentice (see subsection (4)), and d in respect of which any conditions specified in regulations made by the Treasury are met. 3 A person is a care leaver if they are a person— a who is, or was, a child looked after— i by a local authority in England within the meaning of section 22 of the Children Act 1989 (general duty of local authority in relation to children looked after by them); ii by a local authority in Wales within the meaning of the Social Services and Well-being (Wales) Act 2014 (anaw 4) (see section 74 of that Act (child or young person looked after by a local authority)); iii by a local authority in Scotland within the meaning of Chapter 1 of Part 2 of the Children (Scotland) Act 1995 (see section 17(6) of that Act (duty of local authority to child looked after by them)); iv by an authority in Northern Ireland within the meaning of the Children (Northern Ireland) Order 1995 (S.I. 1995/755 (N.I. 2)) (see Article 25 of that Order (children looked after by an authority: interpretation)), and b in respect of whom any other conditions specified in regulations made by the Treasury are met. 4 “ Apprentice ” has the meaning specified in regulations made by the Treasury. 5 Regulations under this section— a may make provision framed by reference to a scheme (however described or named), or document, as it has effect from time to time, b may make different provision for different purposes, c may make different provision for different areas, and d may make retrospective provision. Individual learning account training Exemption for contributions to individual learning account training 255 1 No liability to income tax in respect of income from a current or former employment arises by virtue of— a the provision to a person within subsection (2) (“ the employee ”) of individual learning account training that is given by a person who is not the employee’s employer or former employer, b any payment to the person giving the training in respect of the cost of that provision, c the provision to the employee of any benefit incidental to such training, or d the payment or reimbursement of any costs in respect of such training of a kind specified in subsection (3). 2 A person is within this subsection if the person either— a holds an account that qualifies under section 104 of the Learning and Skills Act 2000 (c. 21), or b is a party to arrangements that qualify under section 105 or 106 of that Act or section 2 of the Education and Training (Scotland) Act 2000 (asp. 8). 3 The costs are— a costs which are incidental to the employee undertaking the training, b expenses incurred in connection with an examination or other assessment of what the employee has gained from the training, and c the cost of obtaining any qualification, registration or award to which the employee becomes or may become entitled as a result of the training or such an examination or other assessment. Meaning of “individual learning account training” 256 In this Chapter “ individual learning account training ” means training or education of a kind that qualifies for grants authorised by— a regulations under section 108 or 109 of the Learning and Skills Act 2000 (c. 21), or b regulations under section 1 of the Education and Training (Scotland) Act 2000. Exception for non-deductible travel expenses 257 1 Where travel or subsistence is provided or the costs of travel or subsistence are paid or reimbursed, section 255 does not apply except to the extent that the travel meets condition A or B or the subsistence meets condition B. 2 Condition A is that, on the assumptions in subsection (4), mileage allowance relief under Chapter 2 of this Part would be available for the travel if no mileage allowance payments had been made. 3 Condition B is that, on those assumptions, the expenses of the travel or subsistence would be deductible under Part 5. 4 The assumptions are— a that the employee undertook the training as one of the duties of the employment, and b that the employee incurred and paid the expenses. 5 In this section— “ mileage allowance payments ” has the meaning given by section 229(2), and “ subsistence ” includes food, drink and temporary living accommodation. Exception where provision for excluded purposes 258 1 Section 255 does not apply if or to the extent that the facilities or other benefits that are provided or made available, or the costs of which are paid or reimbursed, are provided or made available for either or both of the following purposes. 2 They are— a enabling the employee or former employee to enjoy the facilities or benefits for entertainment or recreational purposes, and b rewarding the employee or former employee for performing duties of the employment or former employment or performing them in a particular way. 3 In subsection (2)(a) the reference to enjoying facilities or benefits for entertainment or recreational purposes includes a reference to enjoying them in the course of a leisure activity. Exception where unrelated assets are provided 259 1 Section 255 does not apply if the benefit that is provided, or the use of which is provided, or the cost of which is paid or reimbursed is an asset that is not a training-related asset. 2 “ Training-related asset ”, in relation to individual learning account training provided to an employee or former employee, means— a an asset provided— i for use only in the course of the training, or ii for use in the course of the training and in the performance of the duties of the employee’s employment, but not to any significant extent for any other use, or b training materials provided in the course of the training, or c something made by the employee or former employee in the course of the training or incorporated into something so made. 3 For this purpose “ training materials ” includes stationery, books or other written material, audio or video tapes, compact disks or floppy disks. Exception where training not generally available to staff 260 1 Section 255(1) only applies if any expenditure involved in making the provision, the payment or the reimbursement is incurred in giving effect to existing arrangements providing— a for the person incurring it to contribute to costs arising from the undertaking of individual learning account training by the employer’s employees or former employees, and b for such contributions to be generally available, on similar terms, to the employer’s employees at that time. 2 In subsection (1) “ existing arrangements ” means arrangements in place when the agreement to incur the expenditure was made. 3 The Treasury may by regulations make provision specifying the persons or other entities under whom Crown servants are to be treated for the purposes of this section as holding employment. 4 Such regulations may— a treat a description of Crown servants (or two or more such descriptions taken together) as an entity for the purposes of the regulations, and b make different provision for different descriptions of Crown servants. 5 In this section “ Crown servant ” means a person holding an employment under the Crown. Chapter 5 Exemptions: recreational benefits Recreational facilities Exemption of recreational benefits 261 1 No liability to income tax arises in respect of the provision to an employee or a member of an employee’s family or household of benefits within subsection (2). 2 The benefits are— a sporting or other recreational facilities which meet conditions A to C, and b a right or opportunity to make use of such facilities. This is subject to section 262. 3 Condition A is that the facilities are available generally to the employees of the employer in question. 4 Condition B is that they are not available to members of the public generally. 5 Condition C is that they are used wholly or mainly by persons whose right or opportunity to use them is employment-related (whether or not by reference to the same employer). 6 A person’s right or opportunity to use facilities is “employment-related” if and only if— a it derives from the person being— i an employee or former employee, or ii a member or former member of the family or household of an employee or former employee, of a particular employer, and b the facilities are provided so as to be available generally to that employer’s employees. Benefits not exempted by section 261 262 1 Section 261 (exemption of recreational benefits) does not apply to the following benefits— a an interest in or the use of any of the following— i a mechanically propelled vehicle, ii holiday or other overnight accommodation, or iii facilities which include, or are provided in association with, a right or opportunity to make use of holiday or overnight accommodation, b facilities provided on domestic premises, or c a right or opportunity to make use of facilities within paragraph (a) or (b). 2 In this section— “ domestic premises ” means— premises used wholly or mainly as a private dwelling, or land or other premises belonging to, or enjoyed with, premises so used, and “ vehicle ” includes a ship, boat or other vessel, an aircraft and a hovercraft. Power to alter benefits to which section 261 applies 263 The Treasury may by regulations provide that section 261— a does not apply to a benefit specified in the regulations, b applies to a benefit so specified only where such conditions as the regulations specify are met in relation to the terms on which, and the persons to whom, it is provided, or c applies in such cases as are so specified to— i facilities that do not meet the conditions in section 261(3) to (5), or ii a benefit within section 262. Annual parties and functions Annual parties and functions 264 1 This section applies to an annual party or similar annual function provided for an employer’s employees and available to them generally or available generally to those at a particular location. 2 Where in the tax year only one annual party or similar annual function to which this section applies is provided for the employer’s employees, or the employees in question, no liability to income tax arises in respect of its provision if the cost per head of the party or function does not exceed £150 . 3 Where in the tax year two or more such parties or functions are so provided, no liability to income tax arises in respect of the provision of one or more of them (“the exempt party or parties”) if the cost per head of the exempt party or parties does not exceed £150 or £150 in aggregate. 4 For the purposes of this section, the cost per head of a party or function is the total cost of providing— a the party or function, and b any transport or accommodation incidentally provided for persons attending it (whether or not they are the employer’s employees), divided by the number of those persons. 5 That total cost includes any value added tax on the expenses incurred in providing the party, function, transport or accommodation. Entertainment Third party entertainment 265 1 No liability to income tax arises in respect of the provision of entertainment for an employee or a member of the employee’s family or household if conditions A to C are met. 2 Condition A is that the person providing the entertainment is not the employer or a person connected with the employer. 3 Condition B is that neither the employer nor a person connected with the employer has directly or indirectly procured its provision. 4 Condition C is that it is not provided— a in recognition of particular services performed by the employee in the course of the employment, or b in anticipation of particular services to be so performed. 5 In this section “ entertainment ” includes hospitality of any kind. Chapter 6 Exemptions: non-cash vouchers and credit-tokens General exemptions: use for exempt benefits Exemption of non-cash vouchers for exempt benefits 266 1 No liability to income tax arises by virtue of Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens) in respect of a non-cash voucher if or to the extent that the voucher is used to obtain anything the direct provision of which would fall within— a section 237(1) (parking provision), b section 246 (transport between home and work for disabled employees: general), c section 247 (provision of cars for disabled employees), d section 248 (transport home: late night working and failure of car-sharing arrangements), ... e section 265 (third party entertainment) , or f section 320C (recommended medical treatment); 2 No liability to income tax arises by virtue of Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens) in respect of a non-cash voucher if the voucher evidences the employee’s entitlement to use anything the direct provision of which would fall within— a section 242 (works transport services), b section 243 (support for public bus services), ... c section 244 (cycles and cyclist’s safety equipment), or d section 319 (mobile telephones). 3 No liability to income tax arises by virtue of Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens) in respect of a non-cash voucher if the voucher can only be used to obtain anything the direct provision of which would fall within— a section 245 (travelling and subsistence during public transport strikes), b section 261 (exemption of recreational benefits), c section 264 (annual parties and functions), d section 296 (armed forces' leave travel facilities), ... e section 317 (subsidised meals) , ... f section 320A (eye tests and special corrective appliances) or g section 320B (health screening and medical check-ups). 4 No liability to income tax arises by virtue of Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens) in respect of a non-cash voucher if the voucher evidences the employee’s entitlement to a benefit in respect of which no charge arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) because of regulations under section 210 (power to exempt minor benefits). 5 For the purposes of this section direct provision is taken to fall within a section if it would do so if the employee were not in lower-paid employment as a minister of religion . Exemption of credit-tokens used for exempt benefits 267 1 No liability to income tax arises by virtue of Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens) in respect of a credit-token if or to the extent that the token is used to obtain anything the direct provision of which— a would fall within one of the provisions specified in subsection (2), or b would do so if the employee were not in lower-paid employment as a minister of religion . 2 Those provisions are— a section 237(1) (parking provision), b section 245 (travelling and subsistence during public transport strikes), c section 246 (transport between home and work for disabled employees: general), d section 247 (provision of cars for disabled employees), e section 248 (transport home: late night working and failure of car-sharing arrangements), ... f section 265 (third party entertainment). g section 319 (mobile telephones). , ... h section 320A (eye tests and special corrective appliances) and i section 320B (health screening and medical check-ups). Exemptions for particular non-cash vouchers and credit-tokens Exemption of vouchers and tokens for incidental overnight expenses 268 1 No liability to income tax arises by virtue of Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens) in respect of a non-cash voucher or a credit-token if or to the extent that the voucher or token is used by an employee to obtain goods, services or money if conditions A to C are met. 2 In the case of goods or services, condition A is that— a obtaining them is incidental to the employee’s absence from the place where the employee normally lives, and b that absence is for a continuous period in relation to which the overnight stay conditions are met (“ the qualifying period ”). 3 In the case of money, condition A is that— a it is obtained for the purpose of obtaining goods or services, and b obtaining them is incidental to such an absence during such a period. 4 Condition B is that an amount would not be deductible under section 362 or 363 (deductions where non-cash voucher or credit-token provided) in respect of the cost of obtaining the goods or services. 5 Condition C is that the exemption provisions total in respect of the qualifying period does not exceed the permitted amount. 6 In this section— “ the overnight stay conditions ” has the same meaning as in section 240 (exemption of incidental overnight expenses and benefits) (see section 240(4)), and “ the exemption provisions total ” and “ the permitted amount ” have the same meaning as in section 241 (incidental overnight expenses and benefits: overall exemption limit) (see section 241(2) and (3)). Exemption where benefits or money obtained in connection with taxable car or van or exempt heavy goods vehicle 269 1 No liability to income tax arises by virtue of Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens) in respect of a non-cash voucher or a credit-token if or to the extent that the voucher or token is used by the employee or a member of the employee’s family for obtaining— a goods or services in connection with a taxable car or van or an exempt heavy goods vehicle, or b money which is spent on such goods or services. 2 Subsection (1) applies where the goods in question are fuel for a car, or van, but see section 149(3) or section 160(3) (by virtue of which such use of a voucher or token is treated as the provision of the fuel for the purposes of section 149 (benefit of car fuel treated as earnings) or section 160 (benefit of van fuel treated as earnings) ). 3 For the purposes of this section— a “car” and “van” have the meaning given by section 115, and b a car or van is “taxable” if the cash equivalent of the benefit of it is treated as the employee’s earnings for the tax year in which the voucher or token is used under Chapter 6 of Part 3 (taxable benefits: cars, vans and related benefits). 4 For the purposes of this section— a “ heavy goods vehicle ” has the same meaning as in section 238 (modest private use of heavy goods vehicles), and b a heavy goods vehicle is “exempt” if it is made available in the tax year to the employee in such circumstances that section 238 applies or would apply if the employee were not in lower-paid employment as a minister of religion . Exemption for small gifts of vouchers and tokens from third parties 270 1 No liability to income tax arises by virtue of Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens) in respect of a non-cash voucher or a credit-token if conditions A to C are met. 2 Condition A is that the voucher or token is provided as a gift. 3 Condition B is that it is only capable of being used to obtain goods. 4 Condition C is that it meets conditions A to C and E in section 324 (general exemption of small gifts from third parties). Limited exemption for qualifying childcare vouchers 270A 1 If qualifying childcare vouchers are provided for an eligible employee— a no liability to income tax arises by virtue of section 62 (general definition of earnings), and b liability to income tax by virtue of Chapter 4 of Part 3 (taxable benefits: vouchers and credit tokens) arises only in respect of so much of the cash equivalent of the benefit as exceeds the exempt amount. For the meaning of “eligible employee”, see section 270AA. 2 A “ qualifying childcare voucher ” means a non-cash voucher in relation to which Conditions A to D are met. 3 Condition A is that the voucher is provided to enable an employee to obtain care for a child who— a is a child or stepchild of the employee and is maintained (wholly or partly) at the employee’s expense, or b is resident with the employee and is a person in respect of whom the employee has parental responsibility. 4 Condition B is that the voucher can only be used to obtain qualifying child care. 5 Condition C is that the vouchers are provided under a scheme that is open— a to the employer’s eligible employees generally, or b generally to those at a particular location. 5A Where the scheme under which the vouchers are provided involves— a relevant salary sacrifice arrangements, or b relevant flexible remuneration arrangements, Condition C is not prevented from being met by reason only that the scheme is not open to relevant low-paid employees. 5B In subsection (5A)— “ relevant salary sacrifice arrangements ” means arrangements (whenever made) under which the employees for whom the vouchers are provided give up the right to receive an amount of general earnings or specific employment income in return for the provision of the vouchers; “ relevant flexible remuneration arrangements ” means arrangements (whenever made) under which the employees for whom the vouchers are provided agree with the employer that they are to be provided with the vouchers rather than receive some other description of employment income; “ relevant low-paid employees ” means any of the employer's employees who are remunerated by the employer at a rate such that, if the relevant salary sacrifice arrangements or relevant flexible remuneration arrangements applied to them, the rate at which they would then be so remunerated would be likely to be lower than the national minimum wage. 5C Condition D is that the employer has, at the required time, made an estimate of the employee's relevant earnings amount for the tax year in respect of which the voucher is provided (see section 270B). 6 For the purposes of this section the “exempt amount”, in any tax year, is the sum of— a the appropriate amount for each qualifying week in that year, and b the voucher administration costs for that year. 6ZA In subsection (6)(a) “the appropriate amount”, in the case of an employee, means— a if the relevant earnings amount in the case of the employee for the tax year, as estimated in accordance with subsection (5C), exceeds the higher rate limit for the tax year, £25 , b if the relevant earnings amount in the case of the employee for the tax year, as so estimated, exceeds the basic rate limit for the tax year but does not exceed the higher rate limit for the tax year, £28, and c otherwise, £55. 6A The “ voucher administration costs ” for any tax year in respect of which qualifying childcare vouchers are provided for an employee means the difference between the cost of provision of the vouchers and their face value. The face value of a voucher is the amount stated on or recorded in the voucher as the value of the provision of care for a child that may be obtained by using it. 7 A “ qualifying week ” means a tax week in respect of which a qualifying childcare voucher is received. A “ tax week ” means one of the successive periods in a tax year beginning with the first day of that year and every seventh day after that (so that the last day of a tax year or, in the case of a tax year ending in a leap year, the last two days is treated as a separate week). 8 An employee is only entitled to one exempt amount even if care is provided for more than one child. But it does not matter that another person may also be entitled to an exempt amount in respect of the same child. 9 An employee is not entitled to an exempt amount under this section and under section 318A (limited exemption for employer-contracted childcare) in respect of the same tax week. 10 In this section “ care ”, “ child ”, “ parental responsibility ” and “ qualifying child care ” have the same meaning as in section 318A (see sections 318B and 318C). 10A In this section “ cost of provision ”, in relation to a childcare voucher, has the meaning given in section 87(3) and (3A). 11 The powers conferred by section 318D (childcare: power to vary amounts and qualifying conditions) are exercisable— a in relation to the amounts specified in subsection (6ZA) above as in relation to the amounts specified in section 318A(6A) , and b in relation to the qualifying conditions for the exemption conferred by this section as in relation to the qualifying conditions for the exemption conferred by section 318A. Meaning of “eligible employee” 270AA 1 An employee is an eligible employee for the purposes of section 270A if conditions A to C are met in relation to the employee. 2 Condition A is that the employee— a was employed by the employer immediately before the relevant day, and b has not ceased to be employed by the employer on or after that day. 3 “ The relevant day ” means the day specified by the Treasury in regulations for the purposes of this section. 4 Condition B is that there has not been a period of 52 tax weeks ending on or after the relevant day which has not included at least one qualifying week. 5 In subsection (4)— “ qualifying week ” means a tax week in respect of which a qualifying childcare voucher has been provided for the employee under the scheme by the employer in respect of a child, and “ tax week ” has the meaning given by section 270A(7). 6 Condition C is that the employee has not given the employer a childcare account notice. 7 A “childcare account notice” is a written notice informing the employer that the employee wishes to leave the scheme in order to be able to open a childcare account under section 17 of the Childcare Payments Act 2014 or enable the employee's partner to do so. 8 In subsection (7) “ partner ” is to be read in accordance with regulations made under section 3(5) of that Act. Meaning of “relevant earnings amount” and “required time” 270B 1 For the purposes of section 270A, the “relevant earnings amount”, in the case of an employee provided with vouchers by an employer for any qualifying week in a tax year, means— a the aggregate of— i the amount of any relevant earnings for the tax year from employment by the employer, and ii any amounts treated under Chapters 2 to 12 of Part 3 as earnings from such employment, less b the aggregate of any excluded amounts. 2 But if the employee becomes employed by the employer during the tax year, what would otherwise be the amount of the aggregate mentioned in subsection (1)(a) is the relevant multiple of that amount; and the relevant multiple is— 365 RD where RD is the number of days in the period beginning with the day on which the employee becomes employed by the employer and ending with the tax year. 3 In subsection (1)(a) “ relevant earnings ” means— a salary, wages or fees, and b any other earnings specified in regulations made by the Treasury under this paragraph. 4 In subsection (1)(b) “ excluded amounts ” means amounts specified in regulations made by the Treasury under this subsection. 5 In section 270A “the required time”, in the case of an employee, means— a if the employee joins the scheme under which the vouchers are provided at a time during the tax year, that time, and b otherwise, the beginning of the tax year. 6 For the purposes of subsection (5)(a) the employee is taken to join the scheme as soon as— a the employer has agreed that vouchers will be provided under the scheme for the employee, and b there is a child falling within section 270A(3)(a) or (b) in relation to the employee. 7 The Treasury may by order amend this section. Chapter 7 Exemptions: removal benefits and expenses Exemption of removal benefits and expenses: general Limited exemption of removal benefits and expenses: general 271 1 No liability to income tax in respect of earnings or by virtue of Part 7A arises by virtue of— a the provision of removal benefits to which this section applies, or b the payment or reimbursement of removal expenses to which this section applies. 2 In relation to earnings, subsection (1) does not apply if (disregarding this section) the earnings are general earnings to which either of the following sections applies— a section 22 (chargeable overseas earnings for year when remittance basis applied and employee outside section 26 ), or b section 26 (foreign earnings for year when remittance basis applied and employee met section 26A requirement ). 2A In relation to Part 7A, subsection (1) does not apply to any amount so far as the amount (disregarding this section and section 554P) would count as employment income to which section 554Z9 or 554Z10 would apply. 3 Subsection (1) is subject to section 287 (limit on exemption). Removal benefits and expenses to which section 271 applies 272 1 Benefits are removal benefits to which section 271 applies if— a they are reasonably provided in connection with a change of the employee’s residence which meets the conditions in section 273, b they are provided on or before the limitation day (see section 274), and c they are within subsection (2) or one of the following provisions— i section 277 (acquisition benefits and expenses), ii section 278 (abortive acquisition benefits and expenses), iii section 279 (disposal benefits and expenses), iv section 280 (transporting belongings), v section 281 (travelling and subsistence), vi section 285 (replacement of domestic goods). 2 A benefit is within this subsection if it is a non-cash voucher, cash voucher or credit-token used— a to obtain goods or services the direct provision of which would be a benefit within one of the provisions specified in subsection (1)(c)(i) to (vi), or b to obtain money for the purpose of obtaining such goods or services or meeting expenses within one of those provisions or section 284 (bridging loan expenses). 3 Expenses are removal expenses to which section 271 applies if— a they are reasonably incurred by the employee in connection with a change of the employee’s residence which meets the conditions in section 273, b they are incurred on or before the limitation day, and c they are within one of the provisions referred to in subsection (1)(c)(i) to (vi) or within section 284 (bridging loan expenses). Conditions applicable to change of residence 273 1 The conditions referred to in section 272(1)(a) and (3)(a) which apply to the change of the employee’s residence are conditions A to C. 2 Condition A is that the change of residence results from one of the following changes— a the employee becoming employed, b an alteration of the duties of the employment, or c an alteration of the place where the employee is normally to perform those duties. 3 Condition B is that the change of residence is made wholly or mainly to allow the employee to reside within a reasonable daily travelling distance of the place where the employee normally performs or is normally to perform the duties of the employment after the employment change (see section 275). 4 Condition C is that the employee’s former residence is not within a reasonable daily travelling distance of that place. Meaning of “the limitation day” 274 1 In this Chapter “ the limitation day ”, in relation to an employee’s change of residence, means the last day of the tax year after that in which the employee begins to perform the duties of the employment after the employment change, but this is subject to any direction under subsection (2). 2 An officer of Revenue and Customs may direct that the last day of a later tax year is the limitation day in relation to any particular change of residence if it appears to them reasonable to do so having regard to all the circumstances of that change. Meaning of “the employment change” 275 In this Chapter “ the employment change ”, in relation to an employee’s change of residence, means whichever of the changes specified in section 273(2) results in the change of residence. Meaning of “residence”, “former residence” and “new residence” etc. 276 1 If an employee has more than one residence, references in this Chapter to the employee’s residence are references to the employee’s main residence. 2 In this Chapter, in relation to a change of the employee’s residence— a references to the former residence are references to the employee’s residence before the change, and b references to the new residence are references to the employee’s residence after the change. 3 In this Chapter references to an interest in a residence are, in the case of a building, references to an estate or interest in the land concerned. Benefits and expenses within this Chapter Acquisition benefits and expenses 277 1 This section applies if an interest in the employee’s new residence is acquired by— a the employee, b one or more members of the employee’s family or household, or c the employee and one or more members of the employee’s family or household. 2 The following benefits are within this section— a legal services connected with the acquisition of the interest, including legal services connected with any loan raised by the employee to acquire it, b the waiving of any procurement fees connected with any such loan, c the waiving of any amount payable in respect of insurance effected to cover risks incurred by the maker of any such loan because the loan equals the whole, or a substantial part, of the value of the interest, d any survey or inspection of the residence undertaken in connection with the acquisition, and e the connection of any utility serving the new residence for use by the employee or by the employee and one or more members of the employee’s family or household. 3 The following expenses are within this section— a sums paid for any services within subsection (2)(a), (d) or (e), b any procurement fees connected with any loan raised by the employee to acquire the interest, c the costs of any insurance within subsection (2)(c), d fees payable to an appropriate registry or appropriate register in connection with the acquisition, and e stamp duty or stamp duty land tax charged on the acquisition. 4 In this section references to a loan raised by the employee include a loan raised by— a one or more members of the employee’s family or household, or b the employee and one or more members of the employee’s family or household. 5 In this section— “ appropriate registry ” means— Her Majesty’s Land Registry, the Land Registry in Northern Ireland, or the Registry of Deeds for Northern Ireland, and “ appropriate register ” means any register under the management and control of the Keeper of the Registers of Scotland. Abortive acquisition benefits and expenses 278 Benefits or expenses are within this section if— a they are benefits provided or expenses incurred with a view to the acquisition of an interest in a residence, b the interest is not acquired— i because of circumstances outside the control of the person seeking to acquire it, or ii because that person reasonably declines to proceed, and c the benefits or expenses would have fallen within section 277 if the interest had been acquired. Disposal benefits and expenses 279 1 This section applies if the employee has an interest in the former residence and because of the change of residence it is disposed of or is intended to be disposed of. 2 The following benefits are within this section— a legal services connected with the disposal or intended disposal, including legal services connected with the redemption of a related loan, b the waiving of any penalty for redeeming a related loan for the purpose of the disposal or intended disposal, c the services of an estate agent or auctioneer engaged in the disposal or intended disposal, d services connected with the advertisement of the disposal or intended disposal, e the disconnection, for the purpose of the disposal or intended disposal, of any utility serving the former residence, and f services connected with maintaining, insuring, or preserving the security of, the former residence at any time when it is unoccupied pending the disposal or intended disposal. 3 The following expenses are within this section— a sums paid for any services within subsection (2)(a), (c), (d) or (e), b any penalty for redeeming a related loan for the purpose of the disposal or intended disposal, c rent paid in respect of the former residence at any time when it is unoccupied pending the disposal or intended disposal, and d expenses of maintaining, insuring, or preserving the security of the former residence at any time when it is unoccupied pending the disposal or intended disposal. 4 In this section references to the employee having an interest in a residence include— a one or more members of the employee’s family or household having such an interest, or b the employee and one or more members of the employee’s family or household having such an interest. 5 A loan is a “ related loan ” for this purpose if— a it was raised to obtain an interest in the former residence, or b it is secured on such an interest, or c part of it was so raised and the rest of it is so secured. Transporting belongings 280 1 The following benefits are within this section— a the transportation of domestic belongings from the employee’s former residence to the employee’s new residence, and b the effecting of insurance to cover such transportation. 2 The following expenses are within this section— a expenses connected with such transportation, and b the costs of any such insurance. 3 In this section— “ domestic belongings ” means belongings of the employee or of members of the employee’s family or household, and “ transportation ” includes— packing and unpacking belongings, temporarily storing them, where there is not a direct move from the former to the new residence, detaching domestic fittings from the former residence, where they are to be taken to the new residence, and attaching domestic fittings to the new residence and adapting them, where they are brought from the former residence. Travelling and subsistence 281 1 The following benefits are within this section— a subsistence and facilities for travel provided for the employee and members of the employee’s family or household for temporary visits to the new area for purposes connected with the change of residence, b any other subsistence provided for the employee, c facilities provided for the employee for travel between the employee’s former residence and— i the place where the employee’s new duties are normally performed, or ii the new place where the duties of the employee’s employment are normally performed, or iii temporary living accommodation of the employee, d where the employment change is within section 273(2)(b) or (c) (change of duties or place of performance), facilities provided for the employee for travel before the change between the employee’s new residence and— i the place where the employee normally performs the duties of the employment before the change, or ii temporary living accommodation of the employee, e facilities provided for the employee and members of the employee’s family or household for travel from the employee’s former residence to the employee’s new residence in connection with the change of residence, f subsistence provided for a relevant child while the child stays in education-linked living accommodation, g facilities provided for a relevant child for travel between education-linked living accommodation and the employee’s accommodation. 2 For the purposes of this section, “ education-linked living accommodation ”, in relation to a relevant child, means living accommodation where the child stays for the purpose of securing continuity in education, being— a accommodation in the new area where the child stays before the employee’s change of residence, b accommodation in the former area where the child stays after that change, c accommodation in the new area where the child stays while the employee is living in temporary living accommodation in the former area, or d accommodation in the former area where the child stays while the employee is living in temporary living accommodation in the new area. 3 For the purposes of subsection (1)(g) “ the employee’s accommodation ”, in relation to travel to or from education-linked accommodation, means— a if that accommodation is within subsection (2)(a), the employee’s former residence, b if that accommodation is within subsection (2)(b), the employee’s new residence, and c if that accommodation is within subsection (2)(c) or (d), the employee’s temporary accommodation. 4 The cost of providing subsistence or travel of a kind described in subsection (1) is an expense within this section. 5 Subsections (1) and (4) are subject to section 282 (exclusion from this section of benefits and expenses where deduction allowed), and subsection (1) is also subject to section 283 (exclusion from this section of taxable car and van facilities). 6 In this section— “ new duties ” means— if the employment change is within section 273(2)(a) (change of employer), the duties of the employee’s new employment, and if the employment change is within section 273(2)(b) (change of duties), the new duties of the employment, “ former area ” means the area round or near the former residence of the employee, “ new area ” means— if the employment change is within section 273(2)(a) or (b) (change of employer or duties), the area round or near the place where the employee’s new duties normally are or are to be performed, and if the employment change is within section 273(2)(c) (change of place of performance), the area round or near the new place where the duties of the employee’s employment normally are or are to be performed, “ relevant child ” means a person who is a member of the employee’s family or household and is aged under 19 at the beginning of the tax year in which the employment change occurs, and “ subsistence ” means food, drink and temporary living accommodation. Exclusion from section 281 of benefits and expenses where deduction allowed 282 1 Benefits and expenses are excluded from section 281 (travelling and subsistence) if or to the extent that an amount is deductible in respect of the cost of the benefits or of the expenses under any of the following provisions. 2 They are— a section 341 (travel at start or finish of overseas employment), b section 342 (travel between employments where duties performed abroad), and c Chapter 5 of Part 5 except section 376 (deductions for earnings representing benefits or reimbursed expenses in respect of certain foreign travel). 3 If an amount is so deductible in respect of part only of the cost of a benefit, the part of the benefit excluded by this section is to be determined on a just and reasonable basis. Exclusion from section 281 of taxable car and van facilities 283 1 A car or van is not treated as a facility for the purposes of section 281(1) if in the tax year in which it is provided it is also made available— a to the employee or members of the employee’s family or household for private use not falling within section 281(1), b by reason of the employee’s employment, and c without any transfer of the property in it. 2 The following sections apply for the purposes of this section as they apply for the purposes of Chapter 6 of Part 3 (taxable benefits: cars, vans and related benefits)— a section 115 (meaning of “ car ” and “ van ”), b section 117 (meaning of car or van made available by reason of employment), and c section 118 (availability for private use). Bridging loan expenses 284 1 Expenses are within this section if— a the employee has an interest in the former residence and disposes of it because of the change of residence, b the employee acquires an interest in the new residence, and c the expenses are interest payable by the employee in respect of a loan raised by the employee wholly or partly because expenditure is incurred in connection with that acquisition before the proceeds of that disposal become available. This is subject to subsections (2) and (3). 2 Interest is only within this section if or to the extent that the loan is used— a for acquiring the employee’s interest in the new residence, or b for redeeming a loan— i which was raised by the employee to obtain an interest in the former residence, ii which is secured on such an interest, or iii which was partly so raised and the rest of which is so secured. 3 If the loan exceeds the market value of the employee’s interest in the former residence at the time of acquisition of the new residence, the interest on the excess is not within this section. 4 If subsection (3) applies in a case where the loan is used partly for purposes within subsection (2) and partly for other purposes, the amount of the interest within this section is the appropriate fraction of the total interest. 5 The appropriate fraction is— MV L or, if it is smaller— PL L where— MV is the market value of the employee’s interest in the former residence at the time of acquisition of the new residence, PL is the part of the loan used for purposes within subsection (2), and L is the amount of the loan. 6 In this section— a references to a loan raised by the employee include a loan raised by— i one or more members of the employee’s family or household, or ii the employee and one or more members of the employee’s family or household, and b references to the employee having, disposing of or acquiring an interest in a residence include— i one or more members of the employee’s family or household having, disposing of or acquiring such an interest, or ii the employee and one or more members of the employee’s family or household having, disposing of or acquiring such an interest. Replacement of domestic goods 285 1 Benefits and expenses are within this section if— a the employee has an interest in the former residence and disposes of it because of the change of residence, b the employee acquires an interest in the new residence, c in the case of benefits, they are domestic goods provided to replace goods used at the former residence which are unsuitable for use at the new residence, and d in the case of expenses, they are incurred on the purchase of domestic goods intended for such replacement. 2 In this section references to the employee having, disposing of or acquiring an interest in a residence include— a one or more members of the employee’s family or household having, disposing of or acquiring such an interest, or b the employee and one or more members of the employee’s family or household having, disposing of or acquiring such an interest. Power to amend sections 277 to 285 286 1 The Treasury may by regulations amend sections 277 to 285 so as to secure that benefits or expenses which would not otherwise fall within any of those sections do so. 2 The regulations may include such supplementary, incidental or consequential provisions as appear to the Treasury to be necessary or expedient. 3 Those provisions may be made by amending this Chapter or otherwise. 4 The regulations apply to a change of an employee’s residence resulting from an employment change occurring on or after the day specified in the regulations for this purpose. Limit on exemption Limit on exemption 287 1 If in the case of any change of residence the value of the exemption exceeds £8,000, section 271 (exemption of removal benefits and expenses) does not apply to the excess. 2 The value of the exemption is an amount equal to the sum of— a the section 62 earnings, ... b the benefits code earnings (after taking account of section 64(2)(b) where otherwise an amount that falls within paragraph (a) would be included) , and c the Part 7A employment income 3 In this section “ the section 62 earnings ” means all earnings within section 62 (earnings) in respect of which section 271 would prevent liability to income tax from arising if this section were disregarded. 4 In this section “ the benefits code earnings ” means all earnings— a which are treated as such under the benefits code (except earnings so treated under Chapter 7 of Part 3 (taxable benefits: loans)), and b in respect of which section 271 would prevent liability to income tax from arising if this section were disregarded. 5 In the case of living accommodation, the amount that would be so treated is to be taken to be equal to— CE - D where— CE is the cash equivalent of the accommodation under Chapter 5 of Part 3 (taxable benefits: living accommodation) for the period in which the accommodation is provided (calculated as mentioned in section 103), and D is any amount deductible under section 364 (deductions where living accommodation provided). 6 In this section “ the Part 7A employment income ” means the amount in respect of which section 271 (when read with section 554P) would prevent liability to income tax arising if this section were to be disregarded. Special exemption and relief for bridging loans Limited exemption of certain bridging loans connected with employment moves 288 1 No liability to income tax arises by virtue of Chapter 7 of Part 3 (taxable benefits: loans) in respect of a loan if— a it is a removal benefit (see subsection (2)), b the unused removal benefit exemption condition is met (see subsection (3)), and c the loan is discharged before the end of the exempted loan discharge period (see subsection (4)). 2 For the purposes of this section and section 289, a loan is a removal benefit if— a it is raised by the employee in connection with a change of residence meeting the conditions in section 273 (conditions applicable to change of residence), b the employee has an interest in the former residence and disposes of it in consequence of the change of residence, c the employee acquires an interest in the new residence, d the loan is raised wholly or partly because expenditure is incurred in connection with that acquisition before the proceeds of that disposal become available, and e the loan is made before the limitation day. 3 For the purposes of this section and section 289 the unused removal benefit exemption condition is that, in the case of the particular change of residence— a the sum specified in section 287(1) (limit on exemption), exceeds b the amount referred to in section 287(2) (the value of the exemption); and for those purposes that excess is “the unused exemption”. 4 In this section and section 289 “ the exempted loan discharge period ”, in relation to a loan, means the period of N days beginning with the day on which it is made, taking N as the number obtained by applying the following formula and, if that does not give a whole number, rounding up the result to the nearest whole number— A B × C × 365 where— A is the unused exemption, B is the maximum amount of the loan outstanding in the period beginning with the time when the loan is made and ending with the limitation day, and C is the official rate of interest in force when the loan is made (expressed as a percentage). 5 In this section— a references to a loan raised by the employee include a loan raised by— i one or more members of the employee’s family or household, or ii the employee and one or more members of the employee’s family or household, and b references to the employee having, disposing of or acquiring an interest in a residence include— i one or more members of the employee’s family or household having, disposing of or acquiring such an interest, or ii the employee and one or more members of the employee’s family or household having, disposing of or acquiring such an interest. 6 The tax payable in respect of a loan for a tax year ending before the limitation day may be decided on the basis that the unused removal benefit exemption condition will not be met. Relief for certain bridging loans not qualifying for exemption under section 288 289 1 This subsection applies to a loan if— a it is a removal benefit (see section 288(2)), b the unused removal benefit exemption condition is met (see section 288(3)), and c the loan is not discharged before the end of the exempted loan discharge period (see section 288(4)). 2 A loan to which subsection (1) applies is to be treated for the purposes of Chapter 7 of Part 3 (taxable benefits: loans) as if it was made on the day after the last day of the exempted loan discharge period. 3 Subsection (2) does not apply for the purposes of sections 176, 177, 180, 189 and 190. 4 The tax payable in respect of a loan for a tax year ending before the limitation day may be decided on the basis that subsections (1) and (2) will not apply because the unused removal benefit exemption condition will not be met. CHAPTER 7A Exemptions: amounts which would otherwise be deductible Exemption for paid or reimbursed expenses 289A 1 No liability to income tax arises by virtue of Chapter 3 of Part 3 (taxable benefits: expenses payments) in respect of an amount (“amount A”) paid or reimbursed by a person to an employee (whether or not an employee of the person) in respect of expenses if— a an amount equal to or exceeding amount A would (ignoring this section) be allowed as a deduction from the employee's earnings under Chapter 2 or 5 of Part 5 in respect of the expenses, and b the payment or reimbursement is not provided pursuant to relevant salary sacrifice arrangements. 2 No liability to income tax arises in respect of an amount paid or reimbursed by a person (“the payer”) to an employee (whether or not an employee of the payer) in respect of expenses if— a the amount has been calculated and paid or reimbursed in an approved way (see subsection (6)), b the payment or reimbursement is not provided pursuant to relevant salary sacrifice arrangements, and c conditions A and B are met. 2A No liability to income tax arises in respect of an amount paid or reimbursed by a person (“the payer”) to an employee (whether or not an employee of the payer) for expenses in the course of qualifying travel if— a the amount has been calculated and paid or reimbursed in accordance with regulations made by the Commissioners for Her Majesty's Revenue and Customs, b the payment or reimbursement is not provided pursuant to relevant salary sacrifice arrangements, and c condition C is met. 3 Condition A is that the payer or another person operates a system for checking— a that the employee is, or employees are, in fact incurring and paying amounts in respect of expenses of the same kind, and b that a deduction would (ignoring this section) be allowed under Chapter 2 or 5 of Part 5 in respect of those amounts. 4 Condition B is that neither the payer nor any other person operating the system knows or suspects, or could reasonably be expected to know or suspect— a that the employee has not incurred and paid an amount in respect of the expenses, or b that a deduction from the employee's earnings would not be allowed under Chapter 2 or 5 of Part 5 in respect of the amount. 4A Condition C is that— a the payer or another person operates a system for checking that the employee has undertaken the qualifying travel in relation to which the amount is paid or reimbursed, and b neither the payer nor any other person operating the system knows or suspects, or could reasonably be expected to know or suspect, that the travel was not undertaken. 5 In this section “ relevant ” , in relation to an employee to whom an amount is paid or reimbursed for or in respect of expenses, means arrangements (whenever made, whether before or after the employment began) under which— a the employee gives up the right to receive an amount of general earnings or specific employment income in return for the payment or reimbursement, or b the amount of other general earnings or specific employment income received by the employee depends on the amount of the payment or reimbursement. 5A In this section “ qualifying travel ” means travel for which a deduction from the employee's earnings would be allowed under Chapter 2 or 5 of Part 5. 6 For the purposes of subsection (2) , a sum is calculated and paid or reimbursed in an approved way if— a it is calculated and paid or reimbursed in accordance with regulations made by the Commissioners for Her Majesty's Revenue and Customs, or b it is calculated and paid or reimbursed in accordance with an approval given under section 289B. 7 Regulations made under subsection (2A)(a) or (6)(a) may make different provision for different purposes. 8 Regulations made under subsection (2A)(a) may contain provision about calculating amounts that is framed by reference to rates (for expenses) published from time to time by the Commissioners for Her Majesty's Revenue and Customs. Approval to pay or reimburse expenses at a flat rate 289B 1 A person (“ the applicant ”) may apply to Her Majesty's Revenue and Customs for approval to pay or reimburse expenses of the applicant's employees, or employees of another person, at a rate set out in the application (“the proposed rate”). 2 An officer of Revenue and Customs may give the approval if satisfied that any calculation of a payment or reimbursement of expenses in accordance with the proposed rate, or such other rate as is agreed between the applicant and the officer, would be a reasonable estimate of the amount of expenses actually incurred. 3 An approval under subsection (2) takes effect in accordance with a notice (an “approval notice”) given to the applicant by an officer of Revenue and Customs. 4 An approval notice must specify— a the rate at which expenses may be paid or reimbursed, b the day from which the approval takes effect, that day not being earlier than the day on which the approval notice is given, c the day on which the approval ceases to have effect, that day not being later than the end of the period of 5 years beginning with the day on which the approval takes effect, and d the type of expenses to which the approval relates. 5 An approval notice may specify that the approval is subject to conditions specified or described in the notice. 6 An application for an approval under this section must be in such form and manner, and contain such information, as is specified by Her Majesty's Revenue and Customs. Revocation of approvals 289C 1 An officer of Revenue and Customs may, if in the officer's opinion there is reason to do so, revoke an approval given under section 289B by giving a further notice (a “revocation notice”) to either or both of the following— a the person who applied for the approval, and b the person who is paying or reimbursing expenses in accordance with the approval. 2 A revocation notice may revoke the approval from— a the day on which the approval took effect, or b a later day specified in the notice. 3 A revocation under subsection (1) may be in relation to all expenses or expenses of a description specified in the revocation notice. 4 If the revocation notice revokes the approval from the day on which the approval took effect— a any liability to tax that would have arisen in respect of the payment or reimbursement of expenses if the approval had never been given in relation to such expenses is to be treated as having arisen, and b any person who has made, and any employee who has received, a payment or reimbursement of expenses calculated in accordance with the approval must make all the returns which they would have had to make if the approval had never been given in relation to such expenses. 5 If the revocation notice revokes the approval from a later day— a any liability to tax that would have arisen in respect of the payment or reimbursement of expenses if the approval had ceased to have effect on that day in relation to such expenses is to be treated as having arisen, and b any person who has made, and any employee who has received, a payment or reimbursement of expenses calculated in accordance with the approval must make all the returns which they would have had to make if the approval had ceased to have effect in relation to such expenses on that day. Exemption for other benefits 289D 1 No liability to income tax arises by virtue of any provision of the benefits code in respect of an amount (“amount A”) treated as earnings of an employee as a result of the provision of a benefit if— a an amount equal to amount A would (ignoring this section) be allowed as a deduction from the employee's earnings under Chapter 3 of Part 5 in respect of the provision of the benefit, and b the benefit is not provided pursuant to relevant salary sacrifice arrangements. 2 “ Relevant salary sacrifice arrangements ”, in relation to an employee to whom a benefit is provided, means arrangements (whenever made, whether before or after the employment began) under which— a the employee gives up the right to receive an amount of general earnings or specific employment income in return for the provision of the benefit, or b the amount of other general earnings or specific employment income received by the employee depends on the provision of the benefit. Anti-avoidance 289E 1 This section applies if conditions A to C are met. 2 Condition A is that, pursuant to arrangements, an amount— a is paid or reimbursed to an employee in respect of expenses, or b is treated as earnings of an employee as a result of the provision of a benefit, which, in the absence of this section, would have been exempt from income tax. 3 Condition B is that, in the absence of those arrangements, the employee would have received a greater amount of general earnings or specific employment income in respect of which— a tax would have been chargeable, or b national insurance contributions would have been payable (whether by the employee or another person). 4 Condition C is that the main purpose, or one of the main purposes, of the arrangements is the avoidance of tax or national insurance contributions. 5 If this section applies— a the exemption conferred by section 289A does not apply in respect of the amount paid or reimbursed as mentioned in subsection (2)(a), and b the exemption conferred by section 289D does not apply in respect of the amount treated as earnings as mentioned in subsection (2)(b). 6 In this section “ arrangements ” includes any scheme, transaction or series of transactions, agreement or understanding, whether or not legally enforceable. Chapter 8 Exemptions: special kinds of employees Ministers of religion Accommodation benefits of ministers of religion 290 1 No liability to income tax in respect of a person employed as a full-time minister arises by virtue of— a the payment or reimbursement of a statutory amount payable in connection with qualifying premises, or b the reimbursement of a statutory deduction made in connection with qualifying premises. 2 No liability to income tax in respect of a person employed as a full-time minister arises by virtue of the payment or reimbursement of expenses incurred in connection with providing living accommodation in qualifying premises if the employment is lower-paid employment as a minister of religion (see section 290D) . 3 Subsection (1) does not apply if or to the extent that the amount or deduction is properly attributable to a part of the premises for which the minister receives rent. 4 Premises are qualifying premises in relation to a person employed as a minister if— a an interest in them belongs to a charity or an ecclesiastical corporation, and b because of that interest and by reason of holding the employment, the minister has a residence in them from which to perform the duties of the employment. 5 In this section— ... “ full-time minister ” means a person in full-time employment as a minister of a religious denomination, “ statutory amount ” means an amount paid in pursuance of a provision in, or having the force of, an Act, and “ statutory deduction ” means a deduction made in pursuance of such a provision. Accommodation outgoings of lower-paid ministers of religion 290A 1 No liability to income tax arises in respect of a person in lower-paid employment as a minister of religion by virtue of the payment or reimbursement of accommodation outgoings. 2 Subsection (1) does not apply if the minister is paid an allowance intended to be used, wholly or in part, for paying accommodation outgoings (as to which see section 290B). 3 In this section— “accommodation outgoings” means amounts incurred by the minister in— heating, lighting or cleaning qualifying premises; or maintaining a garden forming part of qualifying premises; ... “qualifying premises” has the same meaning as in section 290. Allowances paid to lower-paid ministers of religion in respect of accommodation outgoings 290B 1 This section applies where a person in lower-paid employment as a minister of religion is paid an allowance intended to be used, wholly or in part, for paying accommodation outgoings. 2 No liability to tax arises by virtue of the payment of the allowance to the extent that it is used for paying accommodation outgoings. 3 In this section— “accommodation outgoings” has the same meaning as in section 290A; “qualifying premises” has the same meaning as in section 290. Provisions of benefits code not applicable to lower-paid ministers of religion 290C 1 This section applies where a person is in employment which is lower-paid employment as a minister of religion in relation to a tax year. 2 No liability to income tax arises in respect of the person in relation to the tax year by virtue of any of the following Chapters of the benefits code— a Chapter 3 (taxable benefits: expenses payments); b Chapter 6 (taxable benefits: cars, vans and related benefits); c Chapter 7 (taxable benefits: loans); d Chapter 10 (taxable benefits: residual liability to charge). 3 Subsection (2)— a means that in any of those Chapters a reference to an employee does not include an employee whose employment is within the exclusion in that subsection, if the context is such that the reference is to an employee in relation to whom the Chapter applies, but b does not restrict the meaning of references to employees in other contexts. 4 Subsection (2) has effect subject to— a section 188(2) (discharge of loan: where employment becomes lower-paid), and b section 290G (employment in two or more related employments). Meaning of “lower-paid employment as a minister of religion” 290D 1 For the purposes of this Part an employment is “ lower-paid employment as a minister of religion ” in relation to a tax year if— a the employment is direct employment as a minister of a religious denomination, and b the earnings rate for the employment for the year (calculated under section 290E) is less than £8,500. 2 An employment is not “ direct employment ” for the purposes of subsection (1)(a) if— a it is an employment which is treated as existing under— i section 56(2) (deemed employment of worker by intermediary), or ii section 61G(2) (deemed employment of worker by managed service company), or b an amount counts as employment income in respect of it by virtue of section 554Z2(1) (treatment of relevant step under Part 7A (employment income provided through third parties)). 3 Subsection (1) is subject to section 290G. Calculation of earnings rate for a tax year 290E 1 For any tax year the earnings rate for an employment is to be calculated as follows— Step 1 Find the total of the following amounts— the total amount of the earnings from the employment for the year within Chapter 1 of Part 3 (earnings), the total of any amounts that are treated as earnings from the employment for the year under the benefits code (see subsections (2) and (3)), and the total of any amounts that are treated as earnings from the employment for the year under Chapter 12 of Part 3 (other amounts treated as earnings), excluding any exempt income, other than any attributable to section 290A or 290B (accommodation outgoings of ministers of religion). Step 2 Add to that total any extra amount required to be added for the year by section 290F (extra amounts to be added in connection with a car). Step 3 Subtract the total amount of any authorised deductions (see subsection (4)) from the result of step 2. Step 4 The earnings rate for the employment for the year is given by the formula— R × Y E where— R is the result of step 3, Y is the number of days in the year, and E is the number of days in the year when the employment is held. 2 Section 290C(2) (provisions of benefits code not applicable to lower-paid ministers of religion) is to be disregarded for the purpose of determining any amount under step 1. 3 If the benefit of living accommodation is to be taken into account under step 1, the cash equivalent is to be calculated in accordance with section 105 (even if the cost of providing the accommodation exceeds £75,000). 4 For the purposes of step 3 “ authorised deduction ” means any deduction that would (assuming it was an amount of taxable earnings) be allowed from any amount within step 1 under— section 346 (employee liabilities), section 370 (travel costs and expenses where duties performed abroad: employee's travel), section 371 (travel costs and expenses where duties performed abroad: visiting spouse's, civil partner's or child's travel), section 373 ( non-resident or qualifying new resident employee's travel costs and expenses where duties performed in UK ), section 374 ( non-resident or qualifying new resident employee's spouse's, civil partner's or child's travel costs and expenses where duties performed in UK ), section 376 (foreign accommodation and subsistence costs and expenses (overseas employments)), section 713 (payroll giving to charities), sections 188 to 194 of FA 2004 (contributions to registered pension schemes), or section 262 of CAA 2001 (capital allowances to be given effect by treating them as deductions). Extra amounts to be added in connection with a car 290F 1 The provisions of this section apply for the purposes of section 290E in the case of a tax year in which a car is made available as mentioned in section 114(1) (cars, vans and related benefits) by reason of the employment. 2 Subsection (3) applies if in the tax year— a an alternative to the benefit of the car is offered, and b the amount that would be earnings within Chapter 1 of Part 3 if the benefit of the car were to be determined by reference to the alternative offered exceeds the benefit code earnings (see subsection (4)). 3 The amount of the excess is an extra amount to be added under step 2 in section 290E(1). 4 For the purposes of subsection (2) “the benefit code earnings” is the total for the year of— a the cash equivalent of the benefit of the car (calculated in accordance with Chapter 6 of Part 3 (taxable benefits: cars, vans etc )), and b the cash equivalent (calculated in accordance with that Chapter) of the benefit of any fuel provided for the car by reason of the employment. 5 Section 290C(2) (provisions of benefits code not applicable to lower-paid ministers of religion) is to be disregarded for the purpose of determining any amount under this section. Related employments 290G 1 This section applies if a person is employed in two or more related employments. 2 None of the employments is to be regarded as lower-paid employment as a minister of religion in relation to a tax year if— a the total of the earnings rates for the employments for the year (calculated in each case under section 290E) is £8,500 or more, or b any of them is an employment falling outside the exclusion contained in section 290C(2) (provisions of benefits code not applicable to lower-paid ministers of religion). 3 For the purposes of this section two employments are “related” if— a both are with the same employer, or b one is with a body or partnership (“A”) and the other is either— i with an individual, partnership or body that controls A (“B”), or ii with another partnership or body also controlled by B. 4 Section 69 (extended meaning of “control”) applies for the purposes of this section as it applies for the purposes of the benefits code. MPs, government ministers etc. Termination payments to MPs and others ceasing to hold office 291 1 No liability to income tax in respect of earnings arises by virtue of any grant or payment to which this section applies (but see Chapter 3 of Part 6: payments and benefits on termination of employment etc.). 2 This section applies to grants and payments— a made under section 5(1) of the Parliamentary Standards Act 2009 in connection with a person's ceasing to be a member of the House of Commons, b made under section 4 of the Ministerial and other Pensions and Salaries Act 1991 (c. 5) (grants to persons ceasing to hold certain ministerial and other offices), c made under section 3 of the European Parliament (Pay and Pensions) Act 1979 (c. 50) (resettlement grants for persons ceasing to be Representatives), or under Article 13 of the Statute for Members of the European Parliament (transitional allowances), d made under section 81(3) of the Scotland Act 1998 (c. 46) to a person— i ceasing to be a member of the Scottish Parliament on its dissolution, or ii ceasing to hold an office corresponding to a relevant office, e made under section 20(3) of the Government of Wales Act 2006 to a person— i ceasing to be a member of the National Assembly for Wales; or ii ceasing to hold office as the Presiding Officer, Deputy Presiding Officer, or such other office in connection with the Assembly as the Assembly may determine, but continuing to be an Assembly Member, ea made under section 53(3) of the Government of Wales Act 2006 to a person ceasing to be a member of the Welsh Assembly Government ... f made under section 48(1) of the Northern Ireland Act 1998 (c. 47) to a person— i ceasing to be a member of the Northern Ireland Assembly on its dissolution, or ii ceasing to hold an office corresponding to a relevant office , or g made under section 26A of the Greater London Authority Act 1999 (payments on ceasing to hold office as Mayor of London or as a member of the London Assembly). 3 In this section “ a relevant office ” has the same meaning as in section 4 of the Ministerial and other Pensions and Salaries Act 1991. Accommodation expenses of MPs 292 1 No liability to income tax arises in respect of a payment made to a member of the House of Commons under section 5(1) of the Parliamentary Standards Act 2009 if the payment is— a expressed to be made in respect of accommodation expenses, or b related to or in consequence of a payment expressed to be so made. 2 “ Accommodation expenses ” means expenses necessarily incurred on overnight accommodation that is required for the performance of the member's parliamentary duties in or about the Palace of Westminster or the member's constituency. 3 But the cost of an overnight stay in a hotel that was required only because, on that night, the member had been required to be at the House of Commons because the House was sitting late does not count as accommodation expenses for the purposes of this section, unless the member had been required to be at the House because it was sitting beyond 1 a.m. 4 Subsection (1) does not apply to a loan for a deposit payable at the commencement of a tenancy. 5 The reference in subsection (1) to a payment made to a member of the House of Commons under section 5(1) of the Parliamentary Standards Act 2009 includes a payment made under that section to another person at the direction of a member (see section 6(7) of that Act). Overnight expenses of other elected representatives 293 1 No liability to income tax arises in respect of a payment to which this section applies if it is expressed to be made in respect of a member’s necessary overnight expenses. 2 This section applies to payments— a made to members of the Scottish Parliament under section 81(2) of the Scotland Act 1998 (c. 46), b made to members of the National Assembly for Wales under section 20(2) of the Government of Wales Act 2006 or to a member of the Welsh Assembly Government under section 53(2) of that Act , or c made to members of the Northern Ireland Assembly under section 47(2) of the Northern Ireland Act 1998 (c. 47). 3 In this section “ a member’s necessary overnight expenses ” means additional expenses necessarily incurred by a member for the purpose of performing duties as a member in staying overnight away from the member’s only or main residence— a in the area in which the Parliament or Assembly to which the member belongs sits, or b in the constituency or region which the member represents. UK travel and subsistence expenses of MPs 293A 1 No liability to income tax arises in respect of a payment made to a member of the House of Commons under section 5(1) of the Parliamentary Standards Act 2009 if the payment is expressed to be made— a in respect of relevant UK travel expenses, or b in respect of relevant subsistence expenses. 2 “ Relevant UK travel expenses ” means expenses necessarily incurred on journeys of the following kinds within the United Kingdom— a journeys made by the member that are necessary for the performance of the member's parliamentary duties, and b if the member shares caring responsibilities with a spouse or partner, journeys made by the spouse or partner between the member's London Area residence and the member's constituency residence. 3 “ Relevant subsistence expenses ” means expenses necessarily incurred on an evening meal (excluding alcoholic drinks) eaten on the Parliamentary Estate, where the member is required to be at the House of Commons because the House is sitting beyond 7.30 p.m. 4 “ Caring responsibilities ” and “ London Area ” have the same meaning in subsection (2)(b) as they have in the scheme in effect for the time being under section 5 of the Parliamentary Standards Act 2009. UK travel expenses of other elected representatives 293B 1 No liability to income tax arises in respect of a payment to which this section applies if it is expressed to be made in respect of relevant UK travel expenses. 2 This section applies to payments— a made to members of the Scottish Parliament under section 81(2) of the Scotland Act 1998, b made to members of the National Assembly for Wales under section 20(2) of the Government of Wales Act 2006 or to a member of the Welsh Assembly Government under section 53(2) of that Act, or c made to members of the Northern Ireland Assembly under section 47(2) of the Northern Ireland Act 1998. 3 In this section “ relevant UK travel expenses ” means expenses necessarily incurred on journeys of the following kinds within the United Kingdom— a journeys within subsection (4) made by the member that are necessary for the performance of his or her duties as a member; b if the member shares caring responsibilities with a spouse or partner, journeys made by the spouse or partner between the constituency or region and the member's parliamentary home. 4 The journeys referred to in subsection (3)(a) are those— a between the constituency or region and the Parliament or Assembly to which the member belongs, b between the constituency or region and the member's parliamentary home, or c within the constituency or region, but not excluded by subsection (5). 5 A journey is excluded if— a in the case of a member who has only one local office, it is between the member's local home and that office, and b in any other case, it is between the member's local home and the principal local office. 6 In this section— “ constituency or region ”, in relation to a member, means the constituency or region which the member represents and the area within 20 miles of the boundary of that constituency or region; “ local office ”, in relation to a member, means an office which is situated in the constituency or region and occupied by the member for the purposes of performing duties as a member; “ the member's local home ” means a residence of the member situated in the constituency or region; “ the member's parliamentary home ” means the member's only or main residence in the area comprising— the main site of the Parliament or Assembly to which the member belongs, and the area within 20 miles of that site; “ principal local office ”, in relation to a member, means the local office most frequently occupied by the member for the purposes of performing duties as a member. 7 A person has “caring responsibilities” if the person— a has parental responsibility for a dependent child aged under 17 or for a child aged 17 or 18 who is in full-time education, or b is the primary carer for a family member in receipt of— i attendance allowance, ii disability living allowance at the middle or highest rate for personal care, iii the daily living component of personal independence payment, or iv constant attendance allowance at or above the maximum rate with an industrial injuries disablement benefit, or the basic (full day) rate with a war disablement pension. 8 The Treasury may by order amend the definition of “caring responsibilities” in subsection (7). European travel expenses of MPs and other representatives 294 1 No liability to income tax arises in respect of a sum that is paid to— a a member of the House of Commons under section 5(1) of the Parliamentary Standards Act 2009, b a member of the Scottish Parliament under section 81(2) of the Scotland Act 1998, c a member of the National Assembly for Wales under section 20(2) of the Government of Wales Act 2006 or a member of the Welsh Assembly Government under section 53(2) of that Act, or d a member of the Northern Ireland Assembly under section 47(2) of the Northern Ireland Act 1998, and expressed to be made in respect of European travel expenses. 2 “ European travel expenses ” means the cost of, and any additional expenses incurred in, travelling between the United Kingdom and a relevant European location. 3 “ Relevant European location ” means— a a European Union institution or agency, or b the national parliament of— i another member State, ii a candidate or applicant country, or iii any other country that is a member of the Council of Europe. 4 The Treasury may by order amend subsection (3) by— a adding a European location, b removing a European location, or c varying the description of a European location. Transport and subsistence for Government ministers etc. 295 1 No liability to income tax arises in respect of the provision of transport or subsistence provided or made available by or on behalf of the Crown to— a the holder of a ministerial office, or b a member of the family or household of the holder of a ministerial office. 2 No liability to income tax arises in respect of payments and reimbursements by or on behalf of the Crown of expenses incurred in connection with the provision of transport or subsistence to a person within subsection (1). 3 “ Ministerial office ” means— a an office in Her Majesty’s Government in the United Kingdom, b any other office which is one of the offices and positions in respect of which salaries are payable under section 1 of the Ministerial and other Salaries Act 1975 (c. 27), and c an office under one of the following Acts which corresponds to an office within paragraph (a) or (b)— i the Scotland Act 1998 (c. 46), ii the Government of Wales Act 2006 , or iii the Northern Ireland Act 1998 (c. 47). 4 In determining whether a particular person holds an office within subsection (3)(b), it is irrelevant whether or not a salary is paid or payable to that person under the Ministerial and other Salaries Act 1975. 5 In this section references to the provision of transport to a person include references to— a the provision or making available to that person of a vehicle with or without a driver, b the provision of fuel for a vehicle provided or made available to that person, and c the provision of any other benefit in connection with such a vehicle. 6 In this section— a “ subsistence ” includes food and drink and temporary living accommodation, and b “ vehicle ” means a mechanically propelled road vehicle. Members of local authorities etc Travel expenses of members of local authorities etc 295A 1 No liability to income tax arises in respect of a qualifying payment made to a member of a relevant authority for travel expenses incurred by the member if— a the payment is for expenses other than those related to the member's use of a vehicle to which Chapter 2 applies, and b the expenses are not excluded by subsection (2). 2 Expenses are excluded by this subsection if— a they are incurred on a journey between the member's home and permanent workplace, and b the member's home is situated more than 20 miles outside the boundary of the area of the relevant authority. 3 In this section “ permanent workplace ” has the same meaning as in Part 5 (see section 339). 4 The Treasury may by regulations— a provide for bodies specified in the regulations (which must be local authorities or bodies that have similar or related functions or purposes) to be relevant authorities for the purposes of this section, b provide for references in this section to a member of a relevant authority to be read as references to a member of a description prescribed in the regulations, and c define what is meant by “ qualifying payment ” for the purposes of this section. 5 The regulations may contain transitional provision and savings. Armed forces Armed forces' leave travel facilities 296 1 No liability to income tax arises in respect of— a the provision of travel facilities for a member of the armed forces of the Crown going on or returning from leave, or b a payment made in respect of such travel. 2 In subsection (1) “ travel facilities ” does not include a vehicle. Armed forces' food, drink and mess allowances 297 1 No liability to income tax arises in respect of allowances if— a they are payable out of the public revenue to any description of members of the armed forces of the Crown, and b the Treasury certifies that they are payable to them instead of food or drink normally supplied to members of the armed forces. 2 No liability to income tax arises in respect of allowances if— a they are payable out of the public revenue in respect of any description of members of the armed forces of the Crown, and b the Treasury certifies that they are so payable as a contribution to the expenses of a mess. Armed forces: the Operational Allowance 297A 1 No liability to income tax arises in respect of payments to members of the armed forces of the Crown of the Operational Allowance. 2 The Operational Allowance is an allowance designated as such under a Royal Warrant made under section 333 of the Armed Forces Act 2006 . Armed forces: the Council Tax Relief 297B 1 No liability to income tax arises in respect of payments of the Council Tax Relief to members of the armed forces of the Crown. 2 Payments of the Council Tax Relief are payments designated as such under a Royal Warrant made under section 333 of the Armed Forces Act 2006 . Armed forces: Continuity of Education Allowance 297C 1 No liability to income tax arises in respect of payments of the Continuity of Education Allowance to or in respect of members of the armed forces of the Crown during their employment under the Crown or after their deaths. 2 The Continuity of Education Allowance is an allowance designated as such under a Royal Warrant made under section 333 of the Armed Forces Act 2006. Armed forces: accommodation allowances 297D 1 No liability to income tax arises in respect of payments of accommodation allowances to, or in respect of, a member of the armed forces of the Crown. 2 An “accommodation allowance” is an allowance— a payable out of the public revenue, b for, or towards, costs of accommodation, and c in respect of which any conditions specified in regulations made by the Treasury are met. 3 The provision that may be made by regulations under subsection (2)(c) includes provision framed by reference to a scheme (by whatever name called), or document, as it has effect from time to time. 4 Regulations under this section may make— a different provision for different cases, and b different provision for different areas. 5 Regulations under this section that do not increase any person's liability to income tax may have effect in relation to times before they are made. Reserve and auxiliary forces' training allowances 298 No liability to income tax arises in respect of the following sums if they are payable out of the public revenue to members of the reserve and auxiliary forces of the Crown— a training expenses allowances, and b bounties payable in consideration of the members undertaking certain training and attaining a particular standard of efficiency. Crown employees Crown employees' foreign service allowances 299 1 No liability to income tax arises in respect of an allowance paid to a person in employment under the Crown if it is certified to represent compensation for the extra cost of being obliged to live outside the United Kingdom in order to perform the duties of the employment. 2 A certificate under subsection (1) may only be given by— a the Treasury, b the Secretary of State, c the Lord Chancellor, d the Chancellor of the Exchequer, e the Minister for the Civil Service, f the Lord President of the Council, g the Lord Privy Seal, or h the Attorney General. Voluntary office-holders Voluntary office-holders: compensation for lost employment income 299A 1 No liability to income tax arises in respect of a payment made by a relevant authority to a person if— a the person holds a voluntary office with the authority, b the person carries out duties of the office in a period in which he or she is also employed, and c the payment is made solely to compensate the person for lost employment income for the period (and accordingly does not exceed the amount of that income). 2 For the purposes of subsection (1) a person holds a voluntary office if, at the time the payment referred to in that subsection is made, the person— a is not entitled to any payment or benefit in connection with carrying out the duties of the office, b has not received any such payment or benefit, and c does not expect to receive any such payment or benefit. 3 For the purposes of subsection (2)(a), (b) and (c) disregard— a a payment (whether an advance payment or a reimbursement) in respect of reasonable expenses incurred in carrying out the duties of the office, and b a payment to which subsection (1) or section 16A of ITTOIA 2005 applies. 4 In subsection (1)(c) “lost employment income” means the difference between— a the amount of employment income, after deduction of tax and national insurance contributions, that the person would have received from the employment for the period if he or she had not carried out the duties of the office, and b the amount of employment income, after deduction of tax and national insurance contributions, that the person did receive from the employment for the period. 5 In subsection (1) “relevant authority” means any of the following— Voluntary office-holders: payments in respect of expenses 299B 1 No liability to income tax arises in respect of a payment to a person who holds a voluntary office if the payment is in respect of reasonable expenses incurred in carrying out the duties of that office. 2 It does not matter whether— a the payment is an advance payment or a reimbursement; b the person who makes the payment is the person with whom the office is held. 3 Subsections (2) and (3) of section 299A apply for the purposes of subsection (1) of this section as they apply for the purposes of subsection (1) of that section. Government A government department The Welsh Ministers and the Counsel General to the Welsh Government The Scottish Ministers The holder of an office in the Scottish Administration which, for the purposes of the Scotland Act 1998, is not a ministerial office (see section 126(8) of that Act) A Northern Ireland department Local government A county, district or parish council in England The council of a London borough The Common Council of the City of London The Greater London Authority The Council of the Isles of Scilly A county, county borough or community council in Wales A council constituted under section 2 of the Local Government etc. (Scotland) Act 1994 or community council in Scotland A district council in Northern Ireland Trade unions An organisation the name of which is entered in the list maintained by the Certification Officer under section 2 of the Trade Union and Labour Relations (Consolidation) Act 1992 An organisation the name of which is entered in the list maintained by the Certification Officer for Northern Ireland under Article 5 of the Industrial Relations (Northern Ireland) Order 1992 ( S.I. 1992/807 (N.I. 5) ) Local medical committees A Local Medical Committee (see section 97(4) of the National Health Service Act 2006) Other public bodies A body (other than a company) that is established by or under a statutory provision for the purpose of carrying out functions conferred on it by or under a statutory provision. 6 In this section— “company” means a company as defined by section 1 of the Companies Act 2006; references to a relevant authority include a company the activities of which consist solely of carrying out some or all of the functions of that authority, otherwise than for profit; “statutory provision” includes any provision made by or under an Act of Parliament, an Act of the Scottish Parliament, any Northern Ireland legislation, or any Act or Measure of the National Assembly for Wales. 7 Section 16A of ITTOIA 2005 (voluntary office-holders: compensation for lost profits) contains equivalent provision for holders of a voluntary office who carry on a trade, profession or vocation. Consuls, foreign agents etc. Consuls 300 1 No liability to income tax arises in respect of income arising from the office of a consul in the United Kingdom in the service of a foreign state. 2 Such income is also to be disregarded in estimating the amount of income for any income tax purposes. 3 In this section “ consul ” means a person recognised by Her Majesty as being a consul-general, consul, vice-consul or consular agent. Official agents 301 1 No liability to income tax arises in respect of income arising from employment as an official agent in the United Kingdom for a foreign state if conditions A and B are met. 2 Condition A is that the employee is neither— a a Commonwealth citizen, nor b a citizen of the Republic of Ireland. 3 Condition B is that the functions of the employment are not exercised in connection with a trade, business or other undertaking carried on for the purposes of profit. 4 Such income is also to be disregarded in estimating the amount of income for any income tax purposes. 5 In this section “ official agent ” means a person who is not a consul (as defined in section 300) but is employed on the staff of— a a consulate, or b an official department or agency of a foreign state. 6 Subsection (5)(b) does not apply to a department or agency which carries on a trade, business or other undertaking for the purposes of profit. Consular employees 302 1 No liability to income tax arises in respect of income arising from employment in the United Kingdom as a consular employee for a foreign state if— a Her Majesty by Order in Council directs that this section applies to the foreign state for the purpose of giving effect to a reciprocal arrangement with that state, and b condition A or B is met. 2 Condition A is that the employee is a national of the foreign state. 3 Condition B is that the employee is not a British citizen, a British overseas territories citizen, a British National (Overseas) or a British Overseas citizen. 4 In this section— “ consular employee ” includes any person employed for the purposes of the official business of a consular officer at— any consulate, any consular establishment, or any other premises used for those purposes, and “ reciprocal arrangement ” means a consular convention or other arrangement with a foreign state, making similar provision to that made by this section , sections 646A and 681A of this Act and section 771 of ITTOIA 2005 (relevant foreign income of consular officers and employees) in the case of Her Majesty’s consular officers or employees in that state. 5 An Order in Council under subsection (1) may limit the operation of this section in relation to a state in any way appearing to Her Majesty necessary or expedient having regard to the arrangement with the state. 6 Such an Order— a may be made so as to have effect from a date earlier than that on which it is made, but not earlier than the arrangement in question comes into force, and b may contain such transitional provisions as appear to Her Majesty necessary or expedient. 7 A statutory instrument containing such an Order is subject to annulment in pursuance of a resolution of the House of Commons. 8 This section does not affect section 301 (official agents). Visiting forces and staff of designated allied headquarters Visiting forces etc 303 1 No liability to income tax arises in respect of earnings if— a they are paid by the government of a designated country to a member of a visiting force of that country or of a civilian component of such a force, and b that person is not a British citizen, a British overseas territories citizen, a British National (Overseas) or a British Overseas citizen. 2 For the purposes of subsection (1)— a members of the armed forces of a designated country who are attached to a designated international military headquarters are treated as a visiting force of that country, and b whether a person is a member of a civilian component of such a force is to be determined accordingly. 3 No liability to income tax arises in respect of earnings if they are paid by a designated allied headquarters to an employee of a category for the time being agreed between Her Majesty’s government in the United Kingdom and the other members of the North Atlantic Council. 4 But where the employee is a British citizen, a British overseas territories citizen, a British National (Overseas) or a British Overseas citizen, subsection (3) only applies if it is necessary for it to do so to give effect to an agreement between parties to the North Atlantic Treaty. 4A No liability to income tax arises in respect of earnings if— a they are paid by the government of a designated country to a person belonging to the EU civilian staff, and b that person is not a British citizen, a British overseas territories citizen, a British National (Overseas) or a British Overseas citizen. 5 Subsections (1) and (2) are to be interpreted as if— a they were in Part 1 of the Visiting Forces Act 1952 (c. 67), and b references in that Act to a country to which a provision of that Act applies were references to a designated country. 6 In this section— “ allied headquarters ” means an international military headquarters established under the North Atlantic Treaty, ... “ designated ” means designated for the purpose in question by or under an Order in Council made for giving effect to an international agreement , and “ the EU civilian staff ” means designated for the purpose in question by or under an Order in Council made for giving effect to an international agreement. civilian personnel seconded by a member State to an EU institution for the purposes of activities (including exercises) relating to the preparation for, and execution of, tasks mentioned in Article 43(1) of the Treaty on European Union (tasks relating to a common security and defence policy), as amended from time to time, and civilian personnel (other than locally hired personnel)— made available to the EU by a member State to work with designated international military headquarters or a force of a designated country, or otherwise made available to the EU by a member State for the purposes of activities of the kind referred to in paragraph (a). Detached national experts Experts seconded to European Commission 304 1 No liability to income tax arises in respect of daily subsistence allowances paid by the European Commission to persons whose services are made available to the Commission by their employers under the detached national experts scheme. 2 “ The detached national experts scheme ” means— a the scheme relating to national experts seconded to the European Commission which was established by the Commission on 26th July 1988, as it has effect for the time being, or b any scheme having effect for the time being which replaces that scheme. Experts seconded to other European Union bodies 304A 1 No liability to income tax arises in respect of any subsistence allowances paid by a relevant EU body to persons who, because of their expertise in matters relating to the subject matter of the functions of the relevant EU body, have been seconded to the body by their employers. 2 Each of the following is a “relevant EU body”— a the European Medicines Agency, established as the European Agency for the Evaluation of Medicinal Products by Council Regulation ( EEC ) No 2309/93 of 22 July 1993, b the European Police College, established by Council Decision of 20 September 2005 (2005/681/ JHA ), c the European Banking Authority, established by Regulation ( EU ) No 1093/2010 of 24 November 2010, and d any other body established by an EU instrument which is designated as a relevant EU body for the purposes of this section by an order made by the Treasury. Offshore oil and gas workers Offshore oil and gas workers: mainland transfers 305 1 No liability to income tax arises in respect of— a the provision for an employee who has a permanent workplace at an offshore installation of— i transfer transport, ii related accommodation and subsistence, or iii local transport, or b the payment or reimbursement of reasonable expenses incurred by such an employee on such transport or accommodation and subsistence. 2 Subsection (1)(a)(ii) only applies if the related accommodation and subsistence is provided at reasonable cost. 3 In this section “ transfer transport ” means transport by sea or air between the mainland of Great Britain or Northern Ireland and the offshore installation, which meets conditions A and B. 4 Condition A is that the place of arrival or departure on the mainland is one to or from which transport between the mainland and the offshore installation is provided for employees generally. 5 Condition B is that the cost of the transport would not be deductible under Part 5 if the employee incurred and paid it. 6 In this section— “ related accommodation and subsistence ” means overnight accommodation and subsistence in the vicinity of the place of departure or arrival on the mainland, which is necessary because of the time at which transfer transport is to be taken, “ local transport ” means transport between a place where the employee is provided with related accommodation and subsistence and the place of departure or arrival on the mainland, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “workplace” and “permanent workplace” have the meaning given by section 339. Miners etc. Miners etc: coal and allowances in lieu of coal 306 1 No liability to income tax arises in respect of the provision of coal or smokeless fuel or an allowance paid in lieu of such provision if the employee is a colliery worker and the condition in subsection (2) is met. 2 That condition is that the amount of coal or fuel provided or in respect of which the allowance is paid does not substantially exceed the amount reasonably required for personal use. 3 That condition is assumed to be met unless the contrary is shown. 4 In this section “ colliery worker ” means a coal miner or any other person employed at or about a colliery otherwise than in clerical, administrative or technical work. Carers Carers: board and lodging 306A 1 For the purposes of this section an individual is employed as a home care worker if the duties of the employment consist wholly or mainly of the provision of personal care to another individual (“ the recipient ”) at the recipient's home, in a case where the recipient is in need of personal care because of— a old age, b mental or physical disability, c past or present dependence on alcohol or drugs, d past or present illness, or e past or present mental disorder. 2 No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of the provision of board or lodging (or both) to an individual employed as a home care worker if the provision is— a on a reasonable scale, b at the recipient's home, and c by reason of the individual's employment as a home care worker. Professional sportspersons Limited exemption for sporting testimonial payments 306B 1 This section applies to any sporting testimonial payments which are— a made out of money raised by a sporting testimonial (“the sporting testimonial”), and b treated by virtue of section 226E as earnings of a person (“S”). 2 No liability to income tax arises in respect of sporting testimonial payments to which this section applies. 3 Subsection (2) has effect subject to and in accordance with the following provisions. 4 It only applies— a if the controller of the relevant event or activity (or of all the relevant events or activities in a series) constituting the sporting testimonial is an independent person, b if S has not already benefitted from an exemption under this section in relation to one or more sporting testimonial payments made out of money raised by another sporting testimonial, and c where the sporting testimonial consists of a series of relevant events or activities taking place over more than a year, if the sporting testimonial payment is made out of money raised by events or activities taking place within the period of one year beginning with the day on which the first event or activity in the series took place. 5 It only applies to the first £100,000 of sporting testimonial payments made out of money raised by the sporting testimonial. 6 If sporting testimonial payments are made (out of money raised by the sporting testimonial) in two or more tax years, any part of the exempt amount that is not used in the first of those years is to be carried forward to the next tax year (and so on). 7 This section applies to sporting testimonial payments made to or to the order of the personal representatives of S (where S has died) but only if the payments are made within the period of 24 months beginning with the date of death. 8 In subsection (4)(a) “ independent person ” means a person who is not (or where the controller is a committee, a committee none of whose members are)— a S or a person connected with S, b an employer or former employer of S or a person connected with an employer or former employer of S, or c a person acting for or on behalf of a person mentioned in paragraph (a) or (b). 9 If the first relevant event or activity in a series took place before 6 April 2017, subsection (4)(c) has effect as if it referred to the year beginning with 6 April 2017. 10 Section 993 of ITA 2007 (meaning of “connected” persons) has effect for the purposes of this section. 11 Terms used in this section and section 226E have the same meaning as in that section. Chapter 9 Exemptions: pension provision Death or retirement benefit provision 307 1 No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of provision made by an employee’s employer under a registered pension scheme or otherwise for a retirement or death benefit. 1A Subsection (1) does not apply to provision made for insuring against the risk that a retirement or death benefit under an employer-financed retirement benefits scheme cannot be paid or given because of the employer’s insolvency. 1B In subsection (1A) “ employer-financed retirement benefits scheme ” has the same meaning as in Chapter 2 of Part 6 (see section 393A). 2 In this section “ retirement or death benefit ” means a pension, annuity, lump sum, gratuity or other similar benefit which will be paid or given to the employee , or paid or given in respect of the employee to any other individual or to a charity, in the event of the employee’s retirement or death. Exemption of contributions to registered pension scheme 308 No liability to income tax arises in respect of earnings where an employee’s employer makes contributions under a registered pension scheme in respect of the employee . Exemption of contributions to overseas pension scheme 308A 1 No liability to income tax arises in respect of earnings where an employer makes contributions under a qualifying overseas pension scheme in respect of an employee who is a relevant migrant member of the pension scheme. 2 In subsection (1)— “ qualifying overseas pension scheme ”, and “ relevant migrant member ”, have the same meaning as in Schedule 33 to FA 2004 (overseas pension schemes: migrant member relief). Independent advice in respect of conversions and transfers of pension scheme benefits 308B 1 No liability to income tax arises in respect of— a the provision to an employee or former employee of appropriate independent advice, or b the payment or reimbursement, to or in respect of an employee or former employee, of the cost of such advice, if conditions A to C are met. 2 Condition A is that the provision, payment or reimbursement is required by regulations under section 49 or 52 of the Pension Schemes Act 2015 (power to require employer to arrange independent advice in respect of conversions and transfers). 3 If condition A is met only as respects part of the payment or reimbursement because the amount of the payment or reimbursement exceeds the amount required to be paid or reimbursed, subsection (1) applies in respect of that part. 4 Condition B is that the provision, payment or reimbursement is not pursuant to relevant salary sacrifice arrangements. 5 Condition C is that such other requirements as may be specified in regulations made by the Treasury are satisfied in relation to the provision, payment or reimbursement. 6 In this section— “appropriate independent advice”— in relation to England and Wales and Scotland, has the meaning given by regulations under section 48 of the Pension Schemes Act 2015; in relation to Northern Ireland, has the meaning given by regulations under section 51 of that Act; “ relevant salary sacrifice arrangements ” means arrangements (whenever made, whether before or after the employment began) under which an employee gives up the right to receive an amount of general earnings or specific employment income in return for the provision of appropriate independent advice or the payment or reimbursement of the cost of such advice. Provision of pensions advice: limited exemption 308C 1 No liability to income tax arises in respect of— a the provision of relevant pensions advice to an employee or former or prospective employee, or b the payment or reimbursement of costs incurred, by or in respect of an employee or former or prospective employee, in obtaining relevant pensions advice, if Condition A or B is met. 2 But subsection (1) does not apply in relation to a person in a tax year so far as the value of the exemption in the person's case in that year exceeds £500. 3 The “ value of the exemption ”, in relation to a person and a tax year, is the amount exempted by subsection (1) from income tax in the person's case in that year, disregarding subsection (2) for this purpose. 4 If in a tax year there is in relation to an individual more than one person who is an employer or former employer, subsections (1) to (3) apply in relation to the individual as employee or former or prospective employee of any one of those persons separately from their application in relation to the individual as employee or former or prospective employee of any other of those persons. 5 “ Relevant pensions advice ”, in relation to a person, means information, or advice, in connection with— a the person's pension arrangements, or b the use of the person's pension funds. 6 Condition A is that the relevant pensions advice, or payment or reimbursement, is provided under a scheme that is open— a to the employer's employees generally, or b generally to the employer's employees at a particular location. 7 Condition B is that the relevant pensions advice, or payment or reimbursement, is provided under a scheme that is open generally to the employer's employees, or generally to those of the employer's employees at a particular location, who— a have reached the minimum qualifying age, or b meet the ill-health condition. 8 The “ minimum qualifying age ”, in relation to an employee, means the employee's relevant pension age less 5 years. 9 “ Relevant pension age ”, in relation to an employee, means— a if any of paragraphs 22, 23, 23ZB or 23ZC of Schedule 36 to FA 2004 apply in relation to the employee, the lowest protected pension age that applies as a result of those paragraphs (in relation to the employee or, as the case may be, to sums or assets that relate to the employee), or b in any other case, the employee's normal minimum pension age, as defined by section 279(1) of FA 2004. 10 The “ill-health condition” is met by an employee if the employer is satisfied, on the basis of evidence provided by a registered medical practitioner, that the employee is (and will continue to be) incapable of carrying on his or her occupation because of physical or mental impairment. Chapter 10 Exemptions: termination of employment Redundancy payments Limited exemptions for statutory redundancy payments 309 1 No liability to income tax in respect of earnings arises by virtue of a redundancy payment or an approved contractual payment, except where subsection (2) applies. 2 Where an approved contractual payment exceeds the amount which would have been due if a redundancy payment had been payable, the excess is liable to income tax. 3 No liability to income tax in respect of employment income other than earnings arises by virtue of a redundancy payment or an approved contractual payment, except where it does so by virtue of Chapter 3 of Part 6 (payments and benefits on termination of employment etc.). 4 For the purposes of this section— a a statutory payment in respect of a redundancy payment is to be treated as paid on account of the redundancy payment, and b a statutory payment in respect of an approved contractual payment is to be treated as paid on account of the approved contractual payment. 5 In this section— “ approved contractual payment ” means a payment to a person on the termination of the person’s employment under an agreement in respect of which an order is in force under section 157 of ERA 1996 or Article 192 of ER(NI)O 1996, “ redundancy payment ” means a redundancy payment under Part 11 of ERA 1996 or Part 12 of ER(NI)O 1996, and “ statutory payment ” means a payment under section 167(1) of ERA 1996 or Article 202(1) of ER(NI)O 1996. 6 In subsection (5) “ employment ”, in relation to a person, has the meaning given in section 230(5) of ERA 1996 or Article 3(5) of ER(NI)O 1996. Outplacement benefits Counselling and other outplacement services 310 1 No liability to income tax arises in respect of— a the provision of services to a person in connection with the cessation of the person’s employment, or b the payment or reimbursement of— i fees for such provision, or ii travelling expenses incurred in connection with such provision, if conditions A to D and, in the case of travel expenses, condition E are met. 2 Condition A is that the only or main purpose of the provision of the services is to enable the person to do either or both of the following— a to adjust to the cessation of the employment, or b to find other gainful employment (including self-employment). 3 Condition B is that the services consist wholly of any or all of the following— a giving advice and guidance, b imparting or improving skills, c providing or making available the use of office equipment or similar facilities. 4 Condition C is that the person has been employed ... in the employment which is ceasing throughout the period of 2 years ending— a at the time when the services begin to be provided, or b if earlier, at the time when the employment ceases. 5 Condition D is that the opportunity to receive the services, on similar terms as to payment or reimbursement of any expenses incurred in connection with their provision, is available— a generally to employees or former employees of the person’s employer in that employment, or b to a particular class or classes of them. 6 Condition E is that the travel expenses are expenses— a in respect of which, on the assumptions in subsection (7), mileage allowance relief under Chapter 2 of this Part would be available if no mileage allowance payments had been made, or b which, on those assumptions, would be deductible under Part 5. 7 The assumptions are— a that receiving the services is one of the duties of the employee’s employment, b that the employee incurs and pays the expenses, and c if the employment has in fact ceased, that it continues. 8 In this section “ mileage allowance payments ” has the meaning given by section 229(2). Retraining courses 311 1 No liability to income tax arises in respect of the payment or reimbursement of retraining course expenses by a person (“ the employer ”) if the course conditions, the employment conditions and, in the case of travel expenses, the conditions in subsection (5) are met. 2 In subsection (1) “ retraining course expenses ” means— a fees for the attendance of another person (“ the employee ”) at a training course, b travelling expenses incurred in connection with it, c fees for an examination taken during or at the end of it, or d the cost of any books which are essential for a person attending it. 3 The course conditions are that— a the course provides training designed to impart or improve skills or knowledge relevant to, and intended to be used in the course of, gainful employment (including self-employment) of any description, b it is entirely devoted to the teaching or practical application (or both) of the skills or knowledge, and c it lasts no more than two years . ... d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 The employment conditions are that— a the employee begins the course while employed by the employer or within the period of one year after the employment ceases, b the employee ceases to be employed by the employer before the end of the period of 2 years beginning at the end of the course and is not re-employed by the employer within the period of 2 years after so ceasing, c the employee is employed ... in the employment which is ceasing throughout the period of 2 years ending— i when the employee begins the course, or ii if earlier, when the employment ceases, and d the opportunity to undertake the course, on similar terms as to payment or reimbursement of amounts within subsection (1), is available— i generally to the employee’s fellow employees or former fellow employees in that employment, or ii to a particular class or classes of them. 5 The travel expenses must be— a expenses in respect of which, on the assumptions in subsection (6), mileage allowance relief under Chapter 2 of this Part would be available if no mileage allowance payments had been made, or b expenses which, on those assumptions, would be deductible under Part 5. 6 The assumptions are— a that attendance at the course is one of the duties of the employee’s employment, b that the employee incurs and pays the expenses, and c if the employee has in fact ceased to be employed by the employer, that the employee continues to be employed by the employer. 7 In this section “ mileage allowance payments ” has the meaning given by section 229(2). Recovery of tax 312 1 This section applies if— a a person’s liability to tax for a tax year has been determined on the assumption that section 311(1) applies, and b subsequently— i the condition in section 311(4)(a) is not met because of the person’s failure to begin the course within the period of one year after ceasing to be employed, or ii the condition in section 311(4)(b) is not met because of the person’s continued employment or re-employment. 2 An assessment of an amount or further amount of tax due as a result of the condition not being met may be made under section 29(1) of TMA 1970. 3 Such an assessment must be made before the end of the period of 6 years immediately following the end of the tax year in which subsection (1) first applies. 4 If subsection (1)(b)(i) or (ii) applies, the person’s employer or former employer must give an officer of Revenue and Customs a notice containing particulars of the person’s failure to begin the course or continued employment or re-employment within 60 days of coming to know of it. 5 If an officer of Revenue and Customs has reason to believe that a person has failed to give such a notice, the officer may by notice require the person to provide such information as the officer may reasonably require for the purposes of this section about— a the failure to begin the course, b the continued employment, or c the re-employment. 6 A notice under subsection (5) may specify a time (not less than 60 days) within which the required information must be provided. CHAPTER 10A Exemptions: bonus payments by certain employers Limited exemption for qualifying bonus payments 312A 1 This section applies in relation to qualifying bonus payments made, in a tax year (“the tax year”), by an employer which is a company to an employee or former employee of the employer. 2 No liability to income tax arises in respect of the qualifying bonus payments if, or to the extent that, the total chargeable amount in respect of those payments does not exceed £3,600 (“the exempt amount”). 3 If qualifying bonus payments are made to the same person by two or more employers in the tax year, subsection (2) applies separately in relation to the total payments made by each employer, unless subsection (4) applies. 4 If two or more employers are members of the same group at the time each of them first makes a qualifying bonus payment to the employee or former employee in the tax year, subsection (2) applies as if the reference to the qualifying bonus payments were to all the qualifying bonus payments made by those employers to the employee or former employee in that tax year. 5 If, in a tax year— a an employer makes a payment when it is a member of a group, and b later in that tax year the employer ceases to be a member of that group, the employer is treated for the purposes of this section as remaining a member of that group for the remainder of the tax year (without prejudice to it also being a member of any other group). 6 In applying subsection (2)— a the exempt amount is set against payments in the order in which they are made, and b if two or more payments are made on the same day, which together take the total payments made in the tax year over the exempt amount, subsection (7) applies to determine the amount of each of those payments which is exempt. 7 In a case within subsection (6)(b), the amount of a payment which is exempt is given by the formula— P SP × REA where— P is the amount of the payment, SP is the sum of that payment and the other payments made on the same day, and REA is so much of the exempt amount as remains after taking account of any qualifying bonus payments previously made in the tax year. 8 Where subsection (2) applies separately to different payments by virtue of subsection (3), subsections (6) and (7) also apply to those payments separately. 9 The Treasury may by order increase or reduce the sum of money specified in subsection (2). 10 A statutory instrument containing an order under this section which reduces the sum of money specified may not be made unless a draft of it has been laid before and approved by a resolution of the House of Commons. 11 In this section “chargeable amount”, in respect of a qualifying bonus payment, means the amount of employment income which would be charged to tax in respect of that qualifying bonus payment, apart from this section. “Qualifying bonus payments” 312B 1 A payment made by an employer (“E”) to an employee or former employee is a qualifying bonus payment if— a it does not consist of regular salary or wages, b it is awarded under a scheme which meets the participation requirement and the equality requirement (see section 312C), c E meets the trading requirement (see section 312D) throughout the qualifying period, d E meets the indirect employee-ownership requirement (see section 312E) throughout the qualifying period, e E meets the office-holder requirement (see section 312F) at the time the payment is made and on at least the requisite number of days in the qualifying period (whether or not those days are consecutive), f E is not a service company (see section 312G), g the payment is not excluded (see section 312H), and h where it is a payment to a former employee, it is made in the period of 12 months beginning with the day the employment ceased. 2 In this section “ the qualifying period ”, in relation to a payment, means the period of 12 months ending with the day on which the payment is made. 3 But in a case where E meets the indirect employee-ownership requirement on the day on which the payment is made— a if the controlling interest requirement was first met during that 12 month period, the qualifying period does not include any time before it was met, and b if the all-employee benefit requirement was first met during that 12 month period, the qualifying period does not include any time before that requirement was met. 4 In this section “ the requisite number of days ” means— a if the qualifying period is 12 months, the number of days in that period reduced by 90, and b if the qualifying period is a shorter period by virtue of subsection (3), the number of days in that period reduced by the corresponding fraction of 90 days. Section 312B: the participation and equality requirements 312C 1 For the purposes of section 312B— a the participation requirement is that all persons in relevant employment when the award is determined must be eligible to participate in that and any other award under the scheme, and b the equality requirement is that every employee who participates in an award under the scheme must do so on the same terms. 2 A person is in “relevant employment” if— a where E is a member of a group, the person is employed by any company which is a member of the group, and b in any other case, the person is employed by E. 2A The participation requirement is not infringed by reason of the exclusion of directors of the company from participating in an award. 3 The participation requirement is not infringed by reason of a person in relevant employment being excluded from participating in an award because, at the time the award is determined, the person has less than the minimum period of continuous service in relevant employment required by E. But the minimum period required by E for this purpose must not exceed 12 months. 4 The participation requirement is not infringed— a by reason of a person being excluded from participating in an award where— i disciplinary proceedings have been taken against the person by E which have resulted in a finding of gross misconduct against the person, and ii that finding was made in the period of 12 months immediately before the time the award is determined, b by reason of a person's eligibility to participate in an award being conditional, in a case where the person is at the time of the award subject to disciplinary proceedings taken by E, upon those proceedings being concluded and no finding of gross misconduct being made against that person, or c by a person being treated as never having been eligible to participate in an award where, after the award was made but before the payment is made— i a finding of gross misconduct is made against that person in disciplinary proceedings taken by E after the award was made, or ii that person is summarily dismissed from the employment. 5 The equality requirement is infringed if the amount of an award to an employee under the scheme is determined by reference to factors other than those mentioned in subsection (6). 6 The equality requirement is not infringed by reason of the amount of an award under the scheme to employees participating in the award being determined by reference to— a an employee's remuneration, b an employee's length of service, or c hours worked by an employee; but this is subject to subsections (7) and (8). 7 The equality requirement is infringed if an award is made on terms such that some (but not all) of the employees participating in the award receive nothing. 8 If the amount of an award is determined by reference to more than one of the factors mentioned in subsection (6), the equality requirement is infringed unless— a each factor gives rise to a separate entitlement related to the level of remuneration, length of service or (as the case may be) hours worked, and b the total entitlement is the sum of those separate entitlements. 9 Subject to subsection (6), the equality requirement is infringed if any feature of the scheme has, or is likely to have, the effect of conferring benefits wholly or mainly on those participating in the award who are— a directors or former directors, or b employees receiving the higher or highest levels of remuneration, or c employees who— i are employed in a particular part of the business carried on by E or, if E is a member of a group, the group, or ii carry on particular kinds of activities. 10 In subsections (1)(b), (5), (6), (7) and (9) references to an employee include a former employee, so, when applying those subsections in relation to a former employee, any reference to remuneration, length of service, hours worked, being employed in a particular part of a business or carrying on particular activities is to be read as relating to that former employment. Section 312B: the trading requirement 312D 1 For the purposes of section 312B, a company meets the trading requirement if— a it is a trading company which is not a member of a group, or b it is a member of a trading group. 2 “ Trading company ” means a company carrying on trading activities whose activities do not include to a substantial extent activities other than trading activities. 3 “ Trading group ” means a group— a one or more of whose members carry on trading group activities, and b the activities of whose members, taken together, do not include to a substantial extent activities other than trading group activities. 4 In this section— “ trading activities ” means activities carried on by the company in the course of, or for the purposes of, a trade being carried on by it; “ trading group activities ” means activities carried on by a member of the group in the course of, or for the purposes of, a trade being carried on by any member of the group. 5 For the purposes of determining whether a company is a trading company or a member of a trading group— a the activities of the members of a group are to be treated as one business (with the result that activities are disregarded to the extent that they are intra-group activities), and b a business carried on by a company in partnership with one or more other persons is to be treated as not being a trading activity. Section 312B: the indirect employee-ownership requirement 312E 1 For the purposes of section 312B, a company meets the indirect employee-ownership requirement if— a a settlement meets the controlling interest requirement in respect of— i the company, or ii if the company is a member of a trading group, but not the principal company, that principal company, and b the settlement meets the all-employee benefit requirement. 2 For this purpose— a section 236M of TCGA 1992 applies to determine if a settlement meets the controlling interest requirement in respect of the company mentioned in subsection (1)(a)(i) or (ii) (as the case may be), and b sections 236J and 236K of that Act apply to determine if the settlement meets the all-employee benefit requirement (but see subsection (3)). 3 If a settlement would not otherwise meet the all-employee benefit requirement at any time during the qualifying period, section 236L of TCGA 1992 applies for the purposes of subsection (1)(b), unless the all-employee benefit requirement has (ignoring that section) previously been met at any time in the period— a beginning with 10 December 2013, and b ending immediately before that time. 4 For the purposes of subsections (2) and (3)— a in sections 236I to 236M of TCGA 1992 references to C are to be read as references to the company in respect of which the settlement is required to meet the controlling interest requirement (see subsection (1)(a)), and b section 236L of that Act applies as if the reference in subsection (1)(c) of that section to the period of 12 months ending with the time in question were a reference to the period of 12 months ending with the date the payment is made (even if the qualifying period is a period of less than 12 months by virtue of section 312B(3)). Section 312B: the office-holder requirement 312F 1 For the purposes of section 312B, a company meets the officer-holder requirement if the appropriate fraction does not exceed 2/5. 2 “ The appropriate fraction ” means— ND NE where— ND is the number of persons who are one or both of the following— a director or other office-holder of the company; an employee of the company connected with a person within paragraph (a); NE is the number of persons who are employees (or office-holders) of the company. “Service company” 312G 1 For the purposes of section 312B, “ service company ” means— a a managed service company within the meaning of section 61B, or b a company (“SC”) in respect of which Conditions A and B are met. 2 Condition A is that the business carried on by SC consists substantially of the provision of the services of persons employed by it. 3 Condition B is that the majority of those services are provided to persons— a to whom subsection (4) applies, but b who are not members of the same group as the company which makes the payment. 4 This subsection applies to— a a person who controls or has controlled, or two or more persons who together control or have controlled, SC or any company of which SC is a 51% subsidiary at the time the payment is made, b a person who, or two or more persons who together, at any time before the time the payment is made— i employed all or a majority of the employees of SC, or ii employed all or a majority of the employees of SC and other companies which are members of the same group as SC at the time the payment is made (taken together), and c any company which is a 51% subsidiary of, controlled by or connected or associated with, any person within paragraph (a) or (b). 5 For the purposes of subsection (4)— a a partnership is to be treated as a single person, and b where a partner (alone or together with others) has control of a company, the partnership is to be treated as having (in the same way) control of that company. 6 The following provisions apply for the purposes of this section— a section 449 of CTA 2010 (“associated company”); b section 995 of ITA 2007 (meaning of “control”); c section 286 of TCGA 1992 (connected persons: interpretation). Excluded payments 312H 1 For the purposes of section 312B, a payment is “excluded” if the employee is a party to arrangements (whether made before or after the beginning of the employee's employment) under which— a the employee gives up the right to receive an amount of general earnings or specific employment income in return for the provision of the payment, or b the employee and employer agree that the employee is to receive the payment rather than receive some other description of employment income. 2 In this section references to an employee include a former employee. Interpretation of Chapter 10A 312I 1 In this Chapter— “ company ” has the meaning given by section 170(9) of TCGA 1992; “ trade ” means any trade which is conducted on a commercial basis and with a view to the realisation of profits. 2 In this Chapter— a references to a group, to membership of a group, to the principal company of a group or to being members of the same group, are to be construed in accordance with section 170 of TCGA 1992, and b references to a group are to be construed with any necessary modifications where applied to a company incorporated under the law of a country or territory outside the United Kingdom. 3 For the purposes of this Chapter, a payment is treated as made when it would be treated as received for the purposes of Chapter 4 of Part 2 if it were not a qualifying bonus payment (see section 18). 4 In this Chapter references to a payment to an employee or former employee include a payment to the personal representatives of an employee or former employee who has died if the payment is made within the period of 12 months beginning with the date of death. Chapter 11 Miscellaneous exemptions Living accommodation Repairs and alterations to living accommodation 313 1 This section applies where living accommodation is provided by reason of a person’s employment. 2 No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of— a alterations and additions to the premises which are of a structural nature, or b landlord’s repairs to the premises. 3 In this section “ landlord’s repairs ” means repairs of a kind which are the obligation of the lessor under the covenants implied by section 11(1) of the Landlord and Tenant Act 1985 (c. 70) (lessor’s repairing obligations in short leases) where premises are let under a lease to which that section applies. Council tax etc. paid for certain living accommodation 314 1 This section applies if living accommodation provided for an employee falls within the exception in one of the following provisions— section 99(1) (accommodation necessary for proper performance of duties), section 99(2) (accommodation provided for better performance of duties), or section 100 (accommodation provided as a result of security threat). 2 No liability to income tax arises by virtue of— a any payment to, for or on behalf of the employee, or b any reimbursement of any payment by the employee, in respect of council tax or rates, or water or sewerage charges, in respect of the accommodation. Limited exemption for expenses connected with certain living accommodation 315 1 This section applies if— a living accommodation is provided for an employee in a tax year, and b conditions A and B are met. 2 Condition A is that the accommodation falls within the exception in one of the following provisions— section 99(1) (accommodation necessary for proper performance of duties), section 99(2) (accommodation provided for better performance of duties), or section 100 (accommodation provided as a result of security threat). 3 Condition B is that there is an amount of earnings from the employment in the tax year by virtue of expenditure, or the reimbursement to the employee of expenditure, on— a heating, lighting or cleaning the premises, b repairs to the premises, their maintenance or decoration, or c the provision in the premises of furniture, equipment or other items which are normal for domestic occupation. 4 If this section applies, no liability to income tax arises in respect of the earnings mentioned in subsection (3) to the extent that they exceed— ( 10 % × NE × DA DE ) − SMG where— DA is the number of reckonable days in the tax year (a “reckonable day” being a day on which— (a) the accommodation is provided, and (b) the employment is held by the employee), DE is— (a) the number of days in that year, or (b) if the employment is held for only part of that year, the number of days in that part, NE is the net amount of the earnings from the employment in the tax year (see subsection (5)), SMG is, where the expenses are incurred by a person other than the employee, so much of any sum made good by the employee to that other person as is properly attributable to the expenses. 5 To calculate the net amount of the earnings from the employment— Step 1 Take the earnings from the employment, leaving out of account the expenses in question. Step 2 Add, in the case of employment by a company, the earnings from any employment by an associated company. A company is “associated” with another for this purpose if one has control of the other or both are under the control of the same person. Step 3 Deduct any deductions allowable under— a section 232 (giving effect to mileage allowance relief) or Part 5 of this Act, b sections 188 to 194 of FA 2004 (contributions to registered pension schemes), or c section 262 of CAA 2001 (capital allowances to be given effect by treating them as deductions from earnings). Work accommodation, supplies etc. Accommodation, supplies and services used in employment duties 316 1 No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of the provision for an employee of accommodation, supplies or services used by the employee in performing duties of the employment if conditions A and B are met. 2 Condition A is that any use of the accommodation, supplies or services for private purposes by the employee or members of the employee’s family or household is not significant. 3 For this purpose, use “ for private purposes ” means— a use that is not use in performing the duties of the employee’s employment, and b use that is at the same time both use in performing the duties of an employee’s employment and other use. 4 Condition B is that where the provision is otherwise than on premises occupied by the person making it— a its sole purpose is to enable the employee to perform the duties of the employee’s employment, and b what is provided is not an excluded benefit. 5 The following are excluded benefits unless regulations under subsection (6) provide otherwise— a a motor vehicle, boat or aircraft, and b a benefit that involves— i the extension, conversion or alteration of living accommodation, or ii the construction, extension, conversion or alteration of a building or other structure on land adjacent to and enjoyed with such accommodation. 6 The Treasury may make provision by regulations as to what is an excluded benefit for the purposes of subsection (4)(b). 7 The regulations may provide that a benefit is an excluded benefit only if such conditions as may be prescribed are met as to the terms on which, and persons to whom, it is provided. Homeworker’s additional household expenses 316A 1 This section applies where an employer makes a payment to an employee in respect of reasonable additional household expenses which the employee incurs in carrying out duties of the employment at home under homeworking arrangements. 2 No liability to income tax arises in respect of the payment. 3 In this section, in relation to an employee— “ homeworking arrangements ” means arrangements between the employee and the employer under which the employee regularly performs some or all of the duties of the employment at home; and “ household expenses ” means expenses connected with the day to day running of the employee’s home. Workplace meals Subsidised meals 317 1 No liability to income tax arises in respect of the provision for an employee by the employer of free or subsidised meals if they are provided— a in a canteen, or b on the employer’s business premises, and conditions A to D are met. 2 Condition A is that the meals are provided on a reasonable scale. 3 Condition B is that all the employer’s employees or all of them at a particular location may obtain one or both of the following— a a free or subsidised meal, or b a free or subsidised meal voucher or token. 4 Condition C is that if the meals are provided in the restaurant or dining room of a hotel or a catering or similar business at a time when meals are being served to the public— a part of the restaurant or dining room is designated for the use of employees only, and b the meals are taken in that part. 4A Condition D is that the provision is not pursuant to— a relevant salary sacrifice arrangements, or b relevant flexible remuneration arrangements. 5 In this section “ free or subsidised meal voucher or token ” means a voucher, ticket, pass or other document or token which— a is intended to enable a person to obtain a meal, and b is provided to the employee free of charge or for less than the cost of the meals to be obtained by it. 5A In this section— “ relevant salary sacrifice arrangements ” means arrangements (whenever made, whether before or after the employment began) under which the employee gives up the right to receive an amount of general earnings or specific employment income in return for the provision of free or subsidised meals; “ relevant flexible remuneration arrangements ” means arrangements (whenever made, whether before or after the employment began) under which the employee and employer agree that the employee is to be provided with free or subsidised meals rather than receive some other description of employment income. 6 In this section “ meals ” includes light refreshments. Childcare Childcare: exemption for employer-provided care 318 1 No liability to income tax arises in respect of the provision for an employee of care for a child if conditions A to D are met. For the meaning of “care” and “child”, see section 318B. 2 If those conditions are met only as respects part of the provision, no such liability arises in respect of that part. 3 Condition A is that the child— a is a child or stepchild of the employee and is maintained (wholly or partly) at the employee’s expense, b is resident with the employee, or c is a person in respect of whom the employee has parental responsibility. For the meaning of “parental responsibility”, see section 318B. 4 Condition B is that— a the premises on which the care is provided are not used wholly or mainly as a private dwelling, and b any applicable registration requirement is met. 5 The registration requirements are— za in England, that under ... Part 3 of the Childcare Act 2006; a in ... Wales, that under Part 2 of the Children and Families (Wales) Measure 2010 ; b in Scotland, that under Part 5 of the Public Services Reform (Scotland) Act 2010 ; c in Northern Ireland, that under Part XI of the Children (Northern Ireland) Order 1995. 6 Condition C is that— a the premises on which the care is provided are made available by the scheme employer alone, or b the partnership requirements are met. In this section “ scheme employer ” means the employer operating the scheme under which the care is provided (who need not be the employer of the employee). 7 The partnership requirements are— a that the care is provided under arrangements made by persons who include the scheme employer, b that the premises on which it is provided are made available by one or more of those persons, and c that under the arrangements the scheme employer is wholly or partly responsible for financing and managing the provision of the care. 8 Condition D is that the care is provided under a scheme that is open— a to the scheme employer’s employees generally, or b generally to those of the scheme employer’s employees at a particular location, and that the employee to whom it is provided is either an employee of the scheme employer or is an employee working at the same location as employees of the scheme employer to whom the scheme is open. Childcare: limited exemption for other care 318A 1 If conditions A to D are met in relation to the provision for an eligible employee of care for a child— a no liability to income tax arises by virtue of section 62 (general definition of earnings), and b liability to income tax by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) arises only in respect of so much of the amount treated as earnings in respect of the benefit by virtue of section 203(1) or 203A(1) (as the case may be) as exceeds the exempt amount. For the meaning of “eligible employee”, see section 318AZA, and for the meaning of “care” and “child”, see section 318B. 2 If those conditions are met only as respects part of the provision, subsection (1) applies in respect of that part. 3 Condition A is that the child— a is a child or stepchild of the employee and is maintained (wholly or partly) at the employee’s expense, or b is resident with the employee and is a person in respect of whom the employee has parental responsibility. For the meaning of “parental responsibility”, see section 318B. 4 Condition B is that the care is qualifying child care. For the meaning of “qualifying child care”, see section 318C. 5 Condition C is that the care is provided under a scheme that is open— a to the employer’s eligible employees generally, or b generally to those at a particular location. 5A Where the scheme under which the care is provided involves— a relevant salary sacrifice arrangements, or b relevant flexible remuneration arrangements, Condition C is not prevented from being met by reason only that the scheme is not open to relevant low-paid employees. 5B In subsection (5A)— “ relevant salary sacrifice arrangements ” means arrangements (whenever made) under which the employees for whom the care is provided give up the right to receive an amount of general earnings or specific employment income in return for the provision of the care; “ relevant flexible remuneration arrangements ” means arrangements (whenever made) under which the employees for whom the care is provided agree with the employer that they are to be provided with the care rather than receive some other description of employment income; “ relevant low-paid employees ” means any of the employer's employees who are remunerated by the employer at a rate such that, if the relevant salary sacrifice arrangements or relevant flexible remuneration arrangements applied to them, the rate at which they would then be so remunerated would be likely to be lower than the national minimum wage. 5C Condition D is that the employer has, at the required time, made an estimate of the employee's relevant earnings amount for the tax year in respect of which the care is provided (see section 318AA). 6 For the purposes of this section the “exempt amount”, in any tax year, is the appropriate amount for each qualifying week in that year. 6A In subsection (6) “the appropriate amount”, in the case of an employee, means— a if the relevant earnings amount in the case of the employee for the tax year, as estimated in accordance with subsection (5C), exceeds the higher rate limit for the tax year, £25 , b if the relevant earnings amount in the case of the employee for the tax year, as so estimated, exceeds the basic rate limit for the tax year but does not exceed the higher rate limit for the tax year, £28, and c otherwise, £55. 7 A “ qualifying week ” means a tax week in which care is provided for a child in circumstances in which conditions A to C are met. A “ tax week ” means one of the successive periods in a tax year beginning with the first day of that year and every seventh day after that (so that the last day of a tax year or, in the case of a tax year ending in a leap year, the last two days is treated as a separate week). 8 An employee is only entitled to one exempt amount even if care is provided for more than one child. But it does not matter that another person may also be entitled to an exempt amount in respect of the same child. 9 An employee is not entitled to an exempt amount under this section and under section 270A (limited exemption for childcare vouchers) in respect of the same tax week. Meaning of “eligible employee” 318AZA 1 An employee is an eligible employee for the purposes of section 318A if conditions A to C are met in relation to the employee. 2 Condition A is that the employee— a was employed by the employer immediately before the relevant day, and b has not ceased to be employed by the employer on or after that day. 3 “ The relevant day ” means the day specified by the Treasury in regulations for the purposes of this section. 4 Condition B is that there has not been a period of 52 tax weeks ending on or after the relevant day which has not included at least one qualifying week. 5 In subsection (4)— “ qualifying week ” means a tax week in which care for a child has been provided for the employee under the scheme by the employer in circumstances in which conditions A to D in section 318A are met, and “ tax week ” has the meaning given by section 318A(7). 6 Condition C is that the employee has not given the employer a childcare account notice. 7 A “childcare account notice” is a written notice informing the employer that the employee wishes to leave the scheme in order to be able to open a childcare account under section 17 of the Childcare Payments Act 2014 or enable the employee's partner to do so. 8 In subsection (7) “ partner ” is to be read in accordance with regulations made under section 3(5) of that Act. 9 For the meaning of “care” and “child”, see section 318B. Meaning of “relevant earnings amount” and “required time” 318AA 1 For the purposes of section 318A, “relevant earnings amount”, in the case of an employee provided with care by an employer for any qualifying week in a tax year, means— a the aggregate of— i the amount of any relevant earnings for the tax year from employment by the employer, and ii any amounts treated under Chapters 2 to 12 of Part 3 as earnings from such employment, less b the aggregate of any excluded amounts. 2 But if the employee becomes employed by the employer during the tax year, what would otherwise be the amount of the aggregate mentioned in subsection (1)(a) is the relevant multiple of that amount; and the relevant multiple is— 365 RD where RD is the number of days in the period beginning with the day on which the employee becomes employed by the employer and ending with the tax year. 3 In subsection (1)— “ relevant earnings ” has the same meaning as in subsection (1)(a) of section 270B (see subsection (3) of that section), and “ excluded amounts ” has the same meaning as in subsection (1)(b) of section 270B (see subsection (4) of that section). 4 In section 318A “the required time”, in the case of an employee, means— a if the employee joins the scheme under which the care is provided at a time during the tax year, that time, and b otherwise, the beginning of the tax year. 5 For the purposes of subsection (5)(a) the employee is taken to join the scheme as soon as— a the employer has agreed that care will be provided under the scheme for the employee, and b there is a child falling within section 318A(3)(a) or (b) in relation to the employee. 6 The Treasury may by order amend this section. Childcare: meaning of “care”, “child” and “parental responsibility” 318B 1 For the purposes of sections 318 to 318AZA (exemptions for employer-provided or employer-contracted childcare) “ care ” means any form of care or supervised activity that is not provided in the course of the child’s compulsory education. 2 For the purposes of those sections a person is a “child” until the last day of the week in which falls the 1st September following the child’s fifteenth birthday (or sixteenth birthday if the child is disabled). 3 For the purposes of subsection (2) a child is disabled if— a a disability living allowance or personal independence payment is payable in respect of him, or has ceased to be payable solely because he is a patient, aa disability assistance is given in respect of the child in accordance with regulations made under section 31 of the Social Security (Scotland) Act 2018, b he is certified as severely sight impaired or blind by a consultant ophthalmologist, or c he ceased to be certified as severely sight impaired or blind by a consultant ophthalmologist within the previous 28 weeks. 4 In subsection (3)(a) “ patient ” means a person (other than a person who is serving a sentence imposed by a court in a prison or youth custody institution or, in Scotland, a young offenders' institution) who is regarded as receiving free in-patient treatment within the meaning of the Social Security (Hospital In-Patients) Regulations 1975 or the Social Security (Hospital In-Patients) Regulations (Northern Ireland) 1975. 5 For the purposes of sections 318 and 318A “ parental responsibility ” means all the rights, duties, powers, responsibilities and authority which by law a parent of a child has in relation to the child and the child’s property. 6 In this section and section 318C “ local authority ” means— a in relation to England, the council of a county or district, a metropolitan district, a London Borough, the Common Council of the City of London or the Council of the Isles of Scilly; b in relation to Wales, the council of a county or county borough; c in relation to Scotland, a council constituted under section 2 of the Local Government etc. (Scotland) Act 1994. Childcare: meaning of “qualifying child care” 318C 1 For the purposes of section 318A “ qualifying child care ” means registered or approved care within any of subsections (2) to (6) below that is not excluded by subsection (7) below. 2 Care provided for a child in England is registered or approved care if it is provided— a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ba by a person registered under Part 3 of the Childcare Act 2006, c by or under the direction of the proprietor of a school on the school premises (subject to subsection (2B)), or d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... ea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . eb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f by a carer supplied by a person registered under Chapter 2 of Part 1 of the Health and Social Care Act 2008 in respect of the activity within paragraph 1 of Schedule 1 (regulated activities: personal care) to the Health and Social Care Act 2008 (Regulated Activities) Regulations 2014. g . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2A In subsection (2)(c)— “proprietor”, in relation to a school, means— the governing body incorporated under section 19 of the Education Act 2002, or if there is no such body, the person or body of persons responsible for the management of the school; “school” means a school that Her Majesty’s Chief Inspector of Education, Children’s Services and Skills (the “Chief Inspector”) is or may be required to inspect; “school premises” means premises that may be inspected as part of an inspection of the school by the Chief Inspector. 2B Care provided for a child in England is not registered or approved care under subsection (2)(c) if— a it is provided during school hours for a child who has reached compulsory school age, or b it is provided in breach of a requirement to register under Part 3 of the Childcare Act 2006. 3 Care provided for a child in Wales is registered or approved care if it is provided— a by a person registered under Part 2 of the Children and Families (Wales) Measure 2010 , b by a person in circumstances where, but for article 11, 12 or 14 of the Child Minding and Day Care Exceptions (Wales) Order 2010, the care would be day care for the purposes of Part 2 of the Children and Families (Wales) Measure 2010, c in the case of care provided for a child out of school hours ..., by a school on school premises or by a local authority, ... d by a child care provider approved by an organisation accredited under the Tax Credit (New Category of Child Care Provider) Regulations 1999 ... e by a person who is employed or engaged under a contract for services to provide care and support by the provider of a domiciliary support service within the meaning of Part 1 of the Regulation and Inspection of Social Care (Wales) Act 2016 ... f by a child care provider approved under the Tax Credits (Approval of Child Care Providers) (Wales) Scheme 2007 or the Approval of Home Childcare Providers (Wales) Scheme 2021 g by a foster parent in relation to a child (other than one whom the foster parent is fostering) in circumstances where, but for the fact that the child is too old, the care would be— i child minding, or day care, for the purposes of Part 2 of the Children and Families (Wales) Measure 2010, or ii qualifying child care for the purposes of the Tax Credits (Approval of Child Care Providers) (Wales) Scheme 2007 or the Approval of Home Childcare Providers (Wales) Scheme 2021 . 4 Care provided for a child in Scotland is registered or approved care if it is provided— a by a person in circumstances where the care service provided by him— i consists of child minding or of day care of children as defined by paragraphs 12 and 13 respectively of schedule 12 to the Public Services Reform (Scotland) Act 2010 , and ii is registered under Chapter 3 of Part 5 of that Act ... or b by a local authority in circumstances where the care service provided by the local authority— i consists of child minding or of day care of children as defined by paragraphs 12 and 13 respectively of schedule 12 to the Public Services Reform (Scotland) Act 2010 , and ii is registered under Chapter 4 of Part 5 of that Act, ... c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Care provided for a child in Northern Ireland is registered or approved care if it is provided— a by a person registered under Part XI of the Children (Northern Ireland) Order 1995, or b by an institution or establishment that does not need to be registered under that Part to provide the care because of an exemption under Article 121 of that Order, ... c in the case of care provided for a child out of school hours ..., by a school on school premises or by an education and library board or an HSS trust. d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e by a home child care provider approved in accordance with the Tax Credits (Approval of Home Child Care Providers) Scheme (Northern Ireland) 2006 , or f by a foster parent in relation to a child (other than one whom the foster parent is fostering) in circumstances where, but for the fact that the child is too old, the care would be— i child minding, or day care, for the purposes of Part XI of the Children (Northern Ireland) Order 1995, or ii qualifying child care for the purposes of the Tax Credits (Approval of Home Child Care Providers) Scheme (Northern Ireland) 2006. 6 Care provided for a child outside the United Kingdom is registered or approved child care if it is provided by a child care provider within regulation 14(2)(d)(i) of the Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002. 7 Child care is excluded from section 318A— a if it is provided by the partner of the employee in question, ... b if it is provided by a relative of the child wholly or mainly in the child’s home or (if different) the home of a person having parental responsibility for the child , ... c in the case of care falling within subsection ... (3)(f) , if— i it is provided wholly or mainly in the home of a relative of the child, and ii the provider usually provides care there solely in respect of one or more children to whom the provider is a relative , or d if it is provided by a foster parent , ... in respect of a child whom that person is fostering ... . 8 In subsection (7)— “ partner ” means one of a couple (within the meaning given by section 137(1) of SSCBA 1992 or section 133(1) of SSCB( NI )A 1992) ; and “ relative ” means parent, grandparent, aunt, uncle, brother or sister, whether by blood, half blood or marriage or civil partnership . 9 In subsection (7)(c), “relative in relation to a child, also includes— a a local authority foster parent in relation to the child, b a foster parent with whom the child has been placed by a voluntary organisation, c a person who fosters the child privately (within the meaning of section 66 of the Children Act 1989, or d a step-parent of the child. . 10 In this section “foster parent” in relation to a child— a in relation to England, means a person with whom the child is placed under the Fostering Services Regulations 2002; b in relation to Wales, means a person with whom the child is placed under the Fostering Services (Wales) Regulations 2003; and c in relation to Northern Ireland, means a person with whom the child is placed under the Foster Placement (Children) Regulations (Northern Ireland) 1996. 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Childcare: power to vary amounts which are the exempt amount and qualifying conditions 318D 1 The Treasury may by order amend section 318A(6A) (employer-contracted care: the amounts which are the exempt amount) so as to substitute different sums of money for those for the time being specified. 2 The Treasury may by regulations make such amendments of the provisions of sections 318 to 318C relating to the qualifying conditions for the exemptions conferred by sections 318 and 318A as appear to them appropriate having regard to the corresponding provisions of regulations under section 12 of the Tax Credits Act 2002 relating to entitlement to the child care element of working tax credit or section 12 of the Welfare Reform Act 2012 or Article 17 of the Welfare Reform (Northern Ireland) Order 2015 relating to amounts in respect of childcare costs that may be included in the calculation of an award of universal credit . Telephones and computer equipment Mobile telephones 319 1 No liability to income tax arises by virtue of section 62 (general definition of earnings) or Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of the provision of one mobile telephone for an employee without any transfer of property in it. 2 In this section “ mobile telephone ” means telephone apparatus which— a is not physically connected to a land-line, and b is not used only as a wireless extension to a telephone which is physically connected to a land-line, or any thing which may be used in such apparatus for the purpose of gaining access to, or using, a public electronic communications service. 3 In this section the reference to the provision of a mobile telephone includes a reference to the provision, together with the mobile telephone provided, of access to, or the use of, a public electronic communications service by means of one mobile telephone number. 4 For the purposes of subsection (2) “ telephone apparatus ” means wireless telegraphy apparatus designed or adapted for the primary purpose of transmitting and receiving spoken messages and used in connection with a public electronic communications service. Limited exemption for computer equipment 320 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Eye tests and special corrective appliances Eye tests and special corrective appliances 320A 1 No liability to income tax arises in respect of the provision for an employee of— a an eye and eyesight test, or b special corrective appliances that an eye and eyesight test shows are necessary, if conditions A and B are met. 2 Condition A is that the provision of the test or appliances is required by regulations made under the Health and Safety at Work etc. Act 1974. 3 Condition B is that tests and appliances of the kind mentioned in subsection (1) are made available generally to those employees of the employer in question for whom they are required to be provided by the regulations. Health-screening and medical check-ups Health-screening and medical check-ups 320B 1 No liability to income tax arises in respect of the provision for an employee, on behalf of an employer, of a health-screening assessment or a medical check-up. 2 Subsection (1) does not apply— a to more than one health-screening assessment provided in a tax year by any one employer or by any of a number of persons who are employers of the employee at the same time, or b to more than one medical check-up so provided. 3 In this section— “ health-screening assessment ” means an assessment to identify employees who might be at particular risk of ill-health, and “ medical check-up ” means a physical examination of the employee by a health professional for (and only for) determining the employee's state of health. Recommended medical treatment Recommended medical treatment 320C 1 No liability to income tax arises in respect of— a the provision to an employee of recommended medical treatment, or b the payment or reimbursement, to or in respect of an employee, of the cost of such treatment, if that provision, payment or reimbursement is not pursuant to relevant salary sacrifice arrangements or relevant flexible remuneration arrangements. 2 But subsection (1) does not apply in a tax year if, and to the extent that, the value of the exemption in that year exceeds £500. 3 Medical treatment is “recommended” if it is provided to the employee in accordance with a recommendation which— a is made to the employee as part of occupational health services provided to the employee by a service provided— i under section 2 of the Employment and Training Act 1973 (arrangements for the purpose of assisting persons to retain employment etc ), or ii by, or in accordance with arrangements made by, the employer, b is made for the purpose of assisting the employee to return to work after a period of absence due to injury or ill health, and c meets any other requirements specified in regulations made by the Treasury. 4 Regulations under subsection (3)(c) may, in particular, specify that the recommendation must be one given after the employee has been assessed as unfit for work— a for at least the specified number of consecutive days, and b in the specified manner by a person of a specified description. 5 The Treasury may by order amend subsection (3)(a) so as to add, amend or remove a reference to any enactment. 6 “The value of the exemption”, in a tax year, is an amount equal to the sum of— a all earnings within section 62 (earnings), and b all earnings which are treated as such under the benefits code, in respect of which subsection (1) would prevent liability to income tax from arising in the tax year disregarding subsection (2). 7 In this section— “ medical treatment ” means all procedures for diagnosing or treating any physical or mental illness, infirmity or defect; “ relevant salary sacrifice arrangements ” means arrangements (whenever made, whether before or after the employment began) under which the employee gives up the right to receive an amount of general earnings or specific employment income in return for the provision of recommended medical treatment or the payment or reimbursement of the cost of such treatment; “ relevant flexible remuneration arrangements ” means arrangements (whenever made, whether before or after the employment began) under which the employee and employer agree that the employee is to be provided with recommended medical treatment or the cost of such treatment is to be paid or reimbursed, rather than the employee receiving some other description of employment income; “ specified ” means specified in regulations under subsection (3)(c). Awards and gifts Suggestion awards 321 1 This section applies where an employer establishes a scheme for the making of suggestions that is open on the same terms— a to employees of the employer generally, or b to a particular description of them. 2 No liability to income tax arises in respect of an encouragement award or financial benefit award made under the scheme for a suggestion which meets conditions A to C if, or to the extent that, it does not exceed the permitted maximum for the award under section 322. 3 Condition A is that the suggestion relates to the activities carried on by the employer. 4 Condition B is that the suggestion is made by an employee who could not reasonably be expected to make it in the course of the duties of the employment, having regard to the employee’s experience. 5 Condition C is that the suggestion is not made at a meeting held for the purpose of proposing suggestions. 6 In this section and section 322— “ encouragement award ” means an award, other than a financial benefit award, made for a suggestion with intrinsic merit or showing special effort, and “ financial benefit award ” means an award for a suggestion relating to an improvement in efficiency or effectiveness which the employer has decided to adopt and reasonably expects will result in a financial benefit. Suggestion awards: “the permitted maximum” 322 1 The permitted maximum for an encouragement award for the purposes of section 321 (suggestion awards) is £25. 2 The permitted maximum for a financial benefit award where no such award for the suggestion has been made before is— a if only one such award is made for the suggestion, the suggestion maximum, and b if two or more such awards are made on the same occasion to different persons for the suggestion, the appropriate proportion of the suggestion maximum. 3 If on a later occasion or occasions one or more further such awards are made for the same suggestion, the permitted maximum for each is— a if only one such award is made for the suggestion on that occasion, the residue of the suggestion maximum, and b if two or more such awards are made on the same occasion to different persons for the suggestion, the appropriate proportion of that residue. 4 The suggestion maximum for a financial benefit award is the financial benefit share or £5000 if that is less. 5 In subsection (4) “ the financial benefit share ” means the greater of— a half the financial benefit reasonably expected to result from the adoption of the suggestion for the first year after its adoption, and b one-tenth of the financial benefit reasonably expected to result from its adoption for the first 5 years after its adoption. 6 In this section— “ the appropriate proportion ” means such proportion as the award bears to the total of the financial benefit awards made on the same occasion for the suggestion, “ the residue of the suggestion maximum ” means the suggestion maximum less the total previous exemption, and “ the total previous exemption ” means the total of the amounts exempted from income tax under section 321 in respect of financial benefit awards for the suggestion made on previous occasions. Long service awards 323 1 No liability to income tax arises in respect of a long service award which meets the condition in subsection (3) if or to the extent that the chargeable amount does not exceed the permitted maximum. 2 In subsection (1)— “ chargeable amount ” means the amount of employment income which would be charged to tax in respect of the award apart from subsection (1), “ long service award ” means an award made to an employee to mark not less than 20 years' service with the same employer, and “ permitted maximum ” means £50 for each year of service in respect of which the award is made. 3 The condition is that the award must take the form of— a tangible moveable property, b shares in a company which is, or belongs to the same group as, the employer, or c the provision of any other benefit except— i a payment, ii a cash voucher, iii a credit-token, iv securities, v shares not within paragraph (b), or vi an interest in or rights over securities or shares. 4 Subsection (1) does not apply to an award (“the later award”) if another award to mark a particular period of service with the same employer has been made to the employee in the period of 10 years ending with the date on which the later award is made. 5 For the purposes of this section, service is treated as being with the same employer if it is with two or more employers— a each of whom is a successor or predecessor of the others, or b one of whom is a company which belongs or has belonged to the same group as the others or a predecessor or successor of the others. 6 In this section “ group ” means a body corporate and its 51% subsidiaries. Trivial benefits provided by employers 323A 1 No liability to income tax arises in respect of a benefit provided by, or on behalf of, an employer to an employee or a member of the employee's family or household if— a conditions A to D are met, or b in a case where subsection (2) applies, conditions A to E are met. 2 This subsection applies where— a the employer is a close company, and b the employee is— i a person who is a director or other office-holder of the employer, or ii a member of the family or household of such a person. 3 Condition A is that the benefit is not cash or a cash voucher within the meaning of section 75. 4 Condition B is that the benefit cost of the benefit does not exceed £50. 5 In this section “ benefit cost ”, in relation to a benefit, means— a the cost of providing the benefit, or b if the benefit is provided to more than one person and the nature of the benefit or the scale of its provision means it is impracticable to calculate the cost of providing it to each person to whom it is provided, the average cost per person of providing the benefit. 6 For the purposes of subsection (5)(b), the average cost per person of providing a benefit is found by dividing the total cost of providing the benefit by the number of persons to whom the benefit is provided. 7 Condition C is that the benefit is not provided pursuant to relevant salary sacrifice arrangements or any other contractual obligation. 8 “ Relevant salary sacrifice arrangements ”, in relation to the provision of a benefit to an employee or to a member of an employee's family or household, means arrangements (whenever made, whether before or after the employment began) under which the employee gives up the right to receive an amount of general earnings or specific employment income in return for the provision of the benefit. 9 Condition D is that the benefit is not provided in recognition of particular services performed by the employee in the course of the employment or in anticipation of such services. 10 Condition E is that— a the benefit cost of the benefit provided to the employee, or b in a case where the benefit is provided to a member of the employee's family or household who is not an employee of the employer, the amount of the benefit cost allocated to the employee in accordance with section 323B(4), does not exceed the employee's available exempt amount (see section 323B). Section 323A: calculation of available exempt amount 323B 1 The “ available exempt amount ”, in relation to an employee of an employer, is the amount found by deducting from the annual exempt amount the aggregate of— a the benefit cost of eligible benefits provided earlier in the tax year by, or on behalf of, the employer to the employee, and b any amounts allocated to the employee in accordance with subsection (4) in respect of eligible benefits provided earlier in the tax year by, or on behalf of, the employer to a member of the employee's family or household who was not at that time an employee of the employer. 2 The annual exempt amount is £300. 3 For the purposes of subsection (1) “ eligible benefits ” means benefits in respect of which conditions A to D in section 323A are met. 4 The amount allocated to an employee of an employer in respect of a benefit provided to a person (“P”) who— a is a member of the employee's family or household, and b is not an employee of the employer, is the benefit cost of that benefit divided by the number of persons who meet the condition in subsection (5) and are members of P's family or household. 5 This condition is met if the person is— a a director or other office-holder of the employer, b an employee of the employer who is a member of the family or household of a person within paragraph (a), or c a former employee of the employer who— i was a director or other office-holder at any time when the employer was a close company, or ii is a member of the family or household of such a person. 6 In this section “ benefit cost ” has the same meaning as in section 323A. Power to amend sections 323A and 323B 323C 1 The Treasury may by regulations amend section 323A so as to alter the conditions which must be met for the exemption conferred by section 323A(1) to apply. 2 Regulations under subsection (1) may include any amendment of section 323B that is appropriate in consequence of an amendment made under subsection (1). 3 The Treasury must not make regulations under subsection (1) unless a draft of the regulations has been laid before and approved by a resolution of the House of Commons. Small gifts from third parties 324 1 No liability to income tax arises in respect of a gift provided for an employee or a member of the employee’s family or household if conditions A to E are met. 2 Condition A is that the gift is not provided by the employer or a person connected with the employer. 3 Condition B is that neither the employer nor a person connected with the employer has directly or indirectly procured the gift. 4 Condition C is that the gift is not made in recognition of particular services performed by the employee in the course of the employment or in anticipation of such services. 5 Condition D is that the gift is not cash or securities or the use of a service. 6 Condition E is that the total cost to the donor of all the eligible gifts in respect of the employee in question during the tax year does not exceed £250 . 7 For the purposes of condition E, the total cost to the donor includes any value added tax payable on the supply of the gifts to the donor, whether or not the donor is entitled to a credit or repayment in respect of that tax. 8 In this section “ eligible gifts ” means all gifts which— a meet conditions A to D, or b are non-cash vouchers or credit-tokens and meet— i conditions A to C, and ii conditions A and B in section 270 (exemption for small gifts of vouchers and tokens from third parties). 9 Subsection (1) does not apply to non-cash vouchers and credit-tokens (but see section 270 which makes provision for a corresponding exemption for them). Overseas medical treatment Overseas medical treatment 325 1 No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of— a providing an employee with medical treatment outside the United Kingdom where the need for it arises while the employee is outside the United Kingdom for the purpose of performing the duties of the employment, or b providing an employee with insurance against the cost of providing such treatment. 2 For the purposes of this section— a “ medical treatment ” includes all procedures for diagnosing or treating any physical or mental illness, infirmity or defect, and b providing a person with medical treatment includes providing for the person to be an in-patient so that such treatment can be given. Health and employment insurance payments 325A 1 No liability to income tax in respect of employment income arises on any payment if or to the extent that— a were the payment an annual payment falling within Chapter 7 of Part 5 of ITTOIA 2005, it would be exempt from income tax under section 735 of that Act (health and employment insurance payments), and b it meets conditions A and B. 2 Condition A is that the payments are made— a to a person (“ the employee ”) who made payments or contributions in respect of premiums under an insurance policy which another person took out wholly or partly for the employee's benefit, or b to the employee's spouse or civil partner . 3 Condition B is that the payments are attributable on a just and reasonable basis to the payments or contributions in respect of premiums. Expenses incidental to sale etc. of asset Expenses incidental to transfer of a kind not normally met by transferor 326 1 No liability to income tax arises by virtue of the payment or reimbursement of expenses which— a are incidental to, and incurred wholly and exclusively as a result of, an employment-related asset transfer, and b are of a kind not normally met by the transferor. 2 There is an “employment-related asset transfer” if— a an asset or the beneficial interest in an asset is transferred to an employee’s employer or a person nominated by the employer, and b the right or opportunity to make the transfer arose by reason of the employment. 3 In this section references to a transfer are to a sale or any other kind of disposal. Monitoring schemes Fees relating to monitoring schemes relating to vulnerable persons 326A 1 No liability to income tax arises by virtue of the payment or reimbursement of a fee in respect of — a an application to join the scheme administered under section 44 of the Protection of Vulnerable Groups (Scotland) Act 2007 (asp 14) (scheme to collate and disclose information about individuals working with vulnerable persons). b a fee paid by virtue of section 116A(4)(b) or (5)(b) of the Police Act 1997 (“the Police Act”) (fee for up-dating certificates); c a fee paid under— i section 113A(1)(b) of the Police Act (fee for criminal record certificates); ii section 113B(1)(b) of the Police Act (fee for enhanced criminal record certificates); iii iii)section 114(1)(b) of the Police Act (fee for criminal record certificates: Crown employment); or iv iv)section 116(1)(b) of the Police Act (fee for enhanced criminal record certificates: judicial appointments and Crown employment); where the application is made at the same time as an application under section 116A(4) or (5) of the Police Act for the certificate to be subject to up-date arrangements. 2 The Treasury may by order amend subsection (1) so as— a to add to the fees covered by that subsection a fee of a specified kind payable in connection with a scheme for England and Wales or Northern Ireland which corresponds to the scheme administered under section 44 of the Protection of Vulnerable Groups (Scotland) Act 2007, or b to amend or remove a reference to a fee added under paragraph (a). Employee shareholder agreements Advice relating to proposed employee shareholder agreements 326B 1 No liability to income tax arises by virtue of— a the provision of relevant advice by a relevant independent adviser, or b the payment or reimbursement, in accordance with section 205A(7) of the Employment Rights Act 1996, of any reasonable costs incurred in obtaining relevant advice. 2 “ Relevant advice ” means— a advice, other than tax advice, which is provided for the purposes of section 205A(6)(a) of that Act (advice as to terms and effect of employee shareholder agreement), and b tax advice which is so provided and consists only of an explanation of the tax effects of employee shareholder agreements generally. 3 In this section— “ employee shareholder agreement ” means an agreement by virtue of which an employee is an employee shareholder (see section 205A(1)(a) to (d) of that Act); “ relevant independent adviser ” has the meaning that it has for the purposes of section 203(3)(c) of that Act. Part 5 Employment income: deductions allowed from earnings Chapter 1 Deductions allowed from earnings: general rules Introduction Deductions from earnings: general 327 1 This Part provides for deductions that are allowed from the taxable earnings from an employment in a tax year in calculating the net taxable earnings from the employment in the tax year for the purposes of Part 2 (see section 11(1)). 2 In this Part, unless otherwise indicated by the context— a references to the earnings from which deductions are allowed are references to the taxable earnings mentioned in subsection (1), and b references to the tax year are references to the tax year mentioned there. 3 The deductions for which this Part provides are those allowed under— Chapter 2 (deductions for employee’s expenses), Chapter 3 (deductions from benefits code earnings), Chapter 4 (fixed allowances for employee’s expenses), Chapter 5 (deductions for earnings representing benefits or reimbursed expenses), and Chapter 6 (deductions from seafarers' earnings). 4 Further provision about deductions from earnings is made in— section 232 (giving effect to mileage allowance relief), ... and section 262 of CAA 2001 (capital allowances to be given effect by treating them as deductions from earnings). 5 Further provision about deductions from income including earnings is made in— Part 12 (payroll giving), and sections 188 to 194 of FA 2004 (contributions to registered pension schemes). General rules The income from which deductions may be made 328 1 The general rule is that deductions under this Part are allowed— a from any earnings from the employment in question, and b not from earnings from any other employment. This is subject to subsections (2) to (4). 2 Deductions under section 351 (expenses of ministers of religion) are allowed from earnings from any employment as a minister of a religious denomination. 3 Deductions under section 368 (fixed sum deductions from earnings payable out of public revenue) are allowed only from earnings payable out of the public revenue. 4 Deductions limited to specified earnings (see subsection (5)) are allowed— a only from earnings from the employment that are taxable earnings under certain of the charging provisions of Chapters 4 and 5 of Part 2, and b not from other earnings from it. 5 “Deductions limited to specified earnings” are deductions under— sections 336 to 342 (deductions from earnings charged on receipt: see sections 335(2) and 354), section 353 (deductions from earnings charged on remittance), sections 370 to 374 (travel deductions from earnings charged on receipt), ... Deductions from earnings not to exceed earnings 329 1 The amount of a deduction allowed under this Part may not exceed the earnings from which it is deductible. 1A If the earnings from which a deduction allowed under this Part is deductible include earnings that are “excluded” within the meaning of section 15(1A)— a the amount of the deduction allowed is a proportion of the amount that would be allowed under this Part if the tax year were not a split year, and b that proportion is equal to the proportion that the part of the earnings that is not “excluded” bears to the total earnings. 2 If two or more deductions allowed under this Part are deductible from the same earnings, the amounts deductible may not in aggregate exceed those earnings (or, in a case within subsection (1A), the part of those earnings that is not “excluded”) . 3 If deductions allowed otherwise than under this Part fall to be allowed from the same earnings as amounts deductible under this Part, the amounts deductible under this Part may not exceed the earnings (or, in a case within subsection (1A), the part of the earnings that is not “excluded”) remaining after the other deductions. 4 Subsections (1) and (2) do not apply to a deduction under section 351 (expenses of ministers of religion), and subsection (3) applies as if such a deduction were allowed otherwise than under this Part. 5 This section is to be disregarded for the purposes of the deductibility provisions (see section 332). 6 See also section 128 of ITA 2007 (which provides that where a loss in an employment is sustained, relief may be given against other income). Prevention of double deductions 330 1 A deduction from earnings under this Part is not allowed more than once in respect of the same costs or expenses. 2 If apart from this subsection— a a deduction would be allowed under Chapter 4 of this Part (fixed allowances for employee’s expenses) for a sum fixed by reference to any kind of expenses, and b the employee would be entitled under another provision to a deduction for an amount paid in respect of the same kind of expenses, only one of those deductions is allowed. Order for making deductions 331 1 This Part needs to be read with section 25(1) to (3) of ITA 2007 (general rule that deductions are to be allowed in the order resulting in the greatest reduction of liability to income tax). 2 In the case of deductions under this Part, the general rule in that section is subject to— a section 23(3) (which requires certain deductions to be made in order to establish “chargeable overseas earnings”), and b section 381 (which requires deductions under other provisions to be taken into account before deductions under Chapter 6 of this Part (seafarers)). Meaning of “the deductibility provisions” 332 For the purposes of this Part, “ the deductibility provisions ” means the following provisions (which refer to amounts or expenses that would be deductible if they were incurred and paid by an employee)— the definition of “business travel” in section 171(1) (definitions for Chapter 6 of Part 3), section 179(6) (exception for certain advances for necessary expenses), the definition of “business travel” in section 236(1) (definitions for Chapter 2 of Part 4), section 240(1)(c) and (5) (exemption of incidental overnight expenses and benefits), section 252(3) (exception from exemption of work-related training provision for non-deductible travel expenses), section 257(3) (exception from exemption for individual learning account training provision for non-deductible travel expenses), section 305(5) (offshore oil and gas workers: mainland transfers), section 310(6)(b) (counselling and other outplacement services), section 311(5)(b) (retraining courses), section 361(b) (scope of Chapter 3 of this Part: cost of benefits deductible as if paid by employee), section 362(1)(c) and (2)(b) (deductions where non-cash voucher provided), section 363(1)(b) and (2)(b) (deductions where credit-token provided), section 364(1)(b) and (2) (deductions where living accommodation provided), section 365(1)(b) and (2) (deductions where employment-related benefit provided). Chapter 2 Deductions for employee’s expenses Introduction Scope of this Chapter: expenses paid by the employee 333 1 A deduction from a person’s earnings for an amount is allowed under the following provisions of this Chapter only if the amount— a is paid by the person, or b is paid on the person’s behalf by someone else and is included in the earnings. 2 In the following provisions of this Chapter, in relation to a deduction from a person’s earnings, references to the person paying an amount include references to the amount being paid on the person’s behalf by someone else if or to the extent that the amount is included in the earnings. 3 Subsection (1)(b) does not apply to the deductions under— a section 351(2) and (3) (expenses of ministers of religion), and b section 355 (deductions for corresponding payments by qualifying new resident employees with foreign employers), and subsection (2) does not apply in the case of those deductions. 4 Chapter 3 of this Part provides for deductions where— a a person’s earnings include an amount treated as earnings under Chapter 4, 5 or 10 of Part 3 (taxable benefits: vouchers etc., living accommodation and residual liability to charge), and b an amount in respect of the benefit in question would be deductible under this Chapter if the person had incurred and paid it. Effect of reimbursement etc. 334 1 For the purposes of this Chapter, a person may be regarded as paying an amount despite— a its reimbursement, or b any other payment from another person in respect of the amount. 2 But where a reimbursement or such other payment is made in respect of an amount, a deduction for the amount is allowed under the following provisions of this Chapter only if or to the extent that— a the reimbursement, or b so much of the other payment as relates to the amount, is included in the person’s earnings. 3 This section does not apply to a deduction allowed under section 351 (expenses of ministers of religion). 4 This section is to be disregarded for the purposes of the deductibility provisions. Application of deductions provisions: “earnings charged on receipt” and “earnings charged on remittance” 335 1 The availability of certain deductions under this Chapter depends on whether the earnings are earnings charged on receipt or earnings charged on remittance. 2 Sections 336 to 342— a only apply if the earnings from which the deduction is to be made are earnings charged on receipt, and b apply subject to section 354(1) if the earnings from the employment also include other earnings. 3 Section 353 (which provides for a deduction for expenses of the kind to which sections 336 to 342 apply)— a only applies if the earnings from which the deduction is to be made are earnings charged on remittance, and b applies subject to section 354(2) if the earnings from the employment also include other earnings. 4 In this Part— “ earnings charged on receipt ” means earnings which are taxable earnings under section 15 ... or 27, and “ earnings charged on remittance ” means earnings which are taxable earnings under section 22 or 26. General rule for deduction of employee’s expenses Deductions for expenses: the general rule 336 1 The general rule is that a deduction from earnings is allowed for an amount if— a the employee is obliged to incur and pay it as holder of the employment, and b the amount is incurred wholly, exclusively and necessarily in the performance of the duties of the employment. 2 The following provisions of this Chapter contain additional rules allowing deductions for particular kinds of expenses and rules preventing particular kinds of deductions. 3 No deduction is allowed under this section for an amount that is deductible under sections 337 to 342 (travel expenses). Travel expenses Travel in performance of duties 337 1 A deduction from earnings is allowed for travel expenses if— a the employee is obliged to incur and pay them as holder of the employment, and b the expenses are necessarily incurred on travelling in the performance of the duties of the employment. 2 This section needs to be read with section 359 (disallowance of travel expenses: mileage allowances and reliefs). Travel for necessary attendance 338 1 A deduction from earnings is allowed for travel expenses if— a the employee is obliged to incur and pay them as holder of the employment, and b the expenses are attributable to the employee’s necessary attendance at any place in the performance of the duties of the employment. 2 Subsection (1) does not apply to the expenses of ordinary commuting or travel between any two places that is for practical purposes substantially ordinary commuting. 3 In this section “ ordinary commuting ” means travel between— a the employee’s home and a permanent workplace, or b a place that is not a workplace and a permanent workplace. 4 Subsection (1) does not apply to the expenses of private travel or travel between any two places that is for practical purposes substantially private travel. 5 In subsection (4) “ private travel ” means travel between— a the employee’s home and a place that is not a workplace, or b two places neither of which is a workplace. 6 This section needs to be read with section 359 (disallowance of travel expenses: mileage allowances and reliefs). Meaning of “workplace” and “permanent workplace” 339 1 In this Part “ workplace ”, in relation to an employment, means a place at which the employee’s attendance is necessary in the performance of the duties of the employment. 2 In this Part “ permanent workplace ”, in relation to an employment, means a place which— a the employee regularly attends in the performance of the duties of the employment, and b is not a temporary workplace. This is subject to subsections (4) and (8). 3 In subsection (2) “ temporary workplace ”, in relation to an employment, means a place which the employee attends in the performance of the duties of the employment— a for the purpose of performing a task of limited duration, or b for some other temporary purpose. This is subject to subsections (4) and (5). 4 A place which the employee regularly attends in the performance of the duties of the employment is treated as a permanent workplace and not a temporary workplace if— a it forms the base from which those duties are performed, or b the tasks to be carried out in the performance of those duties are allocated there. 5 A place is not regarded as a temporary workplace if the employee’s attendance is— a in the course of a period of continuous work at that place— i lasting more than 24 months, or ii comprising all or almost all of the period for which the employee is likely to hold the employment, or b at a time when it is reasonable to assume that it will be in the course of such a period. 6 For the purposes of subsection (5), a period is a period of continuous work at a place if over the period the duties of the employment are performed to a significant extent at the place. 7 An actual or contemplated modification of the place at which duties are performed is to be disregarded for the purposes of subsections (5) and (6) if it does not, or would not, have any substantial effect on the employee’s journey, or expenses of travelling, to and from the place where they are performed. 8 An employee is treated as having a permanent workplace consisting of an area if— a the duties of the employment are defined by reference to an area (whether or not they also require attendance at places outside it), b in the performance of those duties the employee attends different places within the area, c none of the places the employee attends in the performance of those duties is a permanent workplace, and d the area would be a permanent workplace if subsections (2), (3), (5), (6) and (7) referred to the area where they refer to a place. Travel for necessary attendance: employment intermediaries 339A 1 This section applies where an individual (“the worker”)— a personally provides services (which are not excluded services) to another person (“ the client ”), and b the services are provided not under a contract directly between the client or a person connected with the client and the worker but under arrangements involving an employment intermediary. This is subject to the following provisions of this section. 2 Where this section applies, each engagement is for the purposes of sections 338 and 339 to be regarded as a separate employment. 3 This section does not apply if it is shown that the manner in which the worker provides the services is not subject to (or to the right of) supervision, direction or control by any person. 4 Subsection (3) does not apply in relation to an engagement if— a Chapter 8 of Part 2 applies in relation to the engagement, b the conditions in section 51, 52 or 53 are met in relation to the employment intermediary, and c the employment intermediary is not a managed service company. 5 This section does not apply in relation to an engagement if— a Chapter 8 of Part 2 does not apply in relation to the engagement merely because the circumstances in section 49(1)(c) are not met, b assuming those circumstances were met, the conditions in section 51, 52 or 53 would be met in relation to the employment intermediary, and c the employment intermediary is not a managed service company. 6 In determining for the purposes of subsection (4) or (5) whether the conditions in section 51, 52 or 53 are or would be met in relation to the employment intermediary— a in section 51(1)— i disregard “either” in the opening words, and ii disregard paragraph (b) (and the preceding or), and b read references to the intermediary as references to the employment intermediary. 6A Subsection (3) does not apply in relation to an engagement if— a sections 61N to 61R in Chapter 10 of Part 2 apply in relation to the engagement, b one of Conditions A to C in section 61N is met in relation to the employment intermediary, and c the employment intermediary is not a managed service company. 6B This section does not apply in relation to an engagement if— a sections 61N to 61R in Chapter 10 of Part 2 do not apply in relation to the engagement because the circumstances in section 61M(1)(d) are not met, b assuming those circumstances were met, one of Conditions A to C in section 61N would be met in relation to the employment intermediary, and c the employment intermediary is not a managed service company. 6C In determining for the purposes of subsection (6A) or (6B) whether one of Conditions A to C in section 61N is or would be met in relation to the employment intermediary, read references to the intermediary as references to the employment intermediary. 7 Subsection (8) applies if— a the client or a relevant person provides the employment intermediary (whether before or after the worker begins to provide the services) with a fraudulent document which is intended to constitute evidence that, by virtue of subsection (3), this section does not or will not apply in relation to the services, b that section is taken not to apply in relation to the services, and c in consequence, the employment intermediary does not under PAYE regulations deduct and account for an amount that would have been deducted and accounted for under those regulations if this section had been taken to apply in relation to the services. 8 For the purpose of recovering the amount referred to in subsection (7)(c) (“the unpaid tax”)— a the worker is to be treated as having an employment with the client or relevant person who provided the document, the duties of which consist of the services, and b the client or relevant person is under PAYE regulations to account for the unpaid tax as if it arose in respect of earnings from that employment. 9 In subsections (7) and (8) “ relevant person ” means a person, other than the client, the worker or a person connected with the employment intermediary, who— a is resident, or has a place of business, in the United Kingdom, and b is party to a contract with the employment intermediary or a person connected with the employment intermediary under or in consequence of which— i the services are provided, or ii the employment intermediary, or a person connected with the employment intermediary, makes payments in respect of the services. 10 In determining whether this section applies, no regard is to be had to any arrangements the main purpose, or one of the main purposes, of which is to secure that this section does not to any extent apply. 11 In this section— “ arrangements ” includes any scheme, transaction or series of transactions, agreement or understanding, whether or not enforceable, and any associated operations; “ employment intermediary ” means a person, other than the worker or the client, who carries on a business (whether or not with a view to profit and whether or not in conjunction with any other business) of supplying labour; “ engagement ” means any such provision of service as is mentioned in subsection (1)(a); “ excluded services ” means services provided wholly in the client's home; “ managed service company ” means a company which— is a managed service company within the meaning given by section 61B, or would be such a company disregarding subsection (1)(c) of that section. Travel between group employments 340 1 A deduction from earnings from an employment is allowed for travel expenses if conditions A to D are met. 2 Condition A is that the employee is obliged to incur and pay the expenses. 3 Condition B is that the travel is for the purpose of performing duties of the employment at the destination. 4 Condition C is that the employee has performed duties of another employment at the place of departure. 5 Condition D is that the employments are with companies in the same group. 6 In this section “ group ” means a company and its 51% subsidiaries. 7 For the purposes of sections 353 and 354 (special rules for earnings with a foreign element), the expenses are treated as incurred in the performance of the duties to be performed at the destination. 8 This section needs to be read with section 359 (disallowance of travel expenses: mileage allowances and reliefs). Travel between linked employments 340A 1 A deduction from earnings from an employment is allowed for travel expenses if conditions A to E are met. 2 Condition A is that the employee is obliged to incur and pay the expenses. 3 Condition B is that the travel— a takes place within the United Kingdom, and b is for the purpose of performing duties of the employment at the destination. 4 Condition C is that the employee has performed duties of another employment at the place of departure. 5 Condition D is that— a at least one of the employments is as a director of a company (“company X”), and b the other employment is also with a company (“company Y”) but not necessarily as a director of it. 6 Condition E is that the employee was appointed as a director of company X because company Y, or a company in the same group as company Y, has a shareholding or other financial interest in company X. 7 This section needs to be read with section 359 (disallowance of travel expenses: mileage allowances and reliefs). 8 In this section— “director” has the same meaning as in the benefits code (see section 67), and “group” means a company and its 51% subsidiaries. Travel at start or finish of overseas employment 341 1 A deduction from earnings from an employment is allowed for starting travel expenses and finishing travel expenses if conditions A to C are met. 2 Condition A is that the duties of the employment are performed wholly outside the United Kingdom. 3 Condition B is that the employee is UK resident . 4 Condition C is that in a case where the employer is a foreign employer, the employee is not a qualifying new resident for the purposes of Chapter 5C of Part 2 of this Act or Chapter 5 of Part 8 of ITTOIA 2005 (see section 845B of that Act). 5 If the travel is only partly attributable to the taking up or termination of the employment, this section applies only to the part of the expenses properly so attributable. 6 Subsection (7) applies if in the tax year the employment is in substance one whose duties fall to be performed outside the United Kingdom. 7 Duties of the employment performed in the United Kingdom, whose performance is merely incidental to the performance of duties outside the United Kingdom, are to be treated for the purposes of subsection (2) as performed outside the United Kingdom. 8 In this section— “ starting travel expenses ” means expenses incurred by the employee in travelling from a place in the United Kingdom to take up the employment, “ finishing travel expenses ” means expenses incurred by the employee in travelling to a place in the United Kingdom on the termination of the employment, and “ employee ” includes a person who is to be, or has ceased to be, an employee. 9 This section needs to be read with section 359 (disallowance of travel expenses: mileage allowances and reliefs). Travel between employments where duties performed abroad 342 1 A deduction from earnings from an employment is allowed for travel expenses incurred by the employee if conditions A to F are met. 2 Condition A is that the travel is for the purpose of performing duties of the employment at the destination. 3 Condition B is that the employee has performed duties of another employment at the place of departure. 4 Condition C is that the place of departure or the destination or both are outside the United Kingdom. 5 Condition D is that the duties of one or both of the employments are performed wholly or partly outside the United Kingdom. 6 Condition E is that the employee is UK resident . 7 Condition F is that in a case where the employer is a foreign employer, the employee is not a qualifying new resident for the purposes of Chapter 5C of Part 2 of this Act or Chapter 5 of Part 8 of ITTOIA 2005 (see section 845B of that Act). 8 If the travel is only partly attributable to the purpose of performing duties of the employment at the destination, this section applies only to the part of the expenses properly so attributable. 9 This section needs to be read with section 359 (disallowance of travel expenses: mileage allowances and reliefs). Fees and subscriptions Deduction for professional membership fees 343 1 A deduction from earnings from an employment is allowed for an amount paid in respect of a professional fee if— a the duties of the employment involve the practice of the profession to which the fee relates, and b the registration, certification, licensing or other matter in respect of which the fee is payable is a condition, or one of alternative conditions, which must be met if that profession is to be practised in the performance of those duties. 2 In this section “ professional fee ” means a fee mentioned in the following Table. Table Health professionals 1 Fee payable for entry or retention of a name in any of the following— a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b the register maintained by the Registrar of Chiropractors, c the dental care professionals register, d the dentists register, e the register of dispensing opticians, f the register maintained by the Health and Care Professions Council , g . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . h the register of medical practitioners, i the register maintained by the Nursing and Midwifery Council, j either of the registers of opthalmic opticians, k the register maintained by the Registrar of Osteopaths, l the register maintained under article 19 of the Pharmacy Order 2010 so far as relating to pharmacists or pharmacy technicians, n the register of pharmaceutical chemists kept under Articles 6 and 9 of the Pharmacy (Northern Ireland) Order 1976. o . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p the register maintained by the Care Council for Wales, q the register maintained by the Scottish Social Services Council, r the register maintained by the Northern Ireland Social Care Council, s the register of social workers in England kept under section 39(1) of the Children and Social Work Act 2017, t the register kept under the Anaesthesia Associates and Physician Associates Order 2024. 1A Trainee registration fee payable by a specialty registrar to a body which recommends specialty registrars to the registrar of the General Medical Council for the award of a certificate of completion of training under section 34L of the Medical Act 1983. 1B Trainee registration fee payable by a person listed in the dentists register to a body which provides evidence to the General Dental Council relating to a person’s suitability to be awarded a Certificate of Completion of Specialist Training in a specialist branch of dentistry pursuant to regulations made under section 26(3) and (4) of the Dentists Act 1984 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Fee payable for entry or retention of a name in any of the following— a the register maintained by the registrar appointed by the Farriers Registration Council, b the supplementary veterinary register, c the register of veterinary surgeons. ca any list or register of veterinary nurses maintained by the Royal College of Veterinary Surgeons, d the register maintained by the Animal Medicines Training Regulatory Authority pursuant to paragraph 13 of Schedule 3 to the Veterinary Medicines Regulations 2006. Legal professionals 4 Fee payable to the Council for Licensed Conveyancers on the issue of a licence to practise as a licensed conveyancer. 5 Fee and contribution to the compensation fund or Guarantee Fund payable on the issue of a solicitor’s practising certificate. 5A Fee payable to the Costs Lawyer Standards Board on applying for a costs lawyer practising certificate. Architects 6 Fee payable for entry or retention of a name in the Register of Architects. Teachers etc 7 Fee payable for entry or retention of a name in any of the following— a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b the register maintained by the General Teaching Council for Scotland, c the register maintained by the Education Workforce Council . d the register maintained by the General Teaching Council for Northern Ireland. Patent attorneys and trade mark attorneys 8 Registration fee payable by— a a registered patent attorney , b a registered trade mark attorney . 9 Practising fee payable by— a a registered patent attorney , b a registered trade mark attorney . Occupations in the transport sector 10 Fee payable by a driving instructor for entry or retention of a name in the register of approved instructors or on the issue or renewal of a licence authorising its holder to give paid instruction in the driving of a motor car. 11 Fee (including any related medical or technical examination fee) payable, on the issue or renewal of a licence by the Civil Aviation Authority, by— a an aircraft maintenance engineer, b an air traffic controller or student air traffic controller, c a member of the flight crew of an aircraft registered in the United Kingdom, d a flight information service officer. 12 Fee (including any related medical examination fee) payable— a on the issue or renewal of a licence authorising its holder to drive a large goods vehicle or a passenger-carrying vehicle, b by an officer or other seaman on the issue, renewal or endorsement of a certificate, licence or other document which is required as evidence of his qualification or competence to serve in a ship. 13 Fee payable by a seafarer employed in a sea-going United Kingdom ship on the issue or renewal of a medical fitness certificate. 14 Fee payable by a person employed or to be employed at a United Kingdom airport for a criminal records check required for the issue of a security pass authorising him to enter areas within the airport. Occupations in the private security industry 15 Fee payable on applying for a licence from the Security Industry Authority under the Private Security Industry Act 2001. Occupations in the gambling industry 16 Fee payable— a on applying for a personal licence from the Gambling Commission under the Gambling Act 2005, or b on applying to vary such a licence. 17 Any fee payable to the Gambling Commission under section 132 of that Act. 3 The Board of Inland Revenue may make an order adding such fee as is specified in the order to the Table of fees mentioned in subsection (2). 4 The Commissioners may make an order if they consider that such fee is payable in respect of any registration, certification, licensing or other matter if it is required as a condition, or one of alternative conditions, of the practice of a profession. Deduction for annual subscriptions 344 1 A deduction from earnings from an employment is allowed for an amount paid in respect of an annual subscription if— a it is paid to a body of persons approved under this section, and b the activities of the body which are directed to one or more of the objects within subsection (2) are of direct benefit to, or concern the profession practised in, the performance of the duties of the employment. 2 The objects are— a the advancement or dissemination of knowledge (whether generally or among persons belonging to the same or similar professions or occupying the same or similar positions), b the maintenance or improvement of standards of conduct and competence among the members of a profession, c the provision of indemnity or protection to members of a profession against claims in respect of liabilities incurred by them in the exercise of their profession. 3 An officer of Revenue and Customs may approve a body of persons under this section if, on an application by the body, the officer is satisfied that— a the body is not of a mainly local character, b its activities are carried on otherwise than for profit, and c its activities are wholly or mainly directed to objects within subsection (2). 4 An officer of Revenue and Customs must give notice to the body of their decision on the application. 5 If the activities of the body are to a significant extent directed to objects other than objects within subsection (2), an officer of Revenue and Customs may— a determine the proportion of the activities directed to objects within subsection (2), and b determine that only such corresponding part of the subscription as is specified by an officer of Revenue and Customs is allowable under this section. 6 In determining that part, an officer of Revenue and Customs must have regard to the proportion of expenditure of the body attributable to objects other than objects within subsection (2) and all other relevant circumstances. 7 If a body applies for approval under this section and is approved, a subscription paid to it— a before it has applied but in the same tax year as the application, or b after it has applied but before it is approved, is treated for the purposes of this section as having been paid to an approved body. Decisions of an officer of Revenue and Customs under section 344 345 1 An officer of Revenue and Customs may by notice to the body in question— a withdraw an approval given under section 344, and b withdraw or vary a determination made under that section, to take account of any change in circumstances. 2 A body aggrieved by a decision of an officer of Revenue and Customs under section 344 or subsection (1) may appeal .... 3 The notice of appeal must be given to an officer of Revenue and Customs within 30 days after the date on which notice of their decision was given to the body. Employee liabilities and indemnity insurance Deduction for employee liabilities and expenses 346 1 A deduction from earnings from an employment is allowed for any or all of the following— A. Payment in or towards the discharge of a liability related to the employment. B. Payment of any costs or expenses incurred in connection with— a a claim that the employee is subject to a liability related to the employment, or b proceedings relating to or arising out of a claim that the employee is subject to a liability related to the employment. BA. Payment of any costs or expenses not falling within paragraph B which are incurred in connection with the employee giving evidence about matters related to the employment in, or for the purposes of— a a proceeding or other process (whether or not involving the employee), or b an investigation (whether or not likely to lead to any proceeding or other process involving the employee). BB. Payment of any costs or expenses not falling within paragraph B or BA which are incurred in connection with a proceeding or other process, or an investigation, in which— a acts of the employee related to the employment, or b any other matters related to the employment, are being or are likely to be considered. C. Payment of a premium under a qualifying insurance contract, but only to the extent that the premium relates to— a provision in the contract for the employee to be indemnified against a payment falling within paragraph A, or b provision in the contract for the payment of any costs or expenses falling within paragraph B , BA or BB . 2 But a deduction is not allowed for a payment which falls within paragraph A B, BA or BB if it would be unlawful for the employer to enter into a contract of insurance in respect of the liability, or costs or expenses, in question. 2A Nor is a deduction allowed for a payment which falls within any of paragraphs A to C if the payment is made in pursuance of arrangements the main purpose, or one of the main purposes, of which is the avoidance of tax. 3 In this Chapter— a “ premium ”, in relation to a qualifying insurance contract, means an amount payable to the insurer under the contract, and b where a qualifying insurance contract relates to more than one person, employment or risk, the part of the premium to be treated as relating to each of them is to be determined by apportionment on a just and reasonable basis. 4 In this section and section 349— a “ acts ” includes failures to act and acts are “related to the employment” if the employee was acting— i in the employee's capacity as holder of the employment, or ii in any other capacity in which the employee was acting in the performance of the duties of the employment, b “ giving evidence ” includes making a formal or informal statement or answering questions, c “ proceeding or other process ” includes any civil, criminal or arbitration proceedings, any disciplinary or regulatory proceedings of any kind and any process operated for resolving disputes or adjudicating on complaints, and d references to a proceeding or other process or an investigation include a reference to a proceeding or other process or an investigation that is likely to take place. Payments made after leaving the employment 347 1 A deduction for a payment is not allowed under section 346 if— a the employee has ceased to hold the employment, and b the payment is made after the day on which the employee ceased to hold the employment. 2 If subsection (1) applies, see section 555 (former employee entitled to deduction in calculating net income ). Liabilities related to the employment 348 For the purposes of this Chapter each of the following kinds of liability is related to the employment— A. Liability imposed upon the employee because he did an act, or failed to do an act— a in his capacity as holder of the employment, or b in any other capacity in which he acted in the performance of the duties of the employment. B. Liability imposed upon the employee in connection with any proceedings relating to, or arising from, a claim that he is subject to a liability because he did an act, or failed to do an act— a in his capacity as holder of the employment, or b in any other capacity in which he acted in the performance of the duties of the employment. Meaning of “qualifying insurance contract” 349 1 In section 346 “ qualifying insurance contract ” means a contract of insurance which meets conditions A, B, C and D. 2 Condition A is that, so far as the risks insured against are concerned, the contract only relates to one or more of the following— a the indemnification of an employee against a liability related to the employment, b the indemnification of a person against vicarious liability in respect of a liability related to another person’s employment, c the payment of costs or expenses incurred— i in connection with a claim that a person is subject to a liability to which the insurance relates, or ii in connection with any proceedings relating to or arising out of a claim that a person is subject to a liability to which the insurance relates, ca the payment of costs or expenses incurred in connection with an employee giving evidence about matters related to the employee's employment in, or for the purposes of— i a proceeding or other process (whether or not involving the employee), or ii an investigation (whether or not likely to lead to any proceeding or other process involving the employee), cb the payment of any costs or expenses incurred in connection with a proceeding or other process, or an investigation, in which— i acts of an employee related to the employment, or ii any other matters related to the employment of an employee, are being or are likely to be considered, d the indemnification of an employer against loss from a payment made by the employer to an employee in respect of— i a liability related to the employment, or ii any costs or expenses incurred as mentioned in paragraph (c) , (ca) or (cb) . 3 Condition B is that— a the period of insurance under the contract does not exceed 2 years or, if it does, it does so only because of one or more renewals, each for a period of 2 years or less, and b the insured is not required to renew the contract for any period. 4 Condition C is— a that the insured is not entitled under the contract to receive any payment or other benefit in addition to— i cover for the risks insured against, and ii any right to renew the contract, or b if the insured is so entitled, that the part of the premium reasonably attributable to the entitlement is not a significant part of the whole premium. 5 Condition D is that the contract is not connected with another contract. Connected contracts 350 1 An insurance contract is connected with another contract for the purposes of section 349 if conditions E and F are met— a at the time when both contracts are first in force, or b at any time after that time. 2 Condition E is that one of the contracts was entered into— a by reference to the other, or b with a view to enabling or facilitating entry into the other on particular terms. 3 Condition F is that the terms on which one of the contracts was entered into are significantly different from what they would have been if— a it had not been entered into in anticipation of the other being entered into, or b the other had not also been entered into. 4 If— a there is only one such significant difference in terms, and b the contracts meet conditions A, B and C specified in section 349, the difference may be disregarded in the following cases. 5 The first case is where the difference is a reduction in premiums under the contract that is reasonably attributable only to the contract— a containing a right to renew, or b being entered into by way of renewal. 6 The second case is where— a two or more contracts have been entered into as part of a single transaction, and b the difference is reductions in their premiums that are reasonably attributable only to the premium under each of them having been fixed by reference to the appropriate proportion of the combined premium. 7 In subsection (6) “ the combined premium ” means the amount that would have been the total premium under a single contract relating to all the risks covered by the contracts. Expenses of ministers of religion Expenses of ministers of religion 351 1 A deduction is allowed from any earnings from any employment as a minister of a religious denomination for amounts incurred by the minister wholly, exclusively and necessarily in the performance of duties of such an employment. 2 If a minister of a religious denomination pays rent in respect of a dwelling-house, part of which is used mainly and substantially for the purposes of such duties, a deduction is allowed from the minister’s earnings from any employment as such a minister for— a one quarter of the rent, or b if less, the part of the rent that, on a just and reasonable apportionment, is attributable to that part of the dwelling-house. 3 If— a an interest in premises belongs to a charity or an ecclesiastical corporation, and b because of that interest and by reason of holding an employment as a minister of a religious denomination, the minister has a residence in the premises from which to perform the duties of the employment, a deduction is allowed from the minister’s earnings from any such employment for part of any expenses borne by the minister on the maintenance, repair, insurance or management of the premises. 4 The amount of the deduction is— A 4 - B where— A is the amount of the expenses borne by the minister on the maintenance, repair, insurance or management of the premises, and B is the amount of those expenses that are allowed under subsection (1). 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Subsection (1) needs to be read with section 359 (disallowance of travel expenses: mileage allowances and reliefs). Agency fees paid by entertainers Limited deduction for agency fees paid by entertainers 352 1 A deduction is allowed from earnings from an employment as an entertainer for agency fees (and any value added tax on them) if the fees are calculated as a percentage of the whole or part of the earnings from the employment. This is subject to the limit in subsection (2). 2 Amounts may be deducted under this section in calculating the net taxable earnings from an employment in a tax year only to the extent that, in aggregate, they do not exceed 17.5% of the taxable earnings from the employment in the tax year. 3 Subsections (4) and (5) apply for the purposes of this section. 4 “ Entertainer ” means an actor, dancer, musician, singer or theatrical artist. 5 “ Agency fees ”, in relation to an employment, means— a fees paid under a contract between the employee and another person, to whom the fees are paid, who— i agrees under the contract to act as an agent of the employee in connection with the employment, and ii at the time the fees are paid is carrying on an employment agency with a view to profit, and b fees paid under an arrangement under which a co-operative society or the members of such a society agree to act as the employee’s agent in connection with the employment. 6 For the purposes of subsection (5)— “ co-operative society ” does not include a society which carries on or intends to carry on business with the object of making profits mainly for the payment of interest, dividends or bonuses on money invested or deposited with or lent to the society or any other person, and “ employment agency ” has the meaning given by section 13(2) of the Employment Agencies Act 1973 (c. 35). Special rules for earnings with a foreign element Deductions from earnings charged on remittance 353 1 A deduction is allowed from earnings charged on remittance for expenses within subsection (2) if the condition in subsection (3) is met. 2 The expenses are— a any expenses— i paid by the employee out of the earnings, or ii paid on the employee’s behalf by another person and included in the earnings, and b any other expenses paid in the United Kingdom in the tax year or an earlier tax year in which the employee has been resident in the United Kingdom. 3 The condition is that the expenses would have been deductible under sections 336 to 342 if the earnings had been earnings charged on receipt in the tax year in which the expenses were incurred. 4 Where— a any of the deductibility provisions refers to amounts or expenses that would be deductible from earnings if they were paid by a person, and b the earnings in question are earnings charged on remittance, it is assumed for the purposes of those provisions that the person pays the amounts or expenses out of those earnings. Disallowance of expenses relating to earnings taxed on different basis or untaxed 354 1 If the earnings from an employment for a tax year include both earnings charged on receipt and other earnings (except earnings charged under section 22), no deduction is allowed under sections 336 to 342 from the earnings charged on receipt for an amount paid in respect of duties of the employment to which the other earnings relate. 2 If the earnings from an employment for a tax year include both earnings charged on remittance under section 26 and other earnings, no deduction is allowed under section 353 from the earnings charged on remittance for an amount paid in respect of duties of the employment to which the other earnings relate. 3 This section is to be disregarded for the purposes of the deductibility provisions. Deductions for corresponding payments by qualifying new resident employees with foreign employers 355 1 An employee may make a claim to the Commissioners for Her Majesty’s Revenue and Customs under this section if conditions A to D are met. 2 Condition A is that the employee is a qualifying new resident for the purposes of Chapter 5C of Part 2 of this Act or Chapter 5 of Part 8 of ITTOIA 2005 (see section 845B of that Act). 3 Condition B is that the employment is with a foreign employer. 4 Condition C is that the employee has made a payment out of earnings from the employment. 5 Condition D is that the payment does not reduce the employee’s liability to United Kingdom income tax, but was made in circumstances corresponding to those in which it would do so. 6 If the Commissioners are satisfied that conditions A to D are met, they may allow the payment as a deduction under this Chapter. Disallowance of business entertainment and gifts expenses Disallowance of business entertainment and gifts expenses 356 1 No deduction from earnings is allowed under this Part for expenses incurred in providing entertainment or a gift in connection with the employer’s trade, business, profession or vocation. 2 Subsection (1) is subject to the exceptions in— a section 357 (exception where employer’s expenses disallowed), and b section 358 (other exceptions). 3 For the purposes of this section and those sections— a “ entertainment ” includes hospitality of any kind, and b expenses incurred in providing entertainment or a gift include expenses incurred in providing anything incidental to the provision of entertainment or a gift. Business entertainment and gifts: exception where employer’s expenses disallowed 357 1 The prohibition in section 356 on deducting expenses does not apply if— a the earnings include an amount in respect of the expenses, b the employer— i paid the amount to, or on behalf of, the employee, or ii put it at the employee’s disposal, exclusively for meeting expenses incurred or to be incurred by the employee in providing the entertainment or gift, and c condition A, B or C is met. 2 Condition A is that the deduction of the amount falls to be disallowed under section 45 or 867 of ITTOIA 2005 or under section 1298 of CTA 2009 in calculating the employer’s profits from the trade, profession or vocation in question for the purposes of the Tax Acts (or it would do so apart from the exemption in ... section 524 of ITA 2007 or section 478 of CTA 2010 or any relief applying in respect of those profits). 3 Condition B is that the inclusion of the amount falls to be disallowed (or would be disallowed apart from some other relief applying to the employer) under section 1298 of CTA 2009 in calculating— a the employer’s expenses of management for the purposes of giving relief under the Tax Acts, or b the ordinary BLAGAB management expenses of the employer for the purposes of section 76 of FA 2012. 4 Condition C is that— a the employer is a tonnage tax company during the whole or part of the tax year, and b apart from the tonnage tax election, the deduction of the amount included in the employee’s earnings would fall to be disallowed in calculating the employer’s relevant shipping profits. 5 In subsection (4) “ tonnage tax company ”, “ tonnage tax election ” and “ relevant shipping profits ” have the same meaning as in Schedule 22 to FA 2000. Business entertainment and gifts: other exceptions 358 1 The prohibition in section 356 on deducting expenses does not apply if the expenses are incurred in providing entertainment or gifts for the employer’s employees unless— a they are also provided for others, and b their provision for the employees is incidental to their provision for the others. 2 For this purpose directors and persons engaged in the management of a company are regarded as employed by it. 3 The prohibition in section 356 on deducting expenses does not apply if the expenses are incurred in providing a gift which incorporates a conspicuous advertisement for the employer or, if the employer is a company, another company which belongs to the same group as the employer, unless— a the gift is food, drink, tobacco or a token or voucher exchangeable for goods, or b the cost of the gift to the donor, together with any other gifts (except food, drink, tobacco or tokens or vouchers exchangeable for goods) given to the same person in the same tax year, is more than £50. 4 In subsection (3) “ group ” means a body corporate and its 51% subsidiaries. Other rules preventing deductions of particular kinds Disallowance of travel expenses: mileage allowances and reliefs 359 1 No deduction may be made under the travel deductions provisions in respect of travel expenses incurred in connection with the use by the employee of a vehicle that is not a company vehicle if condition A or B is met. 2 Condition A is that mileage allowance payments are made to the employee in respect of the use of the vehicle. 3 Condition B is that mileage allowance relief is available in respect of the use of the vehicle by the employee (see section 231). 4 In this section— “ company vehicle ” has the meaning given by section 236(2), “ mileage allowance payments ” has the meaning given by section 229(2), and “ the travel deductions provisions ” means sections 337 to 342, 370, 371, 373 and 374 (travel expenses) and section 351 (expenses of ministers of religion). Disallowance of certain accommodation expenses of MPs and other representatives 360 1 No deduction from earnings is allowed under this Chapter or section 373 ( non-resident or qualifying new resident employee’s travel costs and expenses where duties performed in UK) for accommodation expenses incurred by a member of— a the House of Commons, b the Scottish Parliament, c the National Assembly for Wales, or d the Northern Ireland Assembly. 2 In this section “ accommodation expenses ” means expenses incurred in, or in connection with, the provision or use of residential or overnight accommodation to enable the member to perform duties as a member of the Parliament or Assembly in or about— a the place where it sits, or b the constituency or region which the member represents. 3 In relation to a member of the House of Commons, subsection (3) of section 292 applies for the purposes of this section as it applies for the purposes of that section. Social security contributions 360A 1 No deduction from earnings is allowed under this Chapter for any contribution paid by any person under Part 1 of SSCBA 1992 or Part 1 of SSCB( NI )A 1992. 2 But this prohibition does not apply to an employer's contribution (see subsection (3)) which is allowable as a deduction— a under section 336 (the general rule), b under any of sections 337 to 342 (travel expenses), or c under section 351(1) (expenses of ministers of religion). 3 For this purpose “ an employer's contribution ” means— a a secondary Class 1 contribution, b a Class 1A contribution, or c a Class 1B contribution, within the meaning of Part 1 of SSCBA 1992 or Part 1 of SSCB( NI )A 1992. Chapter 3 Deductions from benefits code earnings Introduction Scope of this Chapter: cost of benefits deductible as if paid by employee 361 A deduction from a person’s earnings is allowed under the following provisions of this Chapter where— a the earnings include an amount treated as earnings under— i Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens), ii Chapter 5 of Part 3 (taxable benefits: living accommodation), or iii Chapter 10 of Part 3 (taxable benefits: residual liability to charge), and b an amount in respect of the benefit in question would be deductible under Chapter 2 or 5 of this Part if the person had incurred and paid it. Deductions where amounts treated as earnings under the benefits code Deductions where non-cash voucher provided 362 1 A deduction from earnings is allowed if— a the earnings include an amount treated as earnings under section 87(1) or 87A(1) (amount in respect of benefit of non-cash voucher treated as earnings), b the voucher is exchanged for goods or services (whether in the tax year or a later year), and c had the employee incurred and paid the cost of the goods or services in the tax year, the whole or part of the amount paid would have been deductible from the earnings under Chapter 2 or 5 of this Part. 2 The deduction is equal to the lesser of— a the amount treated as earnings, and b the amount that would have been so deductible. Deductions where credit-token provided 363 1 A deduction from earnings is allowed if— a the earnings include an amount treated as earnings under section 94(1) or 94A(1) (amount in respect of benefit of credit-token treated as earnings), and b had the employee incurred and paid the cost of the goods or services obtained by using the token, the whole or part of the amount paid would have been deductible from the earnings under Chapter 2 or 5 of this Part. 2 The deduction is equal to the lesser of— a the amount treated as earnings, and b the amount that would have been so deductible. Deductions where living accommodation provided 364 1 A deduction from earnings is allowed if— a the earnings include an amount treated as earnings under Chapter 5 of Part 3 (taxable benefits: living accommodation), and b had the employee incurred and paid an amount equal to that amount for the accommodation in the tax year, the whole or part of the amount paid would have been deductible under Chapter 2 or 5 of this Part. 2 The deduction is equal to the amount that would have been so deductible. Deductions where certain employment-related benefits provided 365 1 A deduction from earnings is allowed if— a the earnings include an amount treated as earnings under Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of a benefit, ... aa the cost of the benefit was determined under section 204 or 206, and b had the employee incurred and paid the cost of the benefit, the whole or part of the amount paid would have been deductible under Chapter 2 or 5 of this Part. 2 The deduction is equal to the amount that would have been so deductible. 3 For the purposes of this section, the cost of the benefit is determined in accordance with section 204 or 206 . Chapter 4 Fixed allowances for employee’s expenses Introduction Scope of this Chapter: amounts fixed by Treasury 366 A deduction from an employee’s earnings for an amount is allowed under this Chapter where the amount has been fixed by the Treasury by reference to the employee’s employment. Fixed sum deductions Fixed sum deductions for repairing and maintaining work equipment 367 1 A deduction is allowed for the sum, if any, fixed by the Treasury as in their opinion representing the average annual expenses incurred by employees of the class to which the employee belongs in respect of the repair and maintenance of work equipment. 2 The Treasury may only fix such a sum for a class of employees if they are satisfied that— a the employees are generally responsible for the whole or part of the expense of repairing and maintaining the work equipment, and b the expenses for which they are generally responsible would be deductible from the employees' earnings under section 336 if paid by them. 3 No deduction is allowed under this section if the employer pays or reimburses the expenses in respect of which the sum is fixed or would do so if requested. 4 If the employer pays or reimburses part of those expenses or would do so if requested, the amount of the deduction is reduced by the amount which is or would be paid or reimbursed. 5 In this section “ work equipment ” means tools or special clothing. 6 This section needs to be read with section 330(2) (prevention of double deductions). Fixed sum deductions from earnings payable out of public revenue 368 1 A deduction is allowed from earnings payable out of the public revenue for the employee’s fixed sum expenses in respect of the duties to which the earnings relate. 2 “ Fixed sum expenses ” means the sum, if any, fixed by the Treasury as in their opinion representing the average annual expenses which employees of the employee’s description are obliged to pay wholly, exclusively and necessarily in the performance of duties to which such earnings relate. 3 This section needs to be read with section 330(2) (prevention of double deductions). Chapter 5 Deductions for earnings representing benefits or reimbursed expenses Introduction Scope of this Chapter: earnings representing benefits or reimbursed expenses 369 1 A deduction from a person’s earnings for an amount is allowed under the following provisions of this Chapter where the amount is included in the earnings in respect of— a provision made for the person, or b expenses reimbursed by another person. 2 In this Chapter references to “ the included amount ” are references to the amount so included. 3 If the included amount is an amount treated as earnings under— a Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens), b Chapter 5 of Part 3 (taxable benefits: living accommodation), or c Chapter 10 of Part 3 (taxable benefits: residual liability to charge), a deduction may be allowed instead in respect of the benefit in question under Chapter 3 of this Part (deductions from benefits code earnings). Travel costs and expenses where duties performed abroad Travel costs and expenses where duties performed abroad: employee’s travel 370 1 A deduction is allowed from earnings which are relevant taxable earnings if— a the earnings include an amount in respect of— i the provision of travel facilities for a journey made by the employee, or ii the reimbursement of expenses incurred by the employee on such a journey, and b the circumstances fall within Case A, B or C. 2 The deduction is equal to the included amount. 3 Case A is where— a the employee is absent from the United Kingdom wholly and exclusively for the purpose of performing the duties of one or more employments, b the duties concerned can only be performed outside the United Kingdom, and c the journey is— i a journey from a place outside the United Kingdom where such duties are performed to a place in the United Kingdom, or ii a return journey following such a journey. 4 Case B is where— a the duties of the employment are performed partly outside the United Kingdom, b those duties are not performed on a vessel, c the journey is between a place in the United Kingdom and a place outside the United Kingdom where duties of the employment are performed, d the duties performed outside the United Kingdom can only be performed there, and e the journey is made wholly and exclusively for the purpose of performing them or returning after performing them. 5 Case C is where— a the duties of the employment are performed partly outside the United Kingdom, b those duties are performed on a vessel, c the journey is between a place in the United Kingdom and a place outside the United Kingdom where duties of the employment are performed, d the duties performed outside the United Kingdom can only be performed there, and e the journey is made wholly and exclusively for the purpose of performing those duties, or those duties and other duties of the employment, or returning after performing them. 6 In this section “relevant taxable earnings” means general earnings for a tax year ... that— a are taxable earnings under section 15, and b either— i if the tax year is tax year 2024-2025 or an earlier tax year, would be taxable earnings under section 15 even if the employee made a claim under section 809B of ITA 2007 (claim for remittance basis) for that year, or ii if the tax year is tax year 2025-2026 or a later tax year and the employee is a qualifying new resident for the purposes of Chapter 5C of Part 2 for that tax year, are not qualifying foreign general earnings within the meaning of section 41T (qualifying foreign general earnings). Travel costs and expenses where duties performed abroad: visiting spouse’s , civil partner's or child’s travel 371 1 A deduction is allowed from earnings which are relevant taxable earnings if— a the earnings include an amount in respect of— i the provision of travel facilities for a journey made by the employee’s spouse , civil partner or child, or ii the reimbursement of expenses incurred by the employee on such a journey, and b conditions A to C are met. 2 The deduction is equal to the included amount. 3 Condition A is that the employee is absent from the United Kingdom for a continuous period of at least 60 days for the purpose of performing the duties of one or more employments. 4 Condition B is that the journey is between a place in the United Kingdom and a place outside the United Kingdom where such duties are performed. 5 Condition C is that the employee’s spouse , civil partner or child is— a accompanying the employee at the beginning of the period of absence, b visiting the employee during that period, or c returning to a place in the United Kingdom after so accompanying or visiting the employee. 6 A deduction is not allowed under this section for more than two outward and two return journeys by the same person in a tax year. 7 In this section “ child ” includes a stepchild and an illegitimate child, but not a person who is 18 or over at the beginning of the outward journey. 8 In this section “ relevant taxable earnings ” has the meaning given by section 370(6). Where seafarers' duties are performed 372 For the purposes of— a section 370 (employee’s travel costs and expenses where duties performed abroad), and b section 371 (visiting spouse’s , civil partner's or child’s travel costs and expenses where duties performed abroad), whether duties performed on a vessel are performed in or outside the United Kingdom is determined without regard to section 40(2) (certain duties treated as performed in UK). Travel costs and expenses of non-resident or qualifying new resident employees where duties performed in UK Non-resident or qualifying new resident employee’s travel costs and expenses where duties performed in UK 373 1 This section applies if a person (“ the employee ”) who is non-UK resident or a qualifying new resident for the purposes of Chapter 5C of Part 2 of this Act or Chapter 5 of Part 8 of ITTOIA 2005 (see section 845B of that Act) — a receives earnings from an employment for duties performed in the United Kingdom, and b an amount is included in the earnings in respect of— i the provision of travel facilities for a journey made by the employee, or ii the reimbursement of expenses incurred by the employee on such a journey. 2 A deduction is allowed from earnings from the employment which are earnings charged on receipt if the journey meets conditions A and B. 3 Condition A is that the journey ends on, or during the period of 5 years beginning with, a date that is a qualifying arrival date in relation to the employee (see section 375). 4 Condition B is that the journey is made— a from a country outside the United Kingdom in which the employee normally lives at the time the journey is made to a place in the United Kingdom in order to perform duties of the employment, or b to such a country from a place in the United Kingdom in order to return to such a country after performing such duties. 5 If the journey is wholly for a purpose specified in subsection (4), the deduction is equal to the included amount. 6 If the journey is only partly for such a purpose, the deduction is equal to so much of the included amount as is properly attributable to that purpose. 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-resident or qualifying new resident employee’s spouse’s , civil partner's or child’s travel costs and expenses where duties performed in UK 374 1 This section applies if a person (“ the employee ”) who is non-UK resident or a qualifying new resident for the purposes of Chapter 5C of Part 2 of this Act or Chapter 5 of Part 8 of ITTOIA 2005 (see section 845B of that Act) — a receives earnings from an employment for duties performed in the United Kingdom, and b an amount is included in the earnings in respect of— i the provision of travel facilities for a journey made by the employee’s spouse , civil partner or child, or ii the reimbursement of expenses incurred by the employee on such a journey. 2 A deduction is allowed from earnings from the employment which are earnings charged on receipt if conditions A to C are met. 3 Condition A is that the journey— a is made between a country outside the United Kingdom in which the employee normally lives at the time the journey is made and a place in the United Kingdom, and b ends on, or during the period of 5 years beginning with, a date that is a qualifying arrival date in relation to the employee (see section 375). 4 Condition B is that the employee is in the United Kingdom for a continuous period of at least 60 days for the purpose of performing the duties of one or more employments from which the employee receives earnings for duties performed in the United Kingdom. 5 Condition C is that the employee’s spouse , civil partner or child is— a accompanying the employee at the beginning of that period, b visiting the employee during that period, or c returning to a country outside the United Kingdom in which the employee normally lives at the time the journey is made , after so accompanying or visiting the employee. 6 If the journey is wholly for the purpose of so accompanying or visiting the employee or so returning, the deduction is equal to the included amount. 7 If the journey is only partly for that purpose, the deduction is equal to so much of the included amount as is properly attributable to that purpose. 8 A deduction is not allowed under this section for more than two inward journeys and two return journeys by the same person in a tax year. 9 In this section “ child ” includes a stepchild and an illegitimate child, but not a person who is 18 or over at the beginning of the inward journey. 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “qualifying arrival date” 375 1 For the purposes of sections 373(3) and 374(3), a date is a qualifying arrival date in relation to a person if— a it is a date on which the person arrives in the United Kingdom to perform duties of an employment from which the person receives earnings for duties performed in the United Kingdom, and b condition A or B is met. 2 Condition A is that the person has not been in the United Kingdom for any purpose during the period of 2 years ending with the day before the date. 3 Condition B is that the person was not resident in the United Kingdom in either of the 2 tax years preceding the tax year in which the date falls. 4 If, in a case where condition B applies, there are 2 or more dates in the tax year on which the person arrives in the United Kingdom to perform duties of an employment from which the person receives earnings for duties performed in the United Kingdom, the qualifying arrival date is the earliest of them. Foreign accommodation and subsistence costs and expenses Foreign accommodation and subsistence costs and expenses (overseas employments) 376 1 A deduction from earnings from an employment is allowed if— a the duties of the employment are performed wholly outside the United Kingdom, b the employee is UK resident , c in a case where the employer is a foreign employer, the employee is not a qualifying new resident for the purposes of Chapter 5C of Part 2 of this Act or Chapter 5 of Part 8 of ITTOIA 2005 (see section 845B of that Act) , and d the earnings include an amount in respect of— i the provision of accommodation or subsistence outside the United Kingdom for the employee for the purpose of enabling the employee to perform the duties of the employment, or ii the reimbursement of expenses incurred by the employee on such accommodation or subsistence for that purpose. 2 If the accommodation or subsistence is wholly for that purpose, the deduction is equal to the included amount. 3 If the accommodation or subsistence is only partly for that purpose, the deduction is equal to so much of the included amount as is properly attributable to that purpose. 4 Subsection (5) applies if in the tax year the employment is in substance one whose duties fall to be performed outside the United Kingdom. 5 Duties of the employment performed in the United Kingdom, whose performance is merely incidental to the performance of duties outside the United Kingdom, are to be treated for the purposes of subsection (1)(a) as performed outside the United Kingdom. 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Personal security assets and services Costs and expenses in respect of personal security assets and services 377 1 This section applies if— a there is a special threat to an employee’s personal physical security which arises wholly or mainly because of the employee’s employment, b an asset or service which improves personal security is provided for or used by the employee to meet the threat, c the employee’s earnings include an amount in respect of— i the provision or use, or ii expenses connected with it, because the whole or part of the cost of the provision or use is borne, or the expenses are reimbursed to the employee, by or on behalf of another person (“ the provider ”), and d the provider’s sole object in bearing the whole or part of the cost or reimbursing the expenses is meeting the threat. 2 In the case of such an asset, if the provider intends it to be used solely for the purpose of improving personal physical security, a deduction equal to the included amount is allowed. 3 If the provider intends the asset to be used solely to improve personal physical security, any use of the asset incidental to that purpose is ignored. 4 If the provider intends the asset to be used only partly to improve personal physical security, a deduction equal to the proportion of the included amount attributable to the intended use for that purpose is allowed. 5 In determining whether or not this section applies in relation to an asset, it does not matter if— a the asset becomes fixed to land (even a dwelling or grounds), or b the employee is or becomes entitled— i to the property in the asset, or ii if the asset is a fixture, to any estate or interest in the land concerned. 6 In the case of a service within subsection (1), if the benefit resulting to the employee consists wholly or mainly of an improvement of the employee’s personal physical security, a deduction equal to the included amount is allowed. 7 The fact that an asset or a service improves the personal physical security of a member of the employee’s family or household, as well as that of the employee, does not prevent a deduction being allowed. 8 In this section— “ asset ” includes equipment or a structure (such as a wall), but not a car, ship or aircraft or a dwelling or grounds appurtenant to a dwelling, and “ service ” does not include a dwelling or grounds appurtenant to a dwelling. Chapter 6 Deductions from seafarers' earnings Deduction from seafarers' earnings: eligibility 378 1 A deduction is allowed from earnings from an employment as a seafarer if— a the earnings are relevant general earnings , b the duties of the employment are performed wholly or partly outside the United Kingdom, and c any of those duties are performed in the course of an eligible period. 2 In this Chapter “ eligible period ” means a period consisting of at least 365 days which is either— a a period of consecutive days of absence from the United Kingdom, or b a combined period. 3 A combined period is a period— a at least half of the days in which are days of absence from the United Kingdom, and b which consists of 3 consecutive periods, A, B and C, where— A is a period of consecutive days of absence from the United Kingdom or a period which is itself a combined period, B is a period of not more than 183 days, and C is a period of consecutive days of absence from the United Kingdom. 4 For this purpose a person is only regarded as being absent from the United Kingdom on any day if absent at the end of the day. 5 Relevant general earnings” means— a taxable earnings under section 15, 22 or 26, or b general earnings— i to which section 27 applies, and ii which are for a period in which the employee is liable under the law of an EEA State (other than the United Kingdom) to tax in that State by reason of domicile or residence. 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Calculating the deduction 379 1 The deduction under section 378— a is allowed from the amount of the earnings from the employment attributable to the eligible period, and b is equal to that amount. 2 Earnings from the employment for a period of leave immediately after the eligible period are to be regarded as earnings attributable to the eligible period if or to the extent that they are earnings for the tax year in which the eligible period ends. 3 This section is subject to section 380 (limit on deduction where UK duties etc. make amount unreasonable). Limit on deduction where UK duties etc. make amount unreasonable 380 1 If— a section 378 (deduction from seafarers' earnings: eligibility) applies to earnings for a tax year, and b in the tax year the employee performs some of the duties of the employment as a seafarer or of any associated employments in the United Kingdom, the amount of earnings in respect of which the deduction under this Chapter is allowed is subject to the following limitation. 2 The amount is restricted to the proportion of the aggregate earnings for that year from the employment as a seafarer and all associated employments that is reasonable having regard to— a the nature of and time devoted to the duties performed outside and in the United Kingdom, and b all other relevant circumstances. 3 In this section “ associated employments ” means employments with the same employer or with associated employers. 4 The same rules for determining whether employers are associated apply for the purposes of this section as apply for section 24(4) (limit on chargeable overseas earnings where duties of associated employment performed in UK) (see section 24(5)). Taking account of other deductions 381 For the purposes of sections 379 and 380, the amount of the earnings from an employment for a tax year is the amount remaining after any deductions under— a section 232 (giving effect to mileage allowance relief), b Chapter 2, 3, 4 or 5 of this Part, c section 262 of CAA 2001 (capital allowances to be given effect by treating them as deductions from earnings), and d sections 188 to 194 of FA 2004 (contributions to registered pension schemes). Duties on board ship 382 1 Duties which a person performs on a ship engaged— a on a voyage beginning or ending outside the United Kingdom (but excluding any part of it beginning and ending in the United Kingdom), or b on a part beginning or ending outside the United Kingdom of any other voyage, are treated as performed outside the United Kingdom for the purposes of this Chapter. 2 Duties which a person performs on a vessel engaged on a voyage not extending to a port outside the United Kingdom are treated for the purposes of this Chapter as performed in the United Kingdom. 3 For the purposes of subsection (1) the areas designated under section 1(7) of the Continental Shelf Act 1964 (c. 29) are treated as part of the United Kingdom. 4 Subsection (1) applies despite anything to the contrary in section 40 (duties on board vessel or aircraft). Place of performance of incidental duties 383 1 For the purposes of section 378(1)(b) (deduction from seafarers' earnings: eligibility), duties of an employment as a seafarer which are performed outside the United Kingdom are treated as performed in the United Kingdom if conditions A and B are met. 2 Condition A is that in the tax year in which the duties are performed the employment is in substance one whose duties fall to be performed in the United Kingdom. 3 Condition B is that the performance of the duties performed outside the United Kingdom is merely incidental to the performance of duties in the United Kingdom. 4 Section 39 (duties in UK merely incidental to duties outside UK) does not affect the question— a where any duties are performed, or b whether a person is absent from the United Kingdom, for the purposes of section 378(1) to (3). Meaning of employment “as a seafarer” 384 1 In this Chapter employment “ as a seafarer ” means an employment (other than Crown employment) consisting of the performance of duties on a ship or of such duties and others incidental to them. 2 In this section “ Crown employment ” means employment under the Crown— a which is of a public nature, aa which is not employment in the Royal Fleet Auxiliary Service, and b the earnings from which are payable out of the public revenue of the United Kingdom or of Northern Ireland. Meaning of “ship” 385 In this Chapter “ ship ” does not include an offshore installation. Part 6 Employment income: income which is not earnings or share-related Chapter 1 Payments to non-approved pension schemes Charge on payments to non-approved retirement benefits schemes 386 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “non-approved retirement benefits scheme” 387 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Apportionment of payments in respect of more than one employee 388 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exception: employments where earnings charged on remittance 389 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exception: non-domiciled employees with foreign employers 390 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exception: seafarers with overseas earnings 391 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Relief where no benefits are paid or payable 392 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 2 Benefits from employer-financed retirement benefits Benefits treated as employment income Application of this Chapter 393 1 This Chapter applies to relevant benefits provided under an employer-financed retirement benefits scheme. 2 Section 393A defines “employer-financed retirement benefits scheme” and section 393B defines “relevant benefits”. Employer-financed retirement benefits scheme 393A 1 In this Chapter “ employer-financed retirement benefits scheme ” means a scheme for the provision of benefits consisting of or including relevant benefits to or in respect of employees or former employees of an employer. 2 But neither— a a registered pension scheme, nor b a section 615(3) scheme, is an employer-financed retirement benefits scheme. 3 “ Section 615(3) scheme ” means a superannuation fund to which section 615(3) of ICTA applies. 4 “ Scheme ” includes a deed, agreement, series of agreements, or other arrangements. Relevant benefits 393B 1 In this Chapter “ relevant benefits ” means any lump sum, gratuity or other benefit (including a non-cash benefit) provided (or to be provided)— a on or in anticipation of the retirement of an employee or former employee, b on the death of an employee or former employee, c after the retirement or death of an employee or former employee in connection with past service, d on or in anticipation of, or in connection with, any change in the nature of service of an employee, or e to any person by virtue of a pension sharing order or provision relating to an employee or former employee. 2 But— a benefits charged to tax under Part 9 (pension income) , or that would be charged to tax under that Part but for section 573(2A) or (2B), 646D or 646E or any deductions under section 574A(3) , b benefits chargeable to tax by virtue of Schedule 34 to FA 2004 (which applies certain charges under Part 4 of that Act in relation to non-UK schemes), and c excluded benefits, are not relevant benefits. 3 The following are “excluded benefits”— a benefits in respect of ill-health or disablement of an employee during service, b benefits in respect of the death by accident of an employee during service, c benefits under a relevant life policy, and d benefits of any description prescribed by regulations made by the Board of Inland Revenue. 4 In subsection (3)(c) “ relevant life policy ” means— a an excepted group life policy as defined in section 480 of ITTOIA 2005, b a policy of life insurance the terms of which provide for the payment of benefits on the death of a single individual and with respect to which — i condition A in section 481 of that Act would be met if paragraph (a) in that condition referred to the death, in any circumstances or except in specified circumstances, of that individual (rather than the death in any circumstances of each of the individuals insured under the policy) and if the condition did not include paragraph (b), and ii conditions C and D in that section and conditions A and C in section 482 of that Act are met, or c a policy of life insurance that would be within paragraph (a) or (b) but for the fact that it provides for a benefit which is an excluded benefit under or by virtue of paragraph (a), (b) or (d) of subsection (3). 4A Regulations under subsection (3)(d) may include provision having effect in relation to times before they are made. 5 In subsection (1)(e) “ pension sharing order or provision ” means any such order or provision as is mentioned in section 28(1) of WRPA 1999 or Article 25(1) of WRP( NI )O 1999. Charge on benefit to which this Chapter applies 394 1 If a benefit to which this Chapter applies is received by an individual, the amount of the benefit counts as employment income of the individual for the relevant tax year. 1A Subsection (1) does not apply in relation to the benefit if the total amount of the benefits to which this Chapter applies received by the individual in the relevant tax year does not exceed £100. 2 If a benefit to which this Chapter applies is received by a person who is not an individual, the person who is (or persons who are) the responsible person in relation to the scheme under which the benefit is provided is chargeable to income tax on the amount of the benefit for the relevant tax year. 3 In this section the “relevant tax year” is the tax year in which the benefit is received. 4 For the purposes of subsection (2), the rate of tax is 45% or such other rate as may for the time being be specified by the Treasury by order. 4A Subsection (4B) applies if the receipt of a benefit to which this Chapter applies gives rise to other relevant income of the employee, or the former employee, to or in respect of whom the benefit is provided. 4B Subsection (1) or (2) (as the case may be) applies to the amount of the benefit only so far as that amount exceeds the other relevant income. 4C In subsections (4A) and (4B) “ other relevant income ” means— a general earnings of the employee or former employee which are chargeable to income tax, b an amount which counts as employment income of the employee or former employee under Chapter 2 of Part 7A, ... ba an amount which would count as employment income of the employee or former employee under that Chapter but for the application of section 554Z5 (overlap with earlier relevant step), or c an amount which would be within paragraph (a), (b) or (ba) apart from— i the employee or former employee having been non-UK resident for any tax year, or ii any tax year having been a split year as respects the employee or former employee. 5 No liability to income tax arises by virtue of any other provision of this Act in respect of a benefit to which this Chapter applies. 6 Subsection (5) does not affect— a any liability to income tax on general earnings, or b any liability to income tax on an amount which counts as employment income under Chapter 2 of Part 7A. Temporary non-residents 394A 1 This section applies if an individual is temporarily non-resident. 2 Any benefits within subsection (3) are to be treated for the purposes of section 394(1) as if they were received by the individual in the period of return. 3 A benefit is within this subsection if— a this Chapter applies to it, b it is in the form of a lump sum, c it is received by the individual in the temporary period of non-residence, and d ignoring this section— i no charge to tax arises by virtue of section 394(1) in respect of it, 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 Subsection (2) does not affect the operation of section 394(1A) (and, accordingly, “ the relevant tax year ” for the purposes of section 394(1A) remains the tax year in which the benefit is actually received). 6 Nothing in any double taxation relief arrangements is to be read as preventing the individual from being chargeable to income tax in respect of any benefit treated by virtue of this section as received in the period of return (or as preventing a charge to that tax from arising as a result). 7 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. 8 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. Reduction where employee has contributed 395 1 This section applies in relation to a relevant benefit under an employer-financed retirement benefits scheme in the form of a lump sum where, under the scheme, an employee has paid any sum or sums by way of contribution to the provision of the lump sum. 2 The amount which, by virtue of section 394, counts as employment income, or is chargeable to tax under subsection (2) of that section , is the amount of the lump sum reduced by the sum, or the aggregate of the sums, paid by the employee by way of contribution to the provision of the lump sum. 3 A reduction under this section may not be claimed in respect of the same contribution in relation to more than one lump sum. 4 It is to be assumed, unless the contrary is shown, that no reduction is applicable under this section. Benefits under old section 222 schemes not taxed by virtue of section 394 395A Section 394 does not apply to a benefit provided under an employer–financed retirement benefits scheme if— a immediately before 6th April 1980 the scheme was approved under section 222 of ICTA 1970 , b the scheme was not approved under Chapter II of Part II of FA 1970 , c no material changes have been made to the terms on which benefits are provided under the scheme after 5th April 1980, and d no contributions have been paid under the scheme after that date. Exemption or reduction for foreign service 395B 1 This section applies if— a a benefit to which this Chapter applies is provided to or in respect of an employee or former employee in the form of a lump sum, b the employer-financed retirement benefits scheme under which the lump sum is provided is established in a country or territory outside the United Kingdom, c the lump sum is received by the employee or former employee or a related person, ca the recipient is not resident in the United Kingdom in the tax year in which the lump sum is received, d all or part of the lump sum (“the relevant part”) would, but for this section, count as employment income by virtue of section 394(1) or be chargeable to income tax under section 394(2) (account having been taken of section 394(4B) and section 395), and e the service in respect of which rights to receive the relevant part of the lump sum accrued (referred to as “reckonable service”) is or includes foreign service. 2 Section 394(1) or, as the case may be, section 394(2) does not apply to the relevant part of the lump sum if the condition in subsection (3) is met. 3 The condition is that— a three-quarters or more of the period of reckonable service is made up of foreign service, b if the period of reckonable service exceeds 10 years, the whole of the last 10 years of that period is made up of foreign service, or c if the period of reckonable service exceeds 20 years, one-half or more of that period, including any 10 of the last 20 years, is made up of foreign service. 4 If the condition in subsection (3) is not met, the amount that counts as employment income by virtue of section 394(1) or, as the case may be, is chargeable to income tax under section 394(2) is to be reduced by the appropriate proportion. 5 The appropriate proportion is a proportion of the relevant part of the lump sum equal to the proportion that the period of foreign service included in the reckonable service bears to the period of reckonable service. 6 In determining the service in respect of which rights to receive the relevant part of the lump sum accrued— a service in a previous employment or with a previous employer is to be taken into account if rights to receive the relevant part of the lump sum also accrued in respect of that service, and b it does not matter if the rights originally accrued under a different employer-financed retirement benefits scheme (whether one established in the United Kingdom or in a country or territory outside the United Kingdom). 7 “Related person”, in relation to an employee or former employee (E), means any of the following— a E’s spouse or civil partner or E’s widow or widower or surviving civil partner, b a person who is financially dependent on E, whose financial relationship with E is one of mutual dependence or who is dependent on E because of physical or mental impairment (or, if the lump sum is paid after E’s death, anyone who was such a person at the time of E’s death), and c E’s personal representatives. 8 In this section “foreign service” has the meaning given by section 395C . Meaning of “foreign service” in section 395B 395C 1 In section 395B “ foreign service ” means service to which subsection (2), (3), (6) or (8) applies. 2 This subsection applies to service in or after the tax year 2013–14— a to the extent that it consists of duties performed outside the United Kingdom in respect of which earnings would not be relevant earnings, or b if a deduction equal to the whole amount of the earnings from the employment was or would have been allowable under Chapter 6 of Part 5 (deductions from seafarers' earnings). 3 This subsection applies to service in or after the tax year 2003–04 but before the tax year 2013–14 such that— a any earnings from the employment would not be relevant earnings, or b a deduction equal to the whole amount of the earnings from the employment was or would have been allowable under Chapter 6 of Part 5 (deductions from seafarers' earnings). 4 In subsection (2) “ relevant earnings ” means— a for service in or after the tax year 2025-26, earnings— i to which section 15 applies, and ii if the employee is a qualifying new resident for the purposes of Chapter 5C of Part 2 for that tax year, which are not qualifying foreign general earnings within the meaning of section 41T (qualifying foreign general earnings), and b for service before tax year 2025-26, earnings to which section 15 applies and to which that section would apply even if the employee made a claim under section 809B of ITA 2007 (claim for remittance basis) for that year. 5 In subsection (3) “ relevant earnings ” means— a for service in or after the tax year 2008–09, earnings— i which are for a tax year in which the employee is ordinarily UK resident, ii to which section 15 applies, and iii to which that section would apply even if the employee made a claim under section 809B of ITA 2007 (claim for remittance basis) for that year, and b for service before the tax year 2008–09, general earnings to which section 15 or 21 as originally enacted applies. 6 This subsection applies to service before the tax year 2003–04 and after the tax year 1973–74 such that— a the emoluments from the employment were not chargeable under Case I of Schedule E, or would not have been so chargeable had there been any, or b a deduction equal to the whole amount of the emoluments from the employment was or would have been allowable under a foreign earnings deduction provision. 7 In subsection (6) “ foreign earnings deduction provision ” means— a paragraph 1 of Schedule 2 to FA 1974, b paragraph 1 of Schedule 7 to FA 1977, or c section 192A or 193(1) of ICTA. 8 This subsection applies to service before the tax year 1974-75 such that tax was not chargeable in respect of the emoluments of the employment— a in the tax year 1956–57 or later, under Case I of Schedule E, or b in earlier tax years, under Schedule E, or it would not have been so chargeable had there been any such emoluments. Certain lump sums not taxed by virtue of section 394 396 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Certain lump sums: calculation of amount taxed by virtue of section 394 397 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Valuation of benefits etc. Valuation of benefits 398 1 In the case of a cash benefit, for the purposes of this Chapter the amount of a benefit is taken to be the amount received. 2 In the case of a non-cash benefit, for the purposes of this Chapter the amount of a benefit is taken to be the greater of— a the amount of earnings (as defined in Chapter 1 of Part 3) that the benefit would give rise to if it were received for performance of the duties of an employment (money’s worth), and b the cash equivalent of the benefit under the benefits code if it were so received and the code applied to it. 3 For the purposes of subsection (2) the benefits code has effect with the modifications in subsections (4) to (6). 4 References in the benefits code to the employee are to be taken as references to the person by whom the benefit is received. 5 References in the benefits code to the employer are to be taken as including references to the former employer. 6 Where— a section 106 (cash equivalent: cost of accommodation over £75,000) applies, and b the amount referred to in section 105(2)(b) (the sum made good) exceeds the amount referred to in section 105(2)(a) (the rental value), the amount to be subtracted under paragraph (b) of step 4 of the calculation in section 106(2) is that excess (and not only the excess rent referred to there). Employment-related loans: interest treated as paid 399 1 This section applies if— a an amount consisting of, or including, an amount representing the benefit of a loan (“a taxable amount”) counts as employment income of an individual in a tax year under section 394(1), or b the person who is (or any of the persons who are) the responsible person in relation to a scheme is charged to tax on a taxable amount ... under section 394(2). 2 The individual or the responsible person is to be treated for all purposes of the Tax Acts (other than this Chapter) as having paid interest on the loan in the tax year equal to the amount representing the cash equivalent of the loan. 3 The interest is to be treated— a as accruing during the period in the tax year during which the loan is outstanding, and b as paid at the end of the period. 4 The interest is not to be treated— a as income of the person making the loan, or b as relevant loan interest to which section 369 of ICTA applies (mortgage interest payable under deduction of tax). Interpretation Responsible person 399A 1 The following heads specify the person who is, or persons who are, the responsible person in relation to an employer-financed retirement benefits scheme for the purposes of this Chapter. 2 But if a person is, or persons are, the responsible person in relation to the scheme by virtue of being specified under one head, no-one is the responsible person in relation to the scheme by virtue of being specified under a later head. Head 1 If there are one or more trustees of the scheme who are resident in the United Kingdom, that trustee or each of those trustees. Head 2 If there are one or more persons who control the management of the scheme, that person or each of those persons. Head 3 If alive or still in existence, the employer, or any of the employers, who established the scheme and any person by whom that employer, or any of those employers, has been directly or indirectly succeeded in relation to the provision of benefits under the scheme. Head 4 Any employer of employees to or in respect of whom benefits are, or are to be, provided under the scheme. Head 5 If there are one or more trustees of the scheme who are not resident in the United Kingdom, that trustee or each of those trustees. Interpretation 400 In this Chapter— “ employer-financed retirement benefits scheme ” has the meaning given by section 393A; “ relevant benefits ” has the meaning given by section 393B; and “ responsible person ” has the meaning given by section 399A. Chapter 3 Payments and benefits on termination of employment etc. Preliminary Application of this Chapter 401 1 This Chapter applies to payments and other benefits which are received directly or indirectly in consideration or in consequence of, or otherwise in connection with— a the termination of a person’s employment, b a change in the duties of a person’s employment, or c a change in the earnings from a person’s employment, by the person, or the person’s spouse or civil partner , blood relative, dependant or personal representatives. 2 Subsection (1) is subject to subsection (3) and sections 405 to 414A (exceptions for certain payments and benefits). 3 This Chapter does not apply to any payment or other benefit chargeable to income tax apart from this Chapter. 4 For the purposes of this Chapter— a a payment or other benefit which is provided on behalf of, or to the order of, the employee or former employee is treated as received by the employee or former employee, and b in relation to a payment or other benefit— i any reference to the employee or former employee is to the person mentioned in subsection (1), and ii any reference to the employer or former employer is to be read accordingly. Meaning of “benefit” 402 1 In this Chapter “ benefit ” includes anything in respect of which, were it received for performance of the duties of the employment, an amount— a would be taxable earnings from the employment, or b would be such earnings apart from an earnings-only exemption. This is subject to subsections (2) to (4). 2 In this Chapter “ benefit ” does not include a benefit received in connection with the termination of a person’s employment that is a benefit which, were it received for performance of the duties of the employment, would fall within— a section 239(4) (exemption of benefits connected with taxable cars and vans and exempt heavy goods vehicles), so far as that section applies to a benefit connected with a car or van, b section 269 (exemption where benefits or money obtained in connection with taxable car or van or exempt heavy goods vehicle), c section 319 (mobile telephones), or d section 320 (limited exemption for computer equipment). 3 In this Chapter “ benefit ” does not include a benefit received in connection with any change in the duties of, or earnings from, a person’s employment to the extent that it is a benefit which, were it received for performance of the duties of the employment, would fall within section 271(1) (limited exemption of removal benefits and expenses). 4 The right to receive a payment or benefit is not itself a benefit for the purposes of this Chapter. Payments and benefits treated as employment income Split of payments and other benefits between sections 402B and 403 402A 1 In this Chapter “ termination award ” means a payment or other benefit to which this Chapter applies because of section 401(1)(a). 2 Section 402B (termination awards not benefiting from threshold treated as earnings) applies to termination awards to the extent determined under section 402C. 3 Section 403 (charge on payment or benefit where threshold applies) applies to termination awards so far as they are not ones to which section 402B applies. 4 Section 403 also applies to payments and other benefits to which this Chapter applies because of section 401(1)(b) or (c) (change in duties or earnings). Termination awards not benefiting from threshold to be treated as earnings 402B 1 The amount of a termination award to which this section applies— a is treated as an amount of earnings of the employee, or former employee, from the employment , but b is not capable of being an amount to which section 27 applies by virtue of subsection 1(a) or (b) of that section (UK-based taxable earnings for year when employee not resident in UK). 2 See also section 7(3)(b) and (5)(ca) (which cause amounts treated as earnings under this section to be included in general earnings). 3 Section 403(3) (when benefits are received) does not apply in relation to payments or other benefits to which this section applies. The termination awards to which section 402B applies 402C 1 This section has effect for the purpose of identifying the extent to which section 402B applies to termination awards in respect of the termination of the employment of the employee. 2 In this section “ relevant termination award ” means a termination award that is neither— a a redundancy payment, nor b so much of an approved contractual payment as is equal to or less than the amount which would have been due if a redundancy payment had been payable. 3 If the post-employment notice pay (see section 402D) in respect of the termination is greater than, or equal to, the total amount of the relevant termination awards in respect of the termination, section 402B applies to all of those relevant termination awards. 4 If the post-employment notice pay in respect of the termination is less than the total amount of the relevant termination awards in respect of the termination but is not nil— a section 402B applies to a part of those relevant termination awards, and b the amount of that part is equal to the post-employment notice pay. 5 Section 309(4) to (6) (meaning of “redundancy payment” and “approved contractual payment” etc ) apply for the purposes of subsection (2) as they apply for the purposes of section 309. “Post-employment notice pay” 402D 1 “The post-employment notice pay” in respect of a termination is (subject to subsection (11)) given by— ( BP × D P ) − T where— BP, D and P are given by subsections (3) to (7), and T is the total of the amounts of any payment or benefit received in connection with the termination which— would fall within section 401(1)(a) but for section 401(3), is taxable as earnings under Chapter 1 of Part 3, is not pay in respect of holiday entitlement for a period before the employment ends, and is not a bonus payable for termination of the employment. 2 If the amount given by the formula in subsection (1) is a negative amount, the post-employment notice pay is nil. 3 Subject to subsections (5) , (6) and (6A) — BP is the employee's basic pay (see subsection (7)) from the employment in respect of the last pay period of the employee to end before the trigger date, P is the number of days in that pay period, and D is the number of days in the post-employment notice period. 4 See section 402E for the meaning of “trigger date” and “post-employment notice period”. 5 If there is no pay period of the employee which ends before the trigger date then— BP is the employee's basic pay from the employment in respect of the period starting with the first day of the employment and ending with the trigger date, P is the number of days in that period, and D is the number of days in the post-employment notice period. 6 If the last pay period of the employee to end before the trigger date is a month, the employee's basic pay is paid in equal monthly instalments, the minimum notice (see section 402E) is given by contractual terms and is expressed to be a whole number of months, and the post-employment notice period is equal in length to the minimum notice or is otherwise a whole number of months, then— BP is the employee's basic pay from the employment in respect of the last pay period of the employee to end before the trigger date, P is 1, and D is the length of the post-employment notice period expressed in months. 6A In any other case where the last pay period of the employee to end before the trigger date is a month and the employee's basic pay is paid in equal monthly instalments, then— BP is the employee's basic pay from the employment in respect of the last pay period of the employee to end before the trigger date, P is 30.42, and D is the number of days in the post-employment notice period. 7 In this section “ basic pay ” means— a employment income of the employee from the employment but disregarding— i any amount received by way of overtime, bonus, commission, gratuity or allowance, ii any amount received in connection with the termination of the employment, iii any amount treated as earnings under Chapters 2 to 10 of Part 3 (the benefits code) or which would be so treated apart from section 64, iv any amount which is treated as earnings under Chapter 12 of Part 3 (amounts treated as earnings), v any amount which counts as employment income by virtue of Part 7 (income relating to securities and securities options), and vi any employment-related securities that constitute earnings under Chapter 1 of Part 3 (earnings), and b any amount which the employee has given up the right to receive but which would have fallen within paragraph (a) had the employee not done so. 8 In subsection (7) “ employment-related securities ” has the same meaning as it has in Chapter 1 of Part 7 (see section 421B). 9 The Treasury may by regulations amend this section for the purpose of altering the meaning of “basic pay”. 10 A statutory instrument containing regulations under subsection (9) may not be made unless a draft of it has been laid before, and approved by a resolution of, the House of Commons. 11 Where the purpose, or one of the purposes, of any arrangements is the avoidance of tax by causing the post-employment notice pay calculated under subsection (1) to be less than it would otherwise be, the post-employment notice pay is to be treated as the amount which the post-employment notice pay would have been but for the arrangements. 12 In subsection (11) “ arrangements ” includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions. Meaning of “trigger date” and “post-employment notice period” in section 402D 402E 1 Subsections (2) and (4) to (6) have effect for the purposes of section 402D (and subsection (4) has effect also for the purposes of this section). 2 The “trigger date” is— a if the termination is not a notice case, the last day of the employment, and b if the termination is a notice case, the day the notice is given. 3 For the purposes of this section, the termination is a “notice case” if the employer or employee gives notice to the other to terminate the employment, and here it does not matter— a whether the notice is more or less than, or the same as, the minimum notice, or b if the employment ends before the notice expires. 4 The “minimum notice” is the minimum notice required to be given by the employer to terminate the employee's employment by notice in accordance with the law and contractual terms effective— a where the termination is not a notice case— i immediately before the employment ends, or ii where the employment ends by agreement entered into after the start of the employment, immediately before the agreement is entered into, and b where the termination is a notice case, immediately before the notice is given. 5 The “post-employment notice period” is the period— a beginning at the end of the last day of the employment, and b ending with the earliest lawful termination date. (But see subsection (8) for provision about limited-term contracts.) 6 If the earliest lawful termination date is, or precedes, the last day of the employment, the number of days in the post-employment notice period is nil. 7 “The earliest lawful termination date” is the last day of the period which— a is equal in length to the minimum notice, and b begins at the end of the trigger date. 8 In the case of a contract of employment which is a limited-term contract and which does not include provision for termination by notice by the employer, the post-employment notice period is the period— a beginning at the end of the last day of the employment, and b ending with the day of the occurrence of the limiting event. 9 If, in a case to which subsection (8) applies, on the last day of the employment the day of the occurrence of the limiting event is not ascertained or ascertainable (because, for example, the limiting event is the performance of a task), then subsection (8) has effect as if for paragraph (b) there were substituted— b ending with the day on which notice would have expired if the employer had, on the last day of the employment, given to the employee the minimum notice required to terminate the contract under section 86 of the Employment Rights Act 1996 (assuming that that section applies to the employment). 10 In this section “ limited-term contract ” and “ limiting event ” have the same meaning as in the Employment Rights Act 1996 (see section 235(2A) and (2B)). Charge on payment or other benefit where threshold applies 403 1 The amount of a payment or benefit to which this section applies counts as employment income of the employee or former employee for the relevant tax year if and to the extent that it exceeds the £30,000 threshold. 2 In this section “ the relevant tax year ” means the tax year in which the payment or other benefit is received. 3 For the purposes of this Chapter (but see section 402B(3)) — a a cash benefit is treated as received— i when it is paid or a payment is made on account of it, or ii when the recipient becomes entitled to require payment of or on account of it, and b a non-cash benefit is treated as received when it is used or enjoyed. 4 For the purposes of this Chapter the amount of a payment or benefit in respect of an employee or former employee exceeds the £30,000 threshold if and to the extent that, when aggregated with— a other payments or benefits in respect of the employee or former employee that are payments or benefits to which this section applies, and b other payments or benefits in respect of the employee or former employee that are payments or benefits— i received in the tax year 2017-18 or an earlier tax year, and ii to which this Chapter applied in the tax year of receipt, it exceeds £30,000 according to the rules in section 404 (how the £30,000 threshold applies). 5 If it is received after the death of the employee or former employee— a the amount of a payment or benefit to which this section applies counts as the employment income of the personal representatives for the relevant year if or to the extent that it exceeds £30,000 according to the rules in section 404, and b the tax is accordingly to be assessed and charged on them and is a debt due from and payable out of the estate. 6 In this Chapter references to the taxable person are to the person in relation to whom subsection (1) or (5) provides for an amount to count as employment income or, as the case may be, in relation to whom section 402B(1) provides for an amount to be treated as an amount of earnings . How the £30,000 threshold applies 404 1 For the purpose of the £30,000 threshold in section 403(4) and (5), the payments and other benefits provided in respect of an employee or former employee which are to be aggregated are those provided— a in respect of the same employment, b in respect of different employments with the same employer, and c in respect of employments with employers who are associated. 2 For this purpose employers are “associated” if on a termination or change date— a one of them is under the control of the other, or b one of them is under the control of a third person who on that termination or change date or another such date controls or is under the control of the other. 3 In subsection (2)— a references to an employer, or to a person controlling or controlled by an employer, include the successors of the employer or person, and b “ termination or change date ” means a date on which a termination or change occurs in connection with which a payment or other benefit to which section 403 applies is received in respect of the employee or former employee. 4 If payments and other benefits are received in different tax years, the £30,000 is set against the amount of payments and other benefits received in earlier years before those received in later years. 5 If more than one payment or other benefit is received in a tax year in which the threshold is exceeded— a the £30,000 (or the balance of it) is set against the amounts of cash benefits as they are received, and b any balance at the end of the year is set against the aggregate amount of non-cash benefits received in the year. 6 In subsection (3)(b), the reference to a payment or other benefit to which section 403 applies includes a reference to a payment or other benefit— a received in the tax year 2017-18 or an earlier tax year, and b to which this Chapter applied in the tax year of receipt. Amounts charged to be treated as highest part of total income 404A 1 A payment or other benefit which counts as a person's employment income as a result of section 403 is treated as the highest part of the person's total income. 2 Subsection (1) has effect for all income tax purposes except the purposes of sections 535 to 537 of ITTOIA 2005 (gains from contracts for life insurance etc : top slicing relief). 3 See section 1012 of ITA 2007 (relationship between highest part rules) for the relationship between— a the rule in subsection (1), and b other rules requiring particular income to be treated as the highest part of a person's total income. Power to vary threshold 404B 1 The Treasury may by regulations amend the listed provisions by substituting, for the amount for the time being mentioned in those provisions, a different amount. 2 The listed provisions are— subsections (1), (4) and (5) of section 403, and subsections (1), (4) and (5) of section 404 and its heading. 3 Regulations under this section may include transitional provision. 4 A statutory instrument containing regulations under this section which reduce the mentioned amount may not be made unless a draft of it has been laid before, and approved by a resolution of, the House of Commons. Exceptions and reductions Exception for certain payments exempted when received as earnings 405 1 This Chapter does not apply to any payment received in connection with the termination of a person’s employment which, were it received for the performance of the duties of the employment, would fall within section 308 (exemption of contributions to approved personal pension arrangements). 2 This Chapter does not apply to any payment received in connection with any change in the duties of, or earnings from, a person’s employment to the extent that, were it received for the performance of the duties of the employment, it would fall within section 271(1) (limited exemption of removal benefits and expenses). Exception for death or disability payments and benefits 406 1 This Chapter does not apply to a payment or other benefit provided— a in connection with the termination of employment by the death of an employee, or b on account of injury to, or disability of, an employee. 2 Although “injury” in subsection (1) includes psychiatric injury, it does not include injured feelings. Exception for payments and benefits under tax-exempt pension schemes 407 1 This Chapter does not apply to a payment or other benefit provided under a tax-exempt pension scheme if— a the payment or other benefit is by way of compensation— i for loss of employment, or ii for loss or diminution of earnings, and the loss or diminution is due to ill-health, or b the payment or other benefit is properly regarded as earned by past service. 2 For this purpose “ tax-exempt pension scheme ” means— a a registered pension scheme, aa a scheme set up by a government outside the United Kingdom for the benefit of employees or primarily for their benefit, or b any such scheme or fund as was described in section 221(1) and (2) of ICTA 1970 (schemes to which payments could be made without charge to tax under section 220 of ICTA 1970). 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exception for contributions to registered pension schemes 408 1 This Chapter does not apply to a contribution to a registered pension scheme or an employer-financed retirement benefit scheme if the contribution is made— a as part of an arrangement relating to the termination of a person’s employment, and b in order to provide benefits for the person in accordance with the terms of the scheme or approved personal pension arrangements. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exception for payments and benefits in respect of certain legal expenses etc and indemnity insurance 409 1 This Chapter does not apply to a payment or other benefit received by an individual if or to the extent that— a in the case of a cash benefit, it is provided for meeting the cost of a deductible amount, or b in the case of a non-cash benefit, it is or represents a benefit equivalent to the cost of paying a deductible amount. 2 For the purposes of this section “ deductible amount ” means an amount which meets conditions A to C. 3 Condition A is that the amount is paid by the individual or by the employer or former employer on behalf of the individual . 4 Condition B is that a deduction for the amount would have been allowed under section 346 from earnings from the relevant employment, if the individual still held the employment when the amount was paid. 5 Condition C is that the amount is paid at a time which falls within the run-off period. 6 In this section and section 410— “ relevant employment ” means the employment mentioned in section 401(1); “ run-off period ” means the period which— starts with the day on which the relevant employment terminated, and ends with the last day of the sixth tax year following the tax year in which the period started. Exception for payments and benefits in respect of certain legal expenses etc and indemnity insurance: individual deceased 410 1 This Chapter does not apply to a payment or other benefit received by an individual’s personal representatives if or to the extent that— a in the case of a cash benefit, it is provided for meeting the cost of a deductible amount, or b in the case of a non-cash benefit, it is or represents a benefit equivalent to the cost of paying a deductible amount. 2 For the purposes of this section “ deductible amount ” means an amount which meets conditions A to C. 3 Condition A is that the amount is paid by the individual’s personal representatives or by the former employer on behalf of the individual's personal representatives . 4 Condition B is that a deduction for the amount would have been allowed under section 346 from earnings from the relevant employment, if— a the individual had not died, b the amount had been paid by the individual, and c the individual still held the employment when the amount was paid. 5 Condition C is that the amount is paid at a time which falls within the run-off period. Exception for payments and benefits for forces 411 1 This Chapter does not apply to a payment or other benefit provided— a under a Royal Warrant, Queen’s Order or Order in Council relating to members of Her Majesty’s forces, or b by way of payment in commutation of annual or other periodical payments authorised by any such Warrant or Order. 2 This Chapter does not apply to a payment or other benefit provided under a scheme established by an order under section 1(1) of the Armed Forces (Pensions and Compensation) Act 2004. Exception for payments and benefits provided by foreign governments etc. 412 1 This Chapter does not apply to— a a benefit provided under a pension scheme administered by the government of an overseas territory within the Commonwealth, or b a payment of compensation for loss of career, interruption of service or disturbance made— i in connection with any change in the constitution of any such overseas territory, and ii to a person who was employed in the public service of the territory before the change. 2 References in subsection (1) to— a an overseas territory, b the government of such a territory, and c employment in the public service of such a territory, have the meanings given in section 615 of ICTA. Exception in certain cases of foreign service 413 A1 This section applies to a payment or other benefit if— a the payment or other benefit is within section 401(1)(a), and the employee or former employee is non-UK resident for the tax year in which the employment terminates, or b the payment or other benefit is within section 401(1)(b) or (c). 1 This Chapter does not apply if the service of the employee or former employee in the employment in respect of which the payment or other benefit is received included foreign service comprising— a three-quarters or more of the whole period of service ending with the date of the termination or change in question, or b if the period of service ending with that date exceeded 10 years, the whole of the last 10 years, or c if the period of service ending with that date exceeded 20 years, one-half or more of that period, including any 10 of the last 20 years. 2 In subsection (1) “ foreign service ” means service to which subsection (2A), (3), (4) or (6) applies. 2A This subsection applies to service in or after the tax year 2013-14— a to the extent that it consists of duties performed outside the United Kingdom in respect of which earnings would not be relevant earnings, or b if a deduction equal to the whole amount of the earnings from the employment was or would have been allowable under Chapter 6 of Part 5 (deductions from seafarers' earnings). 3 This subsection applies to service in or after the tax year 2003-04 but before the tax year 2013-14 such that— a any earnings from the employment would not be relevant earnings, or b a deduction equal to the whole amount of the earnings from the employment was or would have been allowable under Chapter 6 of Part 5 (deductions from seafarers' earnings). 3ZA In subsection (2A)(a) “ relevant earnings ” means— a for service in or after the tax year 2025-26, earnings— i to which section 15 applies, and ii if the employee is a qualifying new resident for the purposes of Chapter 5C of Part 2 for that tax year, which are not qualifying foreign general earnings within the meaning of section 41T (qualifying foreign general earnings), and b for service before tax year 2025-26, earnings to which section 15 applies and to which that section would apply even if the employee made a claim under section 809B of ITA 2007 (claim for remittance basis) for that year. 3A In subsection (3)(a) “ relevant earnings ” means— a for service in or after the tax year 2008-09, earnings— i which are for a tax year in which the employee is ordinarily UK resident, ii to which section 15 applies, and iii to which that section would apply, even if the employee made a claim under section 809B of ITA 2007 (claim for remittance basis) for that year, and b for service before the tax year 2008-09, general earnings to which section 15 or 21 as originally enacted applies. 4 This subsection applies to service before the tax year 2003-04 and after the tax year 1973-74 such that— a the emoluments from the employment were not chargeable under Case I of Schedule E, or would not have been so chargeable had there been any, or b a deduction equal to the whole amount of the emoluments from the employment was or would have been allowable under a foreign earnings deduction provision. 5 In subsection (4) “ foreign earnings deduction provision ” means— a paragraph 1 of Schedule 2 to FA 1974, b paragraph 1 of Schedule 7 to FA 1977, or c section 192A or 193(1) of ICTA. 6 This subsection applies to service before the tax year 1974-75 such that tax was not chargeable in respect of the emoluments of the employment— a in the tax year 1956-57 or later, under Case I of Schedule E, or b in earlier tax years, under Schedule E, or it would not have been so chargeable had there been any such emoluments. Exception for payment of certain legal costs 413A 1 This Chapter does not apply to a payment which meets conditions A and B. 2 Condition A is that the payment meets the whole or part of legal costs incurred by the employee exclusively in connection with the termination of the employee’s employment. 3 Condition B is that either— a the payment is made pursuant to an order of a court or tribunal, or b the termination of the employee’s employment results in a settlement agreement between the employer and the employee and — i the settlement agreement provides for the payment to be made by the employer, and ii the payment is made directly to the employee’s lawyer. 4 In this section— ... “lawyer” has the same meaning as “qualified lawyer” in section 203(4) of the Employment Rights Act 1996 or article 245(4) of the Employment Rights (Northern Ireland) Order 1996; “legal costs” means fees payable for the services and disbursements of a lawyer. Reduction in other cases of foreign service 414 1 This section applies if— za either— i the payment or other benefit is within section 401(1)(a), and the employee or former employee is non-UK resident for the tax year in which the employment terminates, or ii the payment or other benefit is within section 401(1)(b) or (c), a the service of the employee or former employee in the employment in respect of which the payment or other benefit is received includes foreign service, and b section 413(1) does not except the payment or other benefit from the application of this Chapter. 2 The taxable person may claim relief in the form of a proportionate reduction of the amount that would otherwise— a be treated as earnings by section 402B(1), or b count as employment income as a result of section 403 3 The proportion is that which the length of the foreign service bears to the whole length of service in the employment before the date of the termination or change in question. 4 A person’s entitlement to relief under this section is limited as mentioned in subsection (5) if the person is entitled— a to deduct, retain or satisfy income tax out of a payment which the person is liable to make, or b to charge any income tax against another person. 5 The relief must not reduce the amount of income tax for which the person is liable below the amount the person is entitled so to deduct, retain, satisfy or charge. 6 In this section “ foreign service ” has the same meaning as in section 413(2). Exception for payments and benefits under section 615(3) schemes 414A 1 This Chapter does not apply to a payment or other benefit provided in the form of a lump sum under a section 615(3) scheme. 2 In this section, “section 615(3) scheme” means a superannuation fund to which section 615(3) of ICTA applies. Exception in certain cases of foreign service as seafarer 414B 1 This section applies to a payment or other benefit if— a the payment or other benefit is within section 401(1)(a), and b the employee or former employee is UK resident for the tax year in which the employment terminates. 2 This Chapter does not apply if the service of the employee or former employee in the employment in respect of which the payment or other benefit is received included foreign seafaring service comprising— a three-quarters or more of the whole period of service ending with the date of the termination in question, or b if the period of service ending with that date exceeded 10 years, the whole of the last 10 years, or c if the period of service ending with that date exceeded 20 years, one-half or more of that period, including any 10 of the last 20 years. 3 In subsection (2) “ foreign seafaring service ” means service to which subsection (4), (5) or (7) applies. 4 This subsection applies to service in or after the tax year 2003-04 such that a deduction equal to the whole amount of the earnings from the employment was or would have been allowable under Chapter 6 of Part 5 (deductions from seafarers' earnings). 5 This subsection applies to service before the tax year 2003-04 and after the tax year 1973-74 such that a deduction equal to the whole amount of the emoluments from the employment was or would have been allowable under a seafarers' earnings deduction provision. 6 In subsection (5) “seafarers' earnings deduction provision” means— a paragraph 1 of Schedule 2 to FA 1974 so far as relating to employment as a seafarer, b paragraph 1 of Schedule 7 to FA 1977 so far as relating to employment as a seafarer, c section 192A of ICTA , or d section 193(1) of ICTA so far as relating to employment as a seafarer. 7 This subsection applies to service before the tax year 1974-75 in an employment as a seafarer such that tax was not chargeable in respect of the emoluments of the employment— a in the tax year 1956-57 or later, under Case I of Schedule E, or b in earlier tax years, under Schedule E, or it would not have been so chargeable had there been any such emoluments. 8 In this section “ employment as a seafarer ” is to be read in accordance with section 384. Reduction in other cases of foreign service as seafarer 414C 1 This section applies if— a the payment or other benefit is within section 401(1)(a), b the employee or former employee is UK resident for the tax year in which the employment terminates, c the service of the employee or former employee in the employment in respect of which the payment or other benefit is received includes foreign service, and d section 414B(2) does not except the payment or other benefit from the application of this Chapter. 2 The taxable person may claim relief in the form of a proportionate reduction of the amount that would otherwise— a be treated as earnings by section 402B(1), or b count as employment income as a result of section 403. 3 The proportion is that which the length of the foreign seafaring service bears to the whole length of service in the employment before the date of the termination in question. 4 A person's entitlement to relief under this section is limited as mentioned in subsection (5) if the person is entitled— a to deduct, retain or satisfy income tax out of a payment which the person is liable to make, or b to charge any income tax against another person. 5 The relief must not reduce the amount of income tax for which the person is liable below the amount the person is entitled so to deduct, retain, satisfy or charge. 6 In this section “ foreign seafaring service ” has the same meaning as in section 414B(2). General and supplementary provisions Valuation of benefits 415 1 In the case of a cash benefit, for the purposes of this Chapter the amount of a payment or other benefit is taken to be the amount received. 2 In the case of a non-cash benefit, for the purposes of this Chapter the amount of a payment or other benefit is taken to be the greater of— a the amount of earnings (as defined in Chapter 1 of Part 3) that the benefit would give rise to if it were received by an employee within section 15 for performance of the duties of an employment (money’s worth), and b the cash equivalent of the benefit under the benefits code if it were so received and the code applied to it. 3 For the purposes of subsection (2), the benefits code has effect with the modifications in subsections (4), (6) and (7). 4 References in the benefits code to the employee are to be taken as references to the taxable person and any other person by whom the benefit is received. 5 For the purposes of subsection (4), section 401(4)(a) is to be disregarded. 6 References in the benefits code to the employer are to be taken as including references to the former employer. 7 Where— a section 106 (cash equivalent: cost of accommodation over £75,000) applies, and b the sum referred to in section 105(2)(b) (the sum made good) exceeds the amount referred to in section 105(2)(a) (the rental value), the amount to be subtracted under paragraph (b) of step 4 of the calculation in section 106(2) is that excess (and not only the excess rent referred to there). Notional interest treated as paid if amount charged for beneficial loan 416 1 This section applies if an amount (“the taxable amount”) consisting of, or including, an amount representing the benefit of a loan counts as a person’s employment income in a tax year under section 403. 2 That person is to be treated for the purposes of the Tax Acts (other than this Chapter) as having paid interest on the loan in the tax year equal to the lesser of— a the amount representing the cash equivalent of the loan, and b the taxable amount. 3 The interest is to be treated— a as accruing during the period in the tax year during which the loan is outstanding, and b as paid at the end of the period. 4 The interest is not to be treated— a as income of the person making the loan, or b as relevant loan interest to which section 369 of ICTA applies (mortgage interest payable under deduction of tax). Part 7 Employment income: income and exemptions relating to securities Chapter 1 Introduction General Scope of Part 7 417 1 This Part contains special rules about cases where securities, interests in securities or securities options are acquired in connection with an employment. 2 The rules are contained in— Chapter 2 (restricted securities), Chapter 3 (convertible securities), Chapter 3A (securities with artificially depressed market value), Chapter 3B (securities with artificially enhanced market value), Chapter 3C (securities acquired for less than market value), Chapter 3D (securities disposed of for more than market value), Chapter 4 (post-acquisition benefits from securities), Chapter 5 (securities options), Chapter 6 ( ... share incentive plans), Chapter 7 ( ... SAYE option schemes), Chapter 8 ( ... CSOP schemes), Chapter 9 (enterprise management incentives), and Chapter 10 (priority share allocations). 3 The following make provision for amounts to count as employment income— Chapters 2 to 6, and Chapter 8. 4 The following make provision for exemptions and reliefs from income tax— Chapters 2 and 3, and Chapters 5 to 10. 5 Chapter 11 contains supplementary provisions relating to employee benefit trusts. 6 Section 5(1) (application of employment income Parts to office-holders generally) does not apply to Chapters 6 to 10; and section 549(5) makes provision about its application to Chapter 11. Other related provisions 418 A1 This Part needs to be read with Chapter 5B of Part 2 (taxable specific income from employment-related securities etc : internationally mobile employees). 1 In Part 3— Chapter 1 (earnings), and Chapter 10 (taxable benefits: residual liability to charge), may also have effect in relation to securities and interests in securities ... . 1A But Chapters 1 and 10 of Part 3 do not have effect in relation to— a the acquisition of employment-related securities options (within the meaning of Chapter 5 of Part 7), or b chargeable events (within the meaning given by section 477) occurring in relation to such options. 2 Part 7 of Schedule 7 (transitional provisions relating to securities and securities options) may also be relevant. 3 In view of section 49 of FA 2000 (phasing out of APS schemes) the following are not rewritten in this Act and continue in force unaffected by the repeals made by this Act— section 186 of ICTA (APS schemes) and section 187 of that Act (interpretation) so far as relating to APS schemes, and Schedule 9 to ICTA (approval of share schemes) so far as relating to APS schemes and Schedule 10 to that Act (further provisions about APS schemes). “ APS schemes ” means profit sharing schemes approved under Schedule 9 to ICTA. 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Negative amounts treated as nil 419 If the result given by any formula under any provision of this Part would otherwise be a negative amount, the result is to be taken to be nil instead. Interpretation of Chapters 1 to 5 Meaning of “securities” etc 420 1 Subject to subsections (5) and (6), for the purposes of this Chapter and Chapters 2 to 5 the following are “ securities ”— a shares in any body corporate (wherever incorporated) or in any unincorporated body constituted under the law of a country or territory outside the United Kingdom, aa rights under contracts of insurance other than excluded contracts of insurance, b debentures, debenture stock, loan stock, bonds, certificates of deposit and other instruments creating or acknowledging indebtedness (other than contracts of insurance) , c warrants and other instruments entitling their holders to subscribe for securities (whether or not in existence or identifiable), d certificates and other instruments conferring rights in respect of securities held by persons other than the persons on whom the rights are conferred and the transfer of which may be effected without the consent of those persons, e units in a collective investment scheme, f options and futures, ... g rights under contracts for differences or contracts similar to contracts for differences (other than contracts of insurance) , and h arrangements to which section 564G of ITA 2007 (alternative finance arrangements: investment bond arrangements) applies. 1A For the purposes of subsection (1)(aa) a contract of insurance is an excluded contract of insurance if it is— a a contract for an annuity which is (or will be) pension income (see Part 9), b a contract of long-term insurance, other than an annuity contract, which does not have a surrender value and is not capable of acquiring one (whether on conversion or in any other circumstances), or c a contract of general insurance other than one which falls, in accordance with generally accepted accounting practice, to be accounted for as a financial asset or liability. 1B In this section— “ contract of insurance ”, “ contract of long-term insurance ”, and “ contract of general insurance ”, have the same meaning as in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. 2 In subsection (1)(e) “ collective investment scheme ” means arrangements— a which are made with respect to property of any description, including money, and b the purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income. 3 In subsection (1)(f) “ futures ” means rights under a contract for the sale of a commodity or other property under which delivery is to be made at a future date at a price agreed when the contract is made; and for this purpose a price is to be taken to be agreed when the contract is made— a if it is left to be determined by reference to the price at which a contract is to be entered into on a market or exchange or could be entered into at a time and place specified in the contract, and b in a case where the contract is expressed to be by reference to a standard lot and quality, even if provision is made for a variation in the price to take account of any variation in quantity or quality on delivery. 4 For the purposes of subsection (1)(g) a contract similar to a contract for differences is a contract— a which is not a contract for differences, but b the purpose or pretended purpose of which is to secure a profit or avoid a loss by reference to fluctuations in the value or price of property or an index or other factor designated in the contract. 5 The following are not “ securities ” for the purposes of this Chapter or Chapters 2 to 5— a cheques and other bills of exchange, bankers' drafts and letters of credit (other than bills of exchange accepted by a banker), b money and statements showing balances on a current, deposit or savings account, c leases and other dispositions of property and heritable securities, and d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e securities options. 6 The Treasury may by order amend subsections (1) to (5). 7 An order under subsection (6) may include any appropriate consequential provision (including provision amending any enactment). 8 In this Chapter and Chapters 2 to 5— “ interest ”, in relation to securities (or shares), means an interest in them less than full beneficial ownership and includes an interest in proceeds of their sale, but does not include a right to acquire them, “ securities option ” means a right to acquire securities other than a right to acquire securities which is acquired pursuant to a right or opportunity made available under arrangements the main purpose (or one of the main purposes) of which is the avoidance of tax or national insurance contributions , and “ shares ” includes stock. Meaning of “market value” etc 421 1 In this Chapter and Chapters 2 to 5 “ market value ” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act. 2 Where consideration for anything is given in the form of an asset (as opposed to a payment), any reference in this Chapter or any of Chapters 2 to 5 to the amount of the consideration is to the market value of the asset. Meaning of “ consideration ” 421A 1 This section applies for determining for the purposes of Chapters 2 to 5 the amount of the consideration given for anything. 2 If any consideration is given partly in respect of one thing and partly in respect of another, the amount given in respect of the different things is to determined on a just and reasonable apportionment. 3 The consideration which is taken to be given wholly or partly for anything does not include the performance of any duties of, or in connection with, an employment. 4 No amount is to be counted more than once in calculating the amount of any consideration. Application of Chapters 2 to 4A Application of Chapters 2 to 4A 421B 1 Subject as follows (and to any provision contained in Chapters 2 to 4A ) those Chapters apply to securities, or an interest in securities, acquired by a person where the right or opportunity to acquire the securities or interest is available by reason of an employment of that person or any other person. 2 For the purposes of subsection (1)— a securities are, or an interest in securities is, acquired at the time when the person acquiring the securities or interest becomes beneficially entitled to those securities or that interest (and not, if different, the time when the securities are, or interest is, conveyed or transferred), and b “ employment ” includes a former or prospective employment. 3 A right or opportunity to acquire securities or an interest in securities made available by a person’s employer, or by a person connected with a person’s employer, is to be regarded for the purposes of subsection (1) as available by reason of an employment of that person unless— a the person by whom the right or opportunity is made available is an individual, and b the right or opportunity is made available in the normal course of the domestic, family or personal relationships of that person. 4 Chapters 2 to 4A cease to apply to securities, or an interest in securities, when subsection (5), (6) or (7) is satisfied. 5 This subsection is satisfied immediately after the securities are, or the interest in securities is, disposed of otherwise than to an associated person. 6 This subsection is satisfied immediately before the death of the employee. 7 This subsection is satisfied 7 years after the first date after the acquisition on which the employee is an employee of none of the following— a the employer, b (if the securities are, or the interest in securities is an interest in, securities issued by a company) the company by which they are issued, or c a person connected with a person within paragraph (a) or (b). 8 In this Chapter and Chapters 2 to 4A — “ the acquisition ”, in relation to employment-related securities, means the acquisition of the employment-related securities pursuant to the right or opportunity available by reason of the employment, “ the employment ”, in relation to employment-related securities, means the employment by reason of which the right or opportunity to acquire the employment-related securities is available (“the employee” and “the employer” being construed accordingly unless otherwise indicated), and “ employment-related securities ” means securities or an interest in securities to which Chapters 2 to 4 apply (ignoring any provision of any of those Chapters which limits the application of the Chapter to a particular description or descriptions of employment-related securities). Associated persons 421C 1 For the purposes of this Chapter and Chapters 2 to 4 the following are “ associated persons ” in relation to employment-related securities— a the person who acquired the employment-related securities on the acquisition, b (if different) the employee, and c any relevant linked person. 2 A person is a relevant linked person if— a that person (on the one hand), and b either the person who acquired the employment-related securities on the acquisition or the employee (on the other), are or have been connected or (without being or having been connected) are or have been members of the same household. 3 But a company which would otherwise be a relevant linked person is not if it is— a the employer, b the person from whom the employment-related securities were acquired, c the person by whom the right or opportunity to acquire the employment-related securities was made available, or d the person by whom the employment-related securities (or the securities in which they are an interest) were issued. Replacement and additional securities and changes in interests 421D 1 Subsections (2) and (3) apply where an associated person is entitled to employment-related securities (the “ original securities ”) and either— a as a result of the conversion of the original securities (or the securities in which they are an interest), or of any other transaction or series of transactions, that person ceases to be entitled to the original securities but that person or another associated person acquires securities or an interest in securities (the “ replacement securities ”), or b by virtue of that person being entitled to the original securities, that person or another associated person acquires other securities or an interest in other securities (the “ additional securities ”). 2 The replacement securities or the additional securities are to be regarded for the purposes of section 421B(1) (securities acquired pursuant to a right or opportunity available by reason of an employment) as acquired pursuant to the same right or opportunity as the original securities. 3 Where the market value of the original securities is reduced by reason of the issue of, or of securities including, the replacement securities or the additional securities (or the securities in which they are an interest), the amount of that reduction is to be treated for the purposes of Chapters 2 and 3 as consideration or additional consideration given for the acquisition of the replacement securities or the additional securities and for the purposes of Chapter 3C as a payment made for their acquisition at or before the time of the acquisition . 4 Subsections (2) and (3) apply whether or not the replacement securities, or the additional securities, were acquired for consideration or a payment was made for their acquisition at or before the time of the acquisition . 5 Where Chapters 2 to 4A apply to an interest in securities, an increase of that interest is to be treated for the purposes of section 421B(1) (securities acquired pursuant to a right or opportunity available by reason of an employment) as a separate interest acquired pursuant to the same right or opportunity as the original interest. 6 Where Chapters 2 to 4A apply to an interest in securities, a reduction of that interest (otherwise than by a disposal to an associated person) is to be treated for the purposes of those Chapters as the disposal otherwise than to an associated person of a separate interest proportionate to the reduction. Exclusions: residence etc 421E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exclusions: public offers 421F 1 Chapters 2, 3 and 3C do not apply in relation to employment-related securities that are shares acquired under the terms of an offer to the public or an interest in shares so acquired. 1A But subsection (1) does not disapply those Chapters if the main purpose (or one of the main purposes)— a of the arrangements under which the right or opportunity under which the shares were acquired, or b for which the shares are held, is the avoidance of tax or national insurance contributions. 2 In a case within subsection (1) of section 544 (exemption for priority share allocations where offer to employees separate from public offer), any acquisition made under the terms of either the public offer or the employee offer within the meaning of that subsection is to be treated for the purposes of this section as made under the terms of an offer to the public. 3 Subsection (2) applies whether or not there is any benefit within section 544(2) (benefit derived from entitlement to priority allocation exempt from income tax). Exclusions: approved plan or scheme securities 421G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “employee-controlled” etc 421H 1 For the purposes of Chapters 2 to 4 a company is “ employee-controlled ” by virtue of shares of a class if— a the majority of the company’s shares of that class (other than any held by or for the benefit of an associated company) are held by or for the benefit of employees of the company or a company controlled by the company, and b those employees are together able as holders of the shares to control the company. In this subsection “ employee ” includes a person who is to be or has been an employee. 2 In this section and Chapters 2 to 4 “ associated company ” has the meaning given by section 449 of CTA 2010 . Consideration for acquisition of employment-related securities 421I 1 This section applies for determining for the purposes of Chapters 2 to 3A the amount of the consideration given for the acquisition of employment-related securities. 2 References to consideration given for the acquisition of the employment-related securities are to consideration given by— a the employee, or b (if not the employee) the person by whom the employment-related securities were acquired. 3 The amount of the consideration given by a person for the acquisition of the employment-related securities includes the amount of any consideration given for a right to acquire the employment-related securities. 4 If the right to acquire the employment-related securities (“ the new option ”) is the whole or part of the consideration for the assignment or release of another right to acquire them (“ the old option ”), the amount of the consideration given for the new option is to be treated as being the sum of— a the amount by which the amount of the consideration given for the old option exceeds the amount of any consideration for the assignment or release of the old option, apart from the new option, and b any valuable consideration given for the new option, apart from the old option. 5 Two or more transactions are to be treated for the purposes of subsection (4) as a single transaction by which a right to acquire the employment-related securities is assigned for a consideration which consists of or includes another right to acquire the employment-related securities if— a the transactions result in a person ceasing to hold a right to acquire the employment-related securities and that person or a connected person coming to hold another right to acquire them, and b one or more of the transactions is effected under arrangements to which two or more persons who hold rights to acquire the employment-related securities, in respect of which there may be a liability to tax under Chapter 5 of this Part (securities options), are parties. 6 Subsection (5) applies regardless of the order in which the assignment and the acquisition occur. 7 In this section “ release ”, in relation to a right to acquire the employment-related securities, includes agreeing to the restriction of the exercise of the right. Information Duty to provide information 421J 1 This section applies in relation to reportable events. 2 Section 421K explains what are reportable events for the purposes of this section. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 An officer of Revenue and Customs may by notice require any person to provide the officer with such particulars of any reportable events— a which take place in a period specified in the notice, and b in relation to which that person is a responsible person, as are required by the notice or, if no reportable event in relation to which that person is a responsible person has taken place in that period, to state that fact. 5 A notice under subsection (4) must specify a date by which it must be complied with. 6 That date must not be less than 30 days after the date when the notice is given. 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 421L explains who are the responsible persons in relation to a reportable event. 10 The particulars required by a notice under this section must be provided in a form specified by the Commissioners for Her Majesty’s Revenue and Customs . 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annual returns 421JA 1 This section applies in relation to a person who is (or has been) a responsible person (see section 421L) in relation to reportable events (see section 421K). 2 The person must give to Her Majesty's Revenue and Customs (“ HMRC ”) a return for each tax year falling (wholly or partly) in the person's reportable event period. 3 The person's “reportable event period” is the period— a beginning when the first reportable event occurs in relation to which the person is a responsible person, and b ending when the person will no longer be a responsible person in relation to reportable events. 4 The return for a tax year must— a contain, or be accompanied by, such information as HMRC may require, and b be given on or before 6 July in the following tax year. 5 The information which may be required under subsection (4)(a) includes (in particular) information to enable HMRC to determine the liability to tax, including capital gains tax, of any employee. 6 If the person becomes aware that— a anything which should have been included in, or should have accompanied, a return for a tax year was not included in, or did not accompany, the return, b anything which should not have been included in, or should not have accompanied, a return for a tax year was included in, or accompanied, the return, or c any other error or inaccuracy has occurred in relation to a return for a tax year, the person must give an amended return correcting the position to HMRC without delay. 7 A person's return for a tax year under this section need not contain, or be accompanied by, duplicate information and a person is not required to give a return for a tax year under this section if it would only contain, or be accompanied by, duplicate information. 8 “ Duplicate information ” means information which is contained in or accompanies— a a return which another person gives for the tax year under this section, or b a return which any person gives for the tax year under any of the following provisions— i paragraph 81B of Schedule 2 (annual return for Schedule 2 SIP ); ii paragraph 40B of Schedule 3 (annual return for Schedule 3 SAYE option scheme); iii paragraph 28B of Schedule 4 (annual return for Schedule 4 CSOP scheme); iv paragraph 52 of Schedule 5 (annual return for company whose shares are subject to qualifying options under the EMI code). Returns to be given electronically 421JB 1 A return under section 421JA, and any information accompanying the return, must be given electronically. 2 But, if HMRC consider it appropriate to do so, HMRC may allow a person to give a return or any accompanying information in another way; and, if HMRC do so, the return or information must be given in that other way. 3 The Commissioners for Her Majesty's Revenue and Customs— a must prescribe how returns and accompanying information are to be given electronically; b may make different provision for different cases or circumstances. Penalties for late returns 421JC 1 This section applies if a person fails to give a return under section 421JA for a tax year (containing, or accompanied by, all required information) on or before the date mentioned in section 421JA(4)(b) (“the date for delivery”). 2 The person is liable for a penalty of £100. 3 If the person's failure continues after the end of the period of 3 months beginning with the date for delivery, the person is liable for a further penalty of £300. 4 If the person's failure continues after the end of the period of 6 months beginning with the date for delivery, the person is liable for a further penalty of £300. 5 The person is liable for a further penalty under this subsection if— a the person's failure continues after the end of the period of 9 months beginning with the date for delivery, b HMRC decide that such a penalty should be payable, and c HMRC give notice to the person specifying the period in respect of which the penalty is payable. (The person may be liable for more than one penalty under this subsection.) 6 The penalty under subsection (5) is £10 for each day that the failure continues during the period specified in the notice under subsection (5)(c). 7 The period specified in the notice under subsection (5)(c)— a may begin earlier than the date on which the notice is given, but b may not begin until after the end of the period mentioned in subsection (5)(a) or, if relevant, the end of any period specified in any previous notice under subsection (5)(c) given in relation to the failure. 8 Liability for a penalty under this section does not arise if the person satisfies HMRC (or, on an appeal under section 421JF, the tribunal) that there is a reasonable excuse for the person's failure. 9 For the purposes of subsection (8)— a an insufficiency of funds is not a reasonable excuse, unless attributable to events outside the person's control, b where the person relies on any other person to do anything, that is not a reasonable excuse unless the (first mentioned) person took reasonable care to avoid the failure, and c where the person had a reasonable excuse for the failure but the excuse ceased, the person is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased. Penalty if information not given correctly 421JD 1 This section applies if a return under section 421JA, or any information accompanying such a return— a is given otherwise than in accordance with section 421JB, or b contains a material inaccuracy— i which is careless or deliberate, or ii which is not corrected as required by section 421JA(6). 2 The person in question is liable for a penalty of an amount decided by HMRC. 3 The penalty must not exceed £5,000. 4 For the purposes of subsection (1)(b)(i) an inaccuracy is careless if it is due to a failure by the person in question to take reasonable care. Assessment of penalties 421JE 1 This section applies if a person is liable for a penalty under section 421JC or 421JD. 2 HMRC must assess the penalty and notify the person of the assessment. 3 Subject to subsection (4), the assessment must be made no later than 12 months after the date on which the person becomes liable for the penalty. 4 In the case of a penalty under section 421JD(1)(b), the assessment must be made no later than— a 12 months after the date on which HMRC become aware of the inaccuracy, and b 6 years after the date on which the person becomes liable for the penalty. 5 A penalty payable under this Part must be paid— a no later than 30 days after the date on which the notice under subsection (2) is given to the person, or b if notice of appeal is given against the penalty under section 421JF(1) or (2), no later than 30 days after the date on which the appeal is determined or withdrawn. 6 The penalty may be enforced as if it were income tax or, if the person is a company within the charge to corporation tax, corporation tax charged in an assessment and due and payable. 7 Sections 100 to 103 of TMA 1970 do not apply to a penalty under section 421JC or 421JD. Appeals 421JF 1 A person may appeal against a decision of HMRC that the person is liable for a penalty under section 421JC or 421JD. 2 A person may appeal against a decision of HMRC as to the amount of a penalty payable by the person under section 421JC or 421JD. 3 Notice of appeal must be given to HMRC no later than 30 days after the date on which the notice under section 421JE(2) is given to the person. 4 On an appeal under subsection (1) which is notified to the tribunal, the tribunal may affirm or cancel the decision. 5 On an appeal under subsection (2) which is notified to the tribunal, the tribunal may— a affirm the amount of the penalty decided, or b substitute another amount for that amount. 6 Subject to this section and section 421JE, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to an appeal under this section as they have effect in relation to an appeal against an assessment to income tax or, if the person is a company within the charge to corporation tax, corporation tax. Reportable events 421K 1 This section applies for the purposes of sections 421J and 421JA (duties to provide information and annual returns) . 2 Each of the events mentioned in subsection (3) is a reportable event. 3 The events are— a an acquisition (or an event treated as an acquisition) of securities, an interest in securities or a securities option pursuant to a right or opportunity available by reason of the employment of the person who acquires the securities, interest in securities or securities option or of any other person, b an event which is a chargeable event in relation to securities, or an interest in securities, for the purposes of section 426 (chargeable events in relation to restricted securities and restricted interests in securities), c an event which is a chargeable event in relation to securities, or an interest in securities, for the purposes of section 438 (chargeable events in relation to convertible securities and interests in convertible securities), d the doing of anything which gives rise to a taxable amount counting as employment income under section 446L (artificial enhancement of market value of securities), e an event which discharges a notional loan relating to securities, or an interest in securities, under section 446U (securities and interests in securities acquired for less than market value), f a disposal of securities, or an interest in securities, by virtue of which Chapter 3D of this Part applies (securities and interests in securities disposed of for more than market value), g the receipt of a benefit which gives rise to a taxable amount counting as employment income under section 447 (charge on benefit from securities or interest in securities) or would give rise to such an amount but for Chapter 4A (shares in research institution spin-out companies) , h the assignment or release of a securities option acquired pursuant to a right or opportunity available by reason of the employment of the person who acquires the securities option or any other person, and i the receipt of a benefit in money or money’s worth which is (or by virtue of section 477(6) is to be regarded as being) received in connection with such a securities option. Persons to whom section 421J applies 421L 1 This section applies for the purposes of sections 421J and 421JA (duties to provide information and annual returns) . 2 Each of the following persons is a responsible person in relation to a reportable event. 3 The persons are— a the employer in question, b any host employer of the employee in question, ba if the employee in question is a continental shelf worker and PAYE regulations do not apply to the employer in question, any person who is a relevant person in relation to the employee in question, c the person from whom the securities in question were, or interest or option in question was, acquired, and d in relation to a reportable event concerning securities or an interest in securities which are not excluded securities, the person by whom the securities were issued. 4 In subsection (3)(b) “ host employer ” means a person other than the employer in question— a for whom the employee in question works at the time of the reportable event, and b who would, by virtue of subsection (2) of section 689 (employees of non-UK employers working for a person other than the employer), be treated for the purposes of PAYE regulations as making a payment of PAYE income of the employee in question if a payment to which subsection (5) would apply were made by the employer in question in respect of the period during which the employee works for the other person. 5 For the purposes of subsection (4)(b) this subsection would apply to a payment if— a it were a payment of PAYE income of the employee, and b the conditions in subsection (1)(c) and (d) of section 689 were satisfied in relation to the payment. 5A In subsection (3)(ba) “continental shelf worker” and “relevant person” have the meaning given by section 689A(11) ( PAYE : oil and gas workers on the continental shelf). 6 For the purposes of subsection (3)(d) securities are excluded securities in relation to a reportable event if they are— a loan stock, bonds or other instruments creating or acknowledging indebtedness issued by or on behalf of any national or regional government or local authority (in the United Kingdom or elsewhere) or any body whose members consists of states, national or regional governments or local authorities, or b securities which are issued by a person who, at the time of the reportable event, is not connected with the employer in question and which are listed on a recognised stock exchange or dealt in on any designated market in the United Kingdom . 7 In subsection (6)(b) “ designated ” means designated by an order made by the Commissioners for Her Majesty's Revenue and Customs for the purposes of that provision. 8 An order under subsection (7) may— a designate a market by name or by reference to any class or description of market, and b vary or revoke a previous order under that subsection. Chapter 2 Restricted securities Introduction Application of this Chapter 422 This Chapter applies to employment-related securities if they are— a restricted securities, or b a restricted interest in securities, at the time of the acquisition. “ Restricted securities ” and “ restricted interest in securities ” 423 1 For the purposes of this Chapter employment-related securities are restricted securities or a restricted interest in securities if— a there is any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) applies, and b the market value of the employment-related securities is less than it would be but for that provision. 2 This subsection applies to provision under which— a there will be a transfer, reversion or forfeiture of the employment-related securities, or (if the employment-related securities are an interest in securities) of the interest or the securities, if certain circumstances arise or do not arise, b as a result of the transfer, reversion or forfeiture the person by whom the employment-related securities are held will cease to be beneficially entitled to the employment-related securities, and c that person will not be entitled on the transfer, reversion or forfeiture to receive in respect of the employment-related securities an amount of at least their market value (determined as if there were no provision for transfer, reversion or forfeiture) at the time of the transfer, reversion or forfeiture. 3 This subsection applies to provision under which there is a restriction on— a the freedom of the person by whom the employment-related securities are held to dispose of the employment-related securities or proceeds of their sale, b the right of that person to retain the employment-related securities or proceeds of their sale, or c any other right conferred by the employment-related securities, (not being provision to which subsection (2) applies). 4 This subsection applies to provision under which the disposal or retention of the employment-related securities, or the exercise of a right conferred by the employment-related securities, may result in a disadvantage to— a the person by whom the employment-related securities are held, b the employee (if not the person by whom they are held), or c any person connected with the person by whom they are held or with the employee, (not being provision to which subsection (2) or (3) applies). Exceptions 424 1 Employment-related securities are not restricted securities or a restricted interest in securities by reason only that any one or more of the following is the case— a the employment-related securities (or the securities in which they are an interest) are unpaid or partly paid shares which may be forfeited for non-payment of calls and there is no restriction on the meeting of calls by the person by whom they are held, or b that person may be required to offer for sale or transfer the employment-related securities on the employee ceasing, as a result of misconduct, to be employed by the employer or a person connected with the employer, or c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Subsection (1) does not apply if the main purpose (or one of the main purposes) of the arrangements under which the right or opportunity to acquire the employment-related securities is made available is the avoidance of tax or national insurance contributions. Tax exemption on acquisition No charge in respect of acquisition in certain cases 425 1 Subsection (2) applies if the employment-related securities— a are restricted securities, or a restricted interest in securities, by virtue of subsection (2) of section 423 (provision for transfer, reversion or forfeiture) at the time of the acquisition, and b will cease to be restricted securities, or a restricted interest in securities, by virtue of that subsection within 5 years after the acquisition (whether or not they may remain restricted securities or a restricted interest in securities by virtue of the application of subsection (3) or (4) of that section). 2 No liability to income tax arises in respect of the acquisition, except as provided by— a Chapter 3 of this Part (acquisition by conversion), b Chapter 3C of this Part (acquisition for less than market value), or c Chapter 5 of this Part (acquisition pursuant to securities option). 3 But the employer and the employee may elect that subsection (2) is not to apply to the employment-related securities. 4 An election under subsection (3)— a is to be made by agreement by the employer and the employee, and b is irrevocable. 5 Such an agreement— a must be made in a form approved by the Commissioners for Her Majesty’s Revenue and Customs , and b may not be made more than 14 days after the acquisition. 6 No election may be made under subsection (3) unless, at the time of the acquisition, the earnings from the employment are (or would be if there were any) general earnings to which any of the charging provisions of Chapters 4 and 5 of Part 2 applies. Tax charge on post-acquisition chargeable events Charge on occurrence of chargeable event 426 1 If a chargeable event occurs in relation to the employment-related securities, the taxable amount counts as employment income of the employee for the relevant tax year. 2 For this purpose— a “ chargeable event ” has the meaning given by section 427, b “ the taxable amount ”is the amount determined under section 428, and c “ the relevant tax year ”is the tax year in which the chargeable event occurs. 3 Relief may be available under section 428A (relief for secondary Class 1 contributions met by employee) against an amount counting as employment income under this section. 5 This section is subject to section 429 (case outside charge under this section). Chargeable events 427 1 This section applies for the purposes of section 426 (charge on occurrence of chargeable event). 2 Any of the events mentioned in subsection (3) is a “ chargeable event ” in relation to the employment-related securities. 3 The events are— a the employment-related securities ceasing to be restricted securities, or a restricted interest in securities, in circumstances in which an associated person is beneficially entitled to the employment-related securities after the event, b the variation of any restriction relating to the employment-related securities in such circumstances (without the employment-related securities ceasing to be restricted securities or a restricted interest in securities), and c the disposal for consideration of the employment-related securities, or any interest in them, by an associated person otherwise than to another associated person (at a time when they are still restricted securities or a restricted interest in securities). 4 For the purposes of this Chapter there is a variation of a restriction relating to the employment-related securities if any restriction in relation to them is removed or varied. Amount of charge 428 1 The taxable amount for the purposes of section 426 (charge on occurrence of chargeable event) is— UMV × ( IUP - PCP - OP ) - CE 2 UMV is what would be the market value of the employment-related securities immediately after the chargeable event but for any restrictions. 3 IUP is— IUMV - DA IUMV where— IUMV is what would have been the market value of the employment-related securities at the time of the acquisition but for any restrictions, and DA is the total of any deductible amounts. 4 PCP is the aggregate of the result of the application of the formula— IUP - PCP - OP on each previous event (if any) occurring since the acquisition that was a chargeable event for the purposes of section 426 in relation to the employment-related securities (and so is nil if there has not been such a previous event). 5 OP is— UMV - AMV UMV where AMV is the actual market value of the employment-related securities immediately after the chargeable event. 6 CE is any expenses incurred by the holder of the employment-related securities in connection with— a the employment-related securities ceasing to be restricted securities or a restricted interest in securities, b the variation of a restriction relating to the employment-related securities, or c the disposal of the employment-related securities, together (if the chargeable event is one within section 427(3)(a) or (b) (lifting of restrictions and variation of restriction)) with any consideration given for the employment-related securities ceasing to be restricted securities or a restricted interest in securities or the variation of a restriction relating to the employment-related securities. 6A CE also includes any amount that has counted as employment income of the employee in respect of the employment under Chapter 2 of Part 7A in relation to the employment-related securities where the relevant step (within the meaning of that Part) was taken before the chargeable event occurred. 7 For the purposes of this section each of the following is a “ deductible amount ”— a the amount of any consideration given for the acquisition of the employment-related securities, b any amount that constituted earnings from the employee’s employment under Chapter 1 of Part 3 (earnings) in respect of the acquisition of the employment-related securities (other than an amount of exempt income) , ba any amount treated as earnings from the employee's employment under section 226A (employee shareholder shares: amount treated as earnings) in respect of the acquisition of the employment-related securities (other than an amount of exempt income), bb any amount that was charged to non-UK income tax in respect of the acquisition of the employment-related securities, but only so far as that amount exceeds any amount within paragraph (b) or (ba), c any amount that counted as employment income in relation to the employment-related securities under Chapter 2 or 4 of this Part as originally enacted, d if the employment-related securities were acquired on a conversion of other employment-related securities, any amount that counted as employment income of the employee under Chapter 3 of this Part (including that Chapter as originally enacted) (convertible securities) by reason of the conversion, and e if the acquisition of the employment-related securities was pursuant to a securities option, any amount that counted as employment income of the employee under section 476 (or section 476 or 477 as originally enacted) (acquisition of securities pursuant to securities option) by reason of the acquisition. 7A In subsection (7)(b) and (ba) the references to an amount of exempt income, in a case in which the amount that constituted, or was treated as, earnings in respect of the acquisition was not an amount of general earnings to which any of the charging provisions of Chapters 4 and 5 of Part 2 applied, includes any amount that would have been an amount of exempt income if any of those charging provisions had applied. 7B In subsection (7)(bb) “ non-UK income tax ” means a tax chargeable on income under the law of a territory outside the United Kingdom that corresponds to United Kingdom income tax. 7C A tax is not outside the scope of subsection (7B) by reason only that it— a is chargeable under the law of a province, state or other part of a country, or b is levied by or on behalf of a municipality or other local body. 8 If the employment-related securities are convertible securities, or an interest in convertible securities, their market value is to be determined for the purposes of this section as if they were not. 9 Where the chargeable event is one within section 427(3)(c) (disposal) and CD is less than AMV , the taxable amount for the purposes of section 426 is the amount determined under subsection (1) multiplied by— CD AMV where— CD is the consideration given for the employment-related securities, and AMV is the actual market value of the employment-related securities immediately after the chargeable event. 10 But subsection (9) does not apply if something which affects the employment-related securities has been done (at or before the time of the chargeable event) as part of a scheme or arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax or national insurance contributions. Relief for secondary Class 1 contributions met by employee 428A 1 Relief is available under this section against an amount counting as employment income under section 426 (“the employment income amount”) if— a an agreement having effect under paragraph 3A of Schedule 1 to the Contributions and Benefits Act has been entered into allowing the secondary contributor to recover from the employee the whole or part of any secondary Class 1 contribution in respect of that amount, or b an election having effect under paragraph 3B of that Schedule is in force which has the effect of transferring to the employee the whole or part of the liability to pay secondary Class 1 contributions in respect of that amount. 2 The amount of the relief is the total of— a any amount that under the agreement referred to in subsection (1)(a) is recovered in respect of the employment income amount by the secondary contributor before 5th June in the tax year following that in which the chargeable event occurs, and b the amount of any liability in respect of the employment income amount that, by virtue of the election referred to in subsection (1)(b), has become the employee’s liability. 3 If notice of withdrawal of approval of the election is given, the amount of the liability referred to in subsection (2)(b) is limited to the amount met before 5th June in the tax year following that in which the chargeable event occurs. 4 Relief under this section is given by way of deduction from the amount otherwise counting as employment income. 5 Relief under this section does not affect the amount to be taken into account— a as employment income in determining contributions payable under the Contributions and Benefits Act, or b as relevant employment income for the purposes of paragraph 3A or 3B of Schedule 1 to that Act. 6 In this section— “ approval ”, in relation to an election, means approval by an officer of Revenue and Customs under paragraph 3B of Schedule 1 to the Contributions and Benefits Act, and “ secondary contributor ” has the same meaning as in that Act (see section 7). Case outside charge under section 426 429 1 Section 426 (charge on occurrence of chargeable event) does not apply if— a the employment-related securities are shares (or an interest in shares) in a company of a class, b the provision by virtue of which the employment-related securities are restricted securities, or a restricted interest in securities, applies to all the company’s shares of the class, ba subsection (1A) is satisfied, c all the company’s shares of the class (other than the employment-related securities) are affected by an event similar to that which is a chargeable event in relation to the employment-related securities, and d subsection (3) or (4) is satisfied. 1A This subsection is satisfied unless something which affects the employment-related securities has been done (at or before the time when section 426 would apply) as part of a scheme or arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax or national insurance contributions. 2 For the purposes of subsection (1)(c) shares are affected by an event similar to that which is a chargeable event in relation to the employment-related securities— a in the case of a chargeable event within section 427(3)(a) (lifting of restrictions), if the provision mentioned in subsection (1)(b) ceases to apply to them, b in the case of a chargeable event within section 427(3)(b) (variation of restriction), if that provision is varied in relation to them in the same way as in relation to the employment-related securities, or c in the case of a chargeable event within section 427(3)(c) (disposal), if they are disposed of. 3 This subsection is satisfied if, immediately before the event that would be a chargeable event, the company is employee-controlled by virtue of holdings of shares of the class. 4 This subsection is satisfied if, immediately before that event, the majority of the company’s shares of the class are not employment-related securities. 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Election for outstanding restrictions to be ignored 430 1 The employer and the employee may elect that— a on a chargeable event the taxable amount for the purposes of section 426 is to be determined by applying section 428(1) as if it did not include a reference to OP, and b sections 426 to 429 are not to apply to the employment-related securities after that chargeable event. 2 An election under this section— a is to be made by agreement by the employer and the employee, and b is irrevocable. 3 Such an agreement— a must be made in a form approved by the Commissioners for Her Majesty’s Revenue and Customs , and b may not be made more than 14 days after the chargeable event. 4 No election may be made under this section unless, at the time of the chargeable event, the earnings from the employment are (or would be if there were any) general earnings to which any of the charging provisions of Chapters 4 and 5 of Part 2 applies. Application of this Chapter where securities exchanged for further securities 430A 1 This section applies if— a an associated person disposes of the employment-related securities (“the old securities”) for consideration, otherwise than to another associated person, b the whole or part of the consideration consists of, or includes, other securities which are restricted securities (“the new securities”) being acquired by an associated person, c the value of the consideration determined in accordance with subsection (2) is no more than what would have been the market value of the old securities immediately before the disposal but for any restrictions, and d the avoidance of tax or national insurance contributions is not the main purpose (or one of the main purposes) of the disposal. 2 The value of the consideration is the sum of— a what would have been the market value of the new securities immediately before the disposal but for any restrictions, and b the value of the rest of the consideration (if any). 3 If the consideration consists partly of the new securities and partly of other consideration, the disposal is to be treated for the purposes of this Chapter as being two separate disposals as follows— a a disposal, that is a chargeable event within section 427(3)(c), of the appropriate amount of the old securities (see subsection (4)) for such of the consideration as does not consist of the new securities, and b a disposal, to which this section applies, of the remaining old securities for consideration consisting wholly of the new securities. 4 In subsection (3)(a) the appropriate amount of the old securities is— OS × OC TC where— OS is the total number of the old securities, OC is the value of such of the consideration as does not consist of the new securities, and TC is value of the consideration determined in accordance with subsection (2). 5 If the consideration consists wholly of the new securities— a neither the disposal of the old securities, nor the acquisition of the new securities, gives rise to any liability to income tax, b the disposal is not a chargeable event within section 427(3)(c), and c this Chapter applies to the new securities as it applies to the old securities, subject to subsections (6) to (17). 6 Sections 425 and 431 do not apply in relation to the new securities. 7 If, at the time of the disposal, sections 426 to 429 do not apply to the old securities by virtue of— a an election made under section 430(1) or 431(1) in relation to the old securities, or b this subsection, sections 426 to 430 do not apply to the new securities. 8 If there is a chargeable event for the purposes of section 426 in relation to any of the new securities, for the purposes of section 428 (amount of charge)— a IUP (see subsection (3) of that section) is to be determined in accordance with subsection (9), and b PCP (see subsection (4) of that section) is to be determined in accordance with subsection (10). 9 IUP is equal to what IUP was, for the purposes of determining the taxable amount for the purposes of section 426, in relation to chargeable events relating to the old securities that occurred before the disposal (or what it would have been had there been any such chargeable events). 10 PCP is the aggregate of— a PCP determined in accordance with section 428(4), and b what PCP would have been, for the purposes of determining the taxable amount for the purposes of section 426, if a chargeable event relating to the old securities had occurred immediately before the disposal but after any chargeable events relating to the old securities that actually did occur before the disposal. 11 Subsections (12) to (14) apply if— a section 425(2) (no liability to income tax on acquisition of certain securities subject to forfeiture etc ) applied in relation to the old securities, and b at the time of the disposal, there is still a restriction relating to those securities such that they are restricted securities by virtue of section 423(2) (provision for forfeiture etc ). 12 This Chapter has effect in relation to any of the new securities that are not restricted securities by virtue of section 423(2) as if— a there were a restriction relating to them (“the deemed restriction”) corresponding to the restriction relating to the old securities mentioned in subsection (11)(b), and b immediately after their acquisition, the deemed restriction were removed. 13 Subsection (14) applies if— a there is a restriction by virtue of which some or all of the new securities are, at the time of the disposal, restricted securities, by virtue of subsection (2) of section 423, and b within 5 years after the acquisition of the old securities, the restriction is not removed or varied such that the new securities to which it relates cease to be restricted securities by virtue of that subsection. 14 For the purposes of this Chapter the restriction mentioned in subsection (13) is to be treated as being removed 5 years after the acquisition of the old securities. 15 Subsection (16) applies if, at the time of the disposal— a there is a restriction relating to the old securities such that they are restricted securities by virtue of section 423(2), and b subsections (13) and (14) apply in relation to the old securities (including by virtue of subsection (16)). 16 Subsections (12) to (14) apply in relation to the new securities, but— a the reference in subsection (12)(a) to the restriction mentioned in subsection (11)(b) is to be read as a reference to the restriction mentioned in subsection (15)(a), and b the references in subsections (13)(b) and (14) to the acquisition of the old securities are to be read as references to the acquisition of the original forfeitable securities. 17 In subsection (16) “ original forfeitable securities ” means the restricted securities by virtue of the application to which of section 425(2) subsections (13) and (14) apply to the old securities. 18 In this section references to restricted securities include a restricted interest in securities. Election for full or partial disapplication of this Chapter 431 1 The employer and the employee may elect in relation to employment-related securities which are restricted securities or a restricted interest in securities that— a for the relevant tax purposes their market value at the time of the acquisition is to be calculated as if they were not, and b sections 425 to 430 are not to apply to the employment-related securities. 2 Or the employer and the employee may elect in relation to employment-related securities which are restricted securities or a restricted interest in securities that— a for the relevant tax purposes their market value at the time of the acquisition is to be calculated, and b sections 425 to 430 are to apply to the employment-related securities, as if any specified restriction did not apply to the employment-related securities. 3 For the purposes of subsections (1) and (2) “ the relevant tax purposes ” are— a determining any amount that is to constitute earnings from the employment under Chapter 1 of Part 3 (earnings), aa determining any amount that is to be treated as earnings from the employment where section 226A applies (employee shareholder shares: amount treated as earnings), b determining the amount of any gain realised on the occurrence of an event that is a chargeable event by virtue of section 439(3)(a) (conversion), c operating Chapter 3C of this Part (acquisition of securities for less than market value), ... d determining any amount that counts as employment income of the employee under Chapter 5 of this Part (securities acquired pursuant to securities option) , and e determining any amount that counts as employment income of the employee in respect of the employment under Chapter 2 of Part 7A (employment income provided through third parties) 4 An election under this section— a is to be made by agreement by the employer and the employee, and b is irrevocable. 5 Such an agreement— a must be made in a form approved by the Commissioners for Her Majesty’s Revenue and Customs and b may not be made more than 14 days after the acquisition. 6 No election may be made under this section unless, at the time of the acquisition, the earnings from the employment are (or would be if there were any) general earnings to which any of the charging provisions of Chapters 4 and 5 of Part 2 applies. Shares under tax advantaged plan or scheme 431A 1 Where employment-related securities are restricted securities or a restricted interest in securities, the employer and the employee are to be treated as making an election under section 431(1) in relation to the employment-related securities if they are shares, or an interest in shares, to which this subsection applies. 2 Subsection (1) applies to— a shares awarded or acquired under a Schedule 2 share incentive plan (within the meaning of Chapter 6 of this Part) in circumstances in which (in accordance with section 490) no liability to income tax arises, b shares acquired by the exercise of a share option granted under a Schedule 3 SAYE option scheme (within the meaning of Chapter 7 of this Part) in circumstances in which (in accordance with section 519) no liability to income tax arises, c shares acquired by the exercise of a share option granted under a Schedule 4 CSOP scheme (within the meaning of Chapter 8 of this Part) in circumstances in which (in accordance with section 524) no liability to income tax arises, and d shares acquired by the exercise of a qualifying option within the meaning of section 527(4) (enterprise management incentives) in circumstances in which (in accordance with section 530) no liability to income tax arises. Securities acquired for purpose of avoidance 431B Where employment-related securities are restricted securities or a restricted interest in securities, the employer and the employee are to be treated as making an election under section 431(1) in relation to the employment-related securities if a the main purpose (or one of the main purposes) of the arrangements under which the right or opportunity to acquire the employment-related securities is made available is the avoidance of tax or national insurance contributions , and b at the time of the acquisition, the earnings from the employment are (or would be if there were any) general earnings to which any of the charging provisions of Chapters 4 and 5 of Part 2 applies. Definitions 432 1 In this Chapter— “ interest ”, in relation to securities, “ securities ”, “ securities option ”, and “ shares ”, have the meaning indicated in section 420. 2 In this Chapter “ market value ” has the meaning indicated in section 421(1). 3 For the purposes of this Chapter sections 421(2) and 421A apply for determining the amount of the consideration given for anything and section 421I applies for determining the amount of the consideration given for the acquisition of employment-related securities. 4 In this Chapter— “ the acquisition ”, “ the employee ” (except in section 429), “ the employer ”, “ the employment ”, and “ employment-related securities ”, have the meaning indicated in section 421B(8). 5 In this Chapter “ associated person ” has the meaning indicated in section 421C. 6 In this Chapter— “ associated company ”, and “ employee-controlled ”, have the meaning indicated in section 421H. 7 In this Chapter— “ restricted interest in securities ”, and “ restricted securities ”, have the meaning indicated in sections 423 and 424. 8 In this Chapter “ restriction ”, in relation to securities or an interest in securities, means provision relating to the securities or interest which is made by any contract, agreement, arrangement or condition and to which any of subsections (2) to (4) of section 423 applies. 9 In this Chapter “ variation ”, in relation to a restriction, has the meaning indicated in section 427(4). 10 In this Chapter “ convertible securities ” has the same meaning as in Chapter 3 of this Part (see section 436). Chapter 3 Convertible securities Introduction Application of this Chapter 435 This Chapter applies to employment-related securities if they are— a convertible securities, or b an interest in convertible securities, at the time of the acquisition. “ Convertible securities ” 436 For the purposes of this Chapter securities are convertible securities if— a they confer on the holder an entitlement (whether immediate or deferred and whether conditional or unconditional) to convert them into securities of a different description, b a contract, agreement, arrangement or condition authorises or requires the grant of such an entitlement to the holder if certain circumstances arise, or do not arise, or c a contract, agreement, arrangement or condition makes provision for the conversion of the securities (otherwise than by the holder) into securities of a different description. Tax relief on acquisition Adjustment of charge 437 1 For the purposes of— a any liability to tax under Chapter 1 of Part 3 (earnings), Chapter 10 of Part 3 (taxable benefits: residual liability to charge) , section 226A (employee shareholder shares: amount treated as earnings) or Chapter 5 of this Part (acquisition of securities pursuant to securities option) or Chapter 2 of Part 7A (employment income provided through third parties) , and b the operation of Chapter 3C of this Part (acquisition of securities for less than market value), the market value of the employment-related securities is to be determined as if they were not convertible securities or an interest in convertible securities 2 Subsection (1) does not apply if the main purpose (or one of the main purposes) of the arrangements under which the right or opportunity to acquire the employment-related securities is made available is the avoidance of tax or national insurance contributions unless the market value of the employment-related securities determined under subsection (1) would be greater than that determined under subsection (3). 3 Where subsection (1) does not apply by virtue of subsection (2) the market value of the employment-related securities is to be determined— a where the securities which are (or an interest in which is) the employment-related securities fall within paragraph (a) of section 436 and the entitlement to convert is not both immediate and unconditional, as if it were, b where they fall within paragraph (b) of that section, as if the circumstances are such that an entitlement to convert arises immediately, and c where they fall within paragraph (c) of that section, as if provision were made for their immediate conversion; and in each case is to be determined as if they were immediately and fully convertible. 4 In subsection (3) “ immediately and fully convertible ” means convertible immediately after the acquisition of the employment-related securities so as to obtain the maximum gain that would be possible on a conversion at that time (assuming, where the securities into which the securities may be converted were not in existence at that time and it is appropriate to do so, that they were) without giving any consideration for the conversion or incurring any expenses in connection with it. Tax charge on post-acquisition chargeable events Charge on occurrence of chargeable event 438 1 If a chargeable event occurs in relation to the employment-related securities, the taxable amount counts as employment income of the employee for the relevant tax year. 2 For this purpose— a “ chargeable event ” has the meaning given by section 439, b “ the taxable amount ”is the amount determined under section 440, and c “ the relevant tax year ”is the tax year in which the chargeable event occurs. 3 Relief may be available under section 442A (relief for secondary Class 1 contributions met by employee) against an amount counting as employment income under this section. 5 This section is subject to section 443 (case outside charge under this section). Chargeable events 439 1 This section applies for the purposes of section 438 (charge on occurrence of chargeable event). 2 Any of the events mentioned in subsection (3) is a “ chargeable event ” in relation to the employment-related securities. 3 The events are— a the conversion of the employment-related securities (or the securities in which they are an interest) into securities of a different description in circumstances in which an associated person is beneficially entitled to the securities into which the employment-related securities are converted, b the disposal for consideration of the employment-related securities, or any interest in them, by an associated person otherwise than to another associated person (at a time when they are still convertible securities or an interest in convertible securities), c the release for consideration of the entitlement to convert the employment-related securities (or the securities in which they are an interest) into securities of a different description, and d the receipt by an associated person of a benefit in money or money’s worth in connection with the entitlement to convert (other than securities acquired on the conversion of the employment-related securities or consideration such as is mentioned in paragraph (b) or (c)). 4 A benefit received on account of any disability (within the meaning of the Equality Act 2010 in England and Wales and Scotland, or the Disability Discrimination Act 1995) of the employee is to be disregarded for the purposes of subsection (3)(d). Amount of charge 440 1 The taxable amount for the purposes of section 438 (charge on occurrence of chargeable event) is— AG - CE 2 AG is the amount of any gain realised on the occurrence of the chargeable event. 3 CE is the amount of any consideration given for the entitlement to convert the employment-related securities or the securities in which they are an interest together with the amount of any expenses incurred by the holder of the employment-related securities in connection with the conversion, disposal, release or receipt. 3A If (because of subsection (2) of section 437) subsection (1) of that section did not apply in relation to the employment-related securities, the taxable amount is to be reduced by the amount by which— a the market value of the employment-related securities for the purposes specified in that subsection, exceeded b what it would have been had that subsection applied, (less the aggregate of any amount by which the taxable amount on any previous chargeable event relating to the employment-related securities has been reduced under this subsection). 4 Section 441 explains what is the amount of any gain realised on the occurrence of a chargeable event. 5 Section 442 explains whether consideration is given for the entitlement to convert the employment-related securities or the securities in which they are an interest and, if it is, what is its amount. Amount of gain realised on occurrence of chargeable event 441 1 This section applies for the purposes of section 440 (amount of charge on occurrence of chargeable event). 2 The amount of the gain realised on the occurrence of an event that is a chargeable event by virtue of section 439(3)(a) (conversion) is— CMVCS - ( CMVERS + CC ) 3 The amount of the gain realised on the occurrence of an event that is a chargeable event by virtue of section 439(3)(b) (disposal) is— DC - CMVERS 4 The amount of the gain realised on the occurrence of an event that is a chargeable event by virtue of section 439(3)(c) (release of entitlement to convert) is the amount of the consideration received by an associated person in respect of the release. 5 The amount of the gain realised on the occurrence of an event that is a chargeable event by virtue of section 439(3)(d) (receipt of benefit) is the amount or market value of the benefit. 6 CMVCS— a if the employment-related securities are securities, is the market value at the time of the chargeable event of the securities into which they are converted (determined, where those securities are themselves convertible securities, as if they were not), or b if the employment-related securities are an interest in securities, is the same proportion of that market value as the market value of the interest in the securities in which the employment-related securities are an interest bears to the market value of those securities. 7 CMVERS is the market value of the employment-related securities at the time of the chargeable event determined as if they were not convertible securities or an interest in convertible securities. 8 CC is the amount of any consideration given for the conversion of the employment-related securities. 9 DC is the amount of the consideration given on the disposal. 10 Subsection (11) applies for the purposes of subsection (2) or (3) if— a prior to the acquisition, the employment-related securities were the subject of a relevant step within the meaning of Part 7A by reason of which Chapter 2 of that Part applied in respect of the employment, and b the amount mentioned in subsection (11)(a) is higher than the amount mentioned in subsection (11)(b). 11 The amount of the gain realised is reduced (but not below nil) by the amount equal to— a the amount that counted as employment income of the employee in respect of the employment under Chapter 2 of Part 7A, less b the market value of the employment-related securities when the relevant step was taken determined as if they were not convertible securities or an interest in convertible securities. Amount of consideration given for entitlement to convert 442 1 This section applies for the purposes of section 440 (amount of charge on occurrence of chargeable event). 2 Consideration is to be regarded as given for the entitlement to convert the employment-related securities (or the securities in which they are an interest) if (and only if) ACS exceeds NCMV. 3 The amount of the consideration to be regarded as so given is the amount of the excess. 4 ACS is the amount of the consideration given for the acquisition of the employment-related securities. 5 NCMV is the market value of the employment-related securities at the time of the acquisition, determined as if they were not convertible securities or an interest in convertible securities. Relief for secondary Class 1 contributions met by employee 442A 1 Relief is available under this section against an amount counting as employment income under section 438 (“the employment income amount”) if— a an agreement having effect under paragraph 3A of Schedule 1 to the Contributions and Benefits Act has been entered into allowing the secondary contributor to recover from the employee the whole or part of any secondary Class 1 contribution in respect of that amount, or b an election having effect under paragraph 3B of that Schedule is in force which has the effect of transferring to the employee the whole or part of the liability to pay secondary Class 1 contributions in respect of that amount. 2 The amount of the relief is the total of— a any amount that under the agreement referred to in subsection (1)(a) is recovered in respect of the employment income amount by the secondary contributor before 5th June in the tax year following that in which the chargeable event occurs, and b the amount of any liability in respect of the employment income amount that, by virtue of the election referred to in subsection (1)(b), has become the employee’s liability. 3 If notice of withdrawal of approval of the election is given, the amount of the liability referred to in subsection (2)(b) is limited to the amount met before 5th June in the tax year following that in which the gain is realised. 4 Relief under this section is given by way of deduction from the amount otherwise counting as employment income. 5 Relief under this section does not affect the amount to be taken into account— a as employment income in determining contributions payable under the Contributions and Benefits Act, or b as relevant employment income for the purposes of paragraph 3A or 3B of Schedule 1 to that Act. 6 In this section— “ approval ”, in relation to an election, means approval by an officer of Revenue and Customs under paragraph 3B of Schedule 1 to the Contributions and Benefits Act, and “ secondary contributor ” has the same meaning as in that Act (see section 7). Case outside charge under section 438 443 1 Section 438 (charge on occurrence of chargeable event) does not apply if— a the employment-related securities are shares (or an interest in shares) in a company of a class, b all the company’s shares of the class are convertible securities, ba subsection (1A) is satisfied, c all the company’s shares of the class (other than the employment-related securities) are affected by an event similar to that which is a chargeable event in relation to the employment-related securities, and d subsection (3) or (4) is satisfied. 1A This subsection is satisfied unless something which affects the employment-related securities has been done (at or before the time when section 438 would apply) as part of a scheme or arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax or national insurance contributions. 2 For the purposes of subsection (1)(c) shares are affected by an event similar to that which is a chargeable event in relation to the employment-related securities— a in the case of a chargeable event within section 439(3)(a) (conversion), if they are converted into securities of a different description, b in the case of a chargeable event within section 439(3)(b) (disposal), if they are disposed of, c in the case of a chargeable event within section 439(3)(c) (release of entitlement to convert), if the entitlement to convert them into securities of a different description is released, or d in the case of a chargeable event within section 439(3)(d) (receipt of benefit), if a similar benefit is received in respect of the entitlement to convert them. 3 This subsection is satisfied if, immediately before the event that would be a chargeable event, the company is employee-controlled by virtue of holdings of shares of the class. 4 This subsection is satisfied if, immediately before that event, the majority of the company’s shares of the class are not employment-related securities. 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supplementary Definitions 444 1 In this Chapter— “ interest ”, in relation to securities, “ securities ”, and “ shares ”, have the meaning indicated in section 420. 2 In this Chapter “ market value ” has the meaning indicated in section 421(1). 3 For the purposes of this Chapter sections 421(2) and 421A apply for determining the amount of the consideration given for anything and section 421I applies for determining the amount of the consideration given for the acquisition of employment-related securities. 4 In this Chapter— “ the acquisition ”, “ the employee ” (except in section 443), and “ employment-related securities ”, have the meaning indicated in section 421B(8). 5 In this Chapter “ associated person ” has the meaning indicated in section 421C. 6 In this Chapter— “ associated company ”, and “ employee-controlled ”, have the meaning indicated in section 421H. 7 In this Chapter “ convertible securities ” has the meaning indicated in section 436. Chapter 3A Securities with artificially depressed market value Introduction Application of this Chapter 446A 1 This Chapter applies in certain cases where the market value of employment-related securities (or other relevant securities or interests in securities) is reduced by things done otherwise than for genuine commercial purposes. 2 The following are among the things that are, for the purposes of this Chapter, done otherwise than for genuine commercial purposes— a anything done as part of a scheme or arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax or national insurance contributions, and b any transaction between companies which are members of the same group on terms which are not such as might be expected to be agreed between persons acting at arm’s length (other than a payment for group relief). 3 In subsection (2)(b)— a “ group ” means a company and its 51% subsidiaries, and b “ group relief ” has the same meaning as in section 183(1) of CTA 2010 . Tax charge on acquisition Charge on acquisition 446B 1 This section applies where the market value of employment-related securities at the time of the acquisition has been reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes within the period of 7 years ending with the acquisition. 2 The taxable amount determined under section 446C counts as employment income of the employee for the tax year in which the acquisition occurs. 3 But this section does not apply if section 425(2) (no charge on acquisition of certain restricted securities or restricted interests in securities) applies in relation to the employment-related securities. 4 This section does not affect any liability to income tax arising in respect of the acquisition of the employment-related securities under— a Chapter 1 of Part 3 (earnings), b Chapter 10 of Part 3 (taxable benefits: residual liability to charge), ba section 226A (employee shareholder shares: amount treated as earnings), c Chapter 3 of this Part (acquisition by conversion), d Chapter 3C of this Part (acquisition for less than market value), ... e Chapter 5 of this Part (acquisition pursuant to securities option) , or f Chapter 2 of Part 7A (employment income provided through third parties) Amount of charge 446C 1 The taxable amount for the purposes of section 446B (charge on acquisition) is— FMV - MV 2 FMV is what would be the market value of the employment-related securities at the time of the acquisition if the things mentioned in section 446B(1) had not been done. 3 MV is the actual market value of the employment-related securities at the time of the acquisition. 4 But where what would be MV is less than the amount of any consideration given for the acquisition of the employment-related securities, MV is the amount of that consideration. 4A Subsection (4B) applies if, prior to the acquisition, the employment-related securities were the subject of a relevant step within the meaning of Part 7A by reason of which Chapter 2 of that Part applied in respect of the employment. 4B If what would be MV in accordance with subsection (3) or (4) (as the case may be) is less than the amount that counted as employment income of the employee in respect of the employment under Chapter 2 of Part 7A, MV is the amount of that employment income instead of the amount determined in accordance with subsection (3) or (4). 5 This section is subject to section 446D (restricted securities and convertible securities). Restricted securities and convertible securities 446D 1 Where the employment-related securities are restricted securities or a restricted interest in securities, FMV (but not MV ) is to be determined as if the employment-related securities were not restricted securities or a restricted interest in securities; and, accordingly, sections 426 to 431 (post-acquisition charges on restricted securities) do not apply to the employment-related securities. 2 Where the employment-related securities are convertible securities or an interest in convertible securities, FMV and MV are to be determined as if they were not. Other tax charges Charge on restricted securities 446E 1 This section applies where the market value of employment-related securities which are restricted securities or a restricted interest in securities is artificially low— a immediately after an event which is a chargeable event in relation to the employment-related securities for the purposes of section 426 (charge on restricted securities), aa immediately before the employment-related securities are disposed of (in circumstances which do not constitute such an event) or are cancelled without being disposed of, or b on 5th April in any year. 2 The market value of the employment-related securities is artificially low where it has been reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes within the relevant period. 3 “ The relevant period ”is the period beginning— a if section 425(2) (no charge on acquisition of certain restricted securities or restricted interests in securities) applied in relation to the employment-related securities, 7 years before the acquisition, and b in any other case, 7 years before the relevant date, and ending with the relevant date. 4 “ The relevant date ”is— a in a case within subsection (1)(a), the date on which the chargeable event concerned occurs, b in a case within subsection (1)(aa), the date on which the disposal or cancellation concerned occurs, and c in a case within subsection (1)(b), the 5th April concerned. 5 Where this section applies in a case within subsection (1)(aa) or (b), a chargeable event within section 427(3)(a) (lifting of restrictions) is to be treated as occurring in relation to the employment-related securities on the relevant date. 6 In every case where this section applies, subsection (1) of section 428 (amount of charge on restricted securities) applies as if the reference in subsection (2) of that section to what would be the market value of the employment-related securities immediately after the chargeable event but for any restrictions were to what would be their market value at the appropriate time but for the matters to be disregarded. 7 “ The appropriate time ”is— a in a case within subsection (1)(a) or (b), the time immediately after the chargeable event concerned, and b in a case within subsection (1)(aa), the time immediately before the chargeable event concerned. 8 “The matters to be disregarded” are— a any restrictions, b the things done as mentioned in subsection (2), and c if the employment-related securities are about to be disposed of or cancelled, that fact. 9 Where this section applies in a case within subsection (1)(aa), section 428(1) applies with the omission of the reference to OP. 10 Where this section applies in a case within subsection (1)(a) and the chargeable event concerned is within section 427(3)(c) (disposal for consideration), section 428 applies with the omission of subsection (9) (case where consideration is less than actual market value). Adjustment of market value: conditional interests 446F 1 This section applies where the market value of an employee’s interest in shares which is only conditional is artificially low immediately after a chargeable event relating to the shares under section 427 as originally enacted. 2 The market value of the shares is artificially low where it has been reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes within the period beginning— a 7 years before the chargeable event, or b with 16th April 2003, whichever is later. 3 There is a chargeable event in relation to shares if section 427 (as originally enacted) applies in relation to them. 4 The reference in the definition of MV in section 428(1) (as originally enacted) to the market value of the employee’s interest is to what would be the market value but for the reduction as a result of the things done as mentioned in subsection (2). 5 Expressions used in this section and in Chapter 2 of this Part as originally enacted have the same meaning in this section as in that Chapter. Adjustment of market value: consideration for entitlement to convert 446G 1 This section applies where the market value of employment-related securities which are convertible securities or an interest in convertible securities (determined as if they were not) has been reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes within the period of 7 years ending with the acquisition. 2 The reference to the market value of the employment-related securities in the definition of NCMV in section 442(5) (value of convertible securities at time of acquisition) is to what would be the market value but for the reduction as a result of the things done as mentioned in subsection (1) (and but for the fact that they are convertible securities or an interest in convertible securities). Adjustment of market value: charge on conversion 446H 1 This section applies where the market value of securities (“ the converted securities ”) into which employment-related securities (or securities in which employment-related securities are an interest) are converted is artificially low at the time of an event which is a chargeable event in relation to the employment-related securities by virtue of section 439(3)(a) (conversion). 2 The market value of the converted securities is artificially low where it has been reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes within the period of 7 years ending with the chargeable event. 3 The references to the market value of the converted securities in the definition of CMVCS in section 441(6) (amount of gain realised by conversion) are to what would be the market value but for the reduction as a result of the things done as mentioned in subsection (2). Adjustment of consideration or benefit received 446I 1 This section applies where any consideration or benefit mentioned in— a section 428(9) (consideration on disposal of restricted securities), b section 441(4), (5) or (9) (consideration for disposal of convertible securities or release of entitlement to convert or benefit received in respect of entitlement to convert), c section 446C(4) (securities with artificially depressed market value: MV to be amount of consideration), d sections 446X and 446Y(3) (consideration for disposal of securities exceeding market value), or e section 448 (securities benefit not otherwise subject to tax), consists (in whole or in part) in the provision of securities or an interest in securities the market value of which is artificially low. 2 The market value of any securities or interest in securities is artificially low where it has been reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes within the period of 7 years ending with the receipt of the consideration or benefit. 3 The market value of the consideration or benefit consisting in the provision of the securities or interest in securities is for the purposes of the provision or provisions concerned to be taken to be what it would be but for the reduction as a result of the things done as mentioned in subsection (2). Disapplication of exceptions from charges 446IA 1 Section 429 (exception from charge under section 426 for certain company shares) does not prevent section 426 (restricted securities: chargeable events) applying in relation to an event if section 446E or 446I(1)(a) would have effect in relation to the event. 2 Section 443 (exception from charge under section 438 for certain company shares) does not prevent section 438 (convertible securities: chargeable events) applying in relation to an event if section 446G, 446H or 446I(1)(b) would have effect in relation to the event. 3 Section 446R (exception from charge under Chapter 3C for certain company shares) does not prevent that Chapter (securities acquired for less than market value) applying in relation to employment-related securities if section 446B would have effect in relation to them. 4 Section 449 (exception from charge under Chapter 4 for certain company shares) does not prevent that Chapter (benefits from securities) applying in relation to a benefit if section 446I(1)(e) would have effect in relation to the benefit. Supplementary Definitions 446J 1 In this Chapter— “ interest ”, in relation to securities, and “ securities ”, have the meaning indicated in section 420. 2 In this Chapter “ market value ” has the meaning indicated in section 421(1). 3 For the purposes of this Chapter sections 421(2) and 421A apply for determining the amount of the consideration given for anything and section 421I applies for determining the amount of the consideration given for the acquisition of employment-related securities. 4 In this Chapter— “ the acquisition ”, “ the employee ”, and “ employment-related securities ”, have the meaning indicated in section 421B(8). 5 In this Chapter— “ restricted interest in securities ”, and “ restricted securities ”, have the same meaning as in Chapter 2 of this Part (see sections 423 and 424). 6 In this Chapter “ restriction ” has the same meaning as in Chapter 2 of this Part (see section 432(8)). 7 In this Chapter “ convertible securities ” has the same meaning as in Chapter 3 of this Part (see section 436). Chapter 3B Securities with artificially enhanced market value Introduction Application of this Chapter 446K 1 This Chapter applies in certain cases where the market value of employment-related securities is increased by things done otherwise than for genuine commercial purposes. 2 The following are among the things that are, for the purposes of this Chapter, done otherwise than for genuine commercial purposes— a anything done as part of a scheme or arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax or national insurance contributions, and b any transaction between companies which are members of the same group on terms which are not such as might be expected to be agreed between persons acting at arm’s length (other than a payment for group relief). 3 In subsection (2)(b)— a “ group ” means a company and its 51% subsidiaries, and b “ group relief ” has the same meaning as in section 183(1) of CTA 2010 . 4 In this Chapter, in relation to the market value of the employment-related securities— “ non-commercial increase ” means an increase in the market value as a result of anything done otherwise than for genuine commercial purposes, and “ non-commercial reduction ” means a reduction in the market value as a result of anything done otherwise than for genuine commercial purposes. Charge on non-commercial increases Charge on non-commercial increases 446L 1 This section applies in relation to employment-related securities where on a date that is the valuation date in relation to a relevant period IMV is at least 10% greater than MV. 2 The taxable amount determined under subsection (4) counts as employment income of the employee for the relevant tax year (but subject to sections 446M and 446N). 3 The “ relevant tax year ” is the tax year in which the valuation date falls. 4 The taxable amount is— IMV - MV 5 IMV is the market value of the employment-related securities on the valuation date. 6 MV is the amount that would be the market value of the employment-related securities on the valuation date if any non-commercial increases during the relevant period were disregarded. 7 For the purposes of subsections (5) and (6)— a any restrictions having effect in relation to the employment-related securities on the valuation date, and b any non-commercial reductions during the relevant period, are to be disregarded. Securities subject to restriction on valuation date 446M 1 This section applies where on the valuation date the employment-related securities are relevant restricted securities. 2 The amount determined under section 446L(4) is to be multiplied by CP. 3 CP is— 1 - OP where OP is the amount that would be determined under section 428(5) (amount of charge on chargeable event in relation to restricted securities) on the valuation date if there were on that date a chargeable event (resulting in no tax charge). 4 For the purposes of this section the employment-related securities are relevant restricted securities if they are restricted securities or a restricted interest in securities but are not subject to— a an election under section 430 (election to ignore outstanding restrictions) in relation to a chargeable event which occurred before the valuation date, or b an election under section 431(1) (election to treat securities as not subject to restrictions). 5 If sections 425 to 430 apply to the employment-related securities in accordance with section 431(2) (election to treat securities as not subject to specified restrictions), the reference in subsection (3) to the amount that would be determined under section 428(5) is to the amount that would be so determined in accordance with section 431(2). Securities subject to restriction during relevant period 446N 1 This section applies where the employment-related securities have been restricted securities or a restricted interest in securities at any time during the relevant period. 2 DA is to be deducted from the amount determined under section 446L(4) (or, where section 446M applies, the amount determined under sections 446L(4) and 446M). 3 DA is the aggregate of the amounts arrived at under subsection (4) in relation to each event occurring during the relevant period that is a chargeable event in relation to the employment-related securities. 4 The amount is— TA - ARTA 5 TA is the taxable amount actually determined under section 428 in relation to the chargeable event. 6 AR TA is the taxable amount which would have been determined under section 428 in relation to the chargeable event if any non-commercial increases during the period— a beginning at the same time as the relevant period, and b ending immediately before the chargeable event, had been disregarded. 7 If any of the employment income arising under section 426 by virtue of the chargeable event is foreign securities income within the meaning of section 41C, reduce the taxable amount mentioned in subsection (5) by the amount of the foreign securities income. 8 If any of the employment income that would have arisen (if the non-commercial interests mentioned in subsection (6) had been disregarded) under section 426 by virtue of the chargeable event would have been foreign securities income (within that meaning), reduce the taxable amount mentioned in subsection (6) by the amount of the foreign securities income. Disapplication of exceptions from charges 446NA 1 None of the provisions specified in subsection (2) (exceptions from charges for certain company shares) apply in relation to employment-related securities if the market value of the employment-related securities at the time of the acquisition has been increased by at least 10% by non-commercial increases within the period of 7 years ending with the acquisition. 2 The provisions are— a section 429 (restricted securities), b section 443 (convertible securities), c section 446R (securities acquired for less than market value), and d section 449 (post-acquisition benefits from securities). 3 If section 446L (market value on valuation date increased by more than 10% by non-commercial increases during relevant period) applies in relation to employment-related securities, section 429 does not subsequently apply in relation to the employment-related securities. Supplementary “Relevant period” and “valuation date” 446O 1 This section explains what is meant by “ relevant period ” and “ valuation date ” in this Chapter. 2 The first relevant period in relation to employment-related securities is the period beginning with the date of the acquisition and ending with the following 5th April. 3 After the first relevant period, each period beginning with 6th April and ending with the following 5th April is a relevant period in relation to the employment-related securities. 4 But if this Chapter ceases to apply to the employment-related securities during a relevant period, the relevant period ends with the date on which this Chapter ceases to apply to them. 5 And if this Chapter ceases to apply to an interest in the employment-related securities during a relevant period, the relevant period ends in relation to that interest with the date on which this Chapter ceases to apply to that interest. 6 In a case where subsection (5) applies, this Chapter has effect separately in relation to that interest and the remainder of the employment-related securities. 7 In this Chapter “ valuation date ”, in relation to a relevant period, means the date with which the relevant period ends. Definitions 446P 1 In this Chapter “ interest ”, in relation to securities, has the meaning indicated in section 420. 2 In this Chapter “ market value ” has the meaning indicated in section 421(1). 3 In this Chapter— “ the acquisition ”, “ the employee ”, and “ employment-related securities ”, have the meaning indicated in section 421B(8). 4 In this Chapter— “ restricted interest in securities ”, and “ restricted securities ”, have the same meaning as in Chapter 2 of this Part (see sections 423 and 424). 5 In this Chapter “ chargeable event ” means an event which is a chargeable event for the purposes of section 426. 6 In this Chapter “ restriction ” has the same meaning as in Chapter 2 of this Part (see section 432(8)). 7 In this Chapter— “ non-commercial increase ”, and “ non-commercial reduction ”, have the meaning indicated in section 446K(4). 8 In this Chapter— “ relevant period ”, and “ valuation date ”, have the meaning indicated in section 446O. Chapter 3C Securities acquired for less than market value Application of this Chapter 446Q 1 This Chapter applies if— a no payment is made for employment-related securities at or before the time of the acquisition, or b the payment made for employment-related securities at or before that time is less than their market value. 2 For the purposes of subsection (1) any obligation to make a payment or further payment after the time of the acquisition is to be disregarded. 3 Where the employment-related securities are, or are an interest in, securities which are not fully paid up, the reference in subsection (1) to the market value of the employment-related securities is to what it would be if the securities were fully paid up. 4 If section 425(2) (no charge on acquisition of certain restricted securities or restricted interests in securities) applies in relation to the employment-related securities, this Chapter has effect as if the employment-related securities were not acquired until the occurrence of the first event which is a chargeable event for the purposes of section 426 in relation to the employment-related securities. 5 This section is subject to section 446R (case outside this Chapter). Case outside this Chapter 446R 1 This Chapter does not apply if— a the employment-related securities are shares (or an interest in shares) in a company of a class, b all the company’s shares of the class are acquired either for no payment or for a payment less than their market value, ba subsection (1A) is satisfied, and c subsection (3) or (4) is satisfied. 1A This subsection is satisfied unless something which affects the employment-related securities has been done (at or before the time of the acquisition) as part of a scheme or arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax or national insurance contributions. 2 Where the company’s shares of the class are not fully paid up, the reference in subsection (1) to their market value is to what it would be if they were fully paid up. 3 This subsection is satisfied if, at the time of the acquisition of the employment-related securities, the company is employee-controlled by virtue of holdings of shares of the class. 4 This subsection is satisfied if, at that time, the majority of the company’s shares of the class are not employment-related securities. 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notional loan 446S 1 Where this Chapter applies an interest-free loan (“ the notional loan ”) is to be treated as having been made to the employee by the employer at the time of the acquisition. 2 The provisions listed in subsection (3) apply as though the notional loan were an employment-related loan as defined in section 174 if and for so long as the employment has not terminated. 3 The provisions are— section 175 (benefit of taxable cheap loan treated as earnings), section 178 (exception for loans where interest qualifies for tax relief), section 180 (threshold for benefit of loan to be treated as earnings), section 182 (normal method of calculation: averaging), section 183 (alternative method of calculation), section 184 (interest treated as paid), section 185 (apportionment of cash equivalent in case of joint loan etc ), and section 187 (aggregation of loans by close company to director). 4 This section is not affected by section 554Z2(2). Amount of notional loan 446T 1 The amount of the notional loan initially outstanding is— MV - DA where— MV is the market value of the employment-related securities at the time of the acquisition, and DA is the total of any deductible amounts. 2 Where the employment-related securities are, or are an interest in, securities which are not fully paid up, the reference in subsection (1) to the market value of the employment-related securities is to what it would be if the securities were fully paid up. 3 For the purposes of subsection (1) each of the following is a “ deductible amount ”— a any payment made for the employment-related securities by the employee, and any payment so made by the person by whom they were acquired (if not the employee), at or before the time of the acquisition, b any amount that constitutes earnings from the employee’s employment under Chapter 1 of Part 3 (earnings) in respect of the acquisition of the employment-related securities (other than an amount of exempt income) , ba any amount treated as earnings from the employee's employment under section 226A (employee shareholder shares: amount treated as earnings) in respect of the acquisition of the employment-related securities (other than an amount of exempt income), c if section 425(2) (no charge on acquisition of certain restricted securities or restricted interests in securities) applies in relation to the employment-related securities, any amount that counts as employment income of the employee under section 426 by reason of the first event which is a chargeable event for the purposes of that section in relation to the employment-related securities, d if the employment-related securities were acquired on a conversion of other employment-related securities, any amount that counts as employment income of the employee under section 438 (charge on conversion) by reason of the conversion, ... e if the acquisition is pursuant to a securities option, any amount that counted as employment income of the employee under section 476 (acquisition of securities pursuant to securities option) in respect of the acquisition , and f any amount that has counted as employment income of the employee in respect of the employment under Chapter 2 of Part 7A in relation to the employment-related securities. 3A In subsection (3)(b) and (ba) the references to an amount of exempt income, in a case in which the amount that constitutes, or is treated as, earnings in respect of the acquisition is not an amount of general earnings to which any of the charging provisions of Chapters 4 and 5 of Part 2 applies, includes any amount that would be an amount of exempt income if any of those charging provisions were to apply. 4 The amount of the notional loan outstanding at any subsequent time is the difference between— a the amount initially outstanding, and b the amount of any payments or further payments made for the employment-related securities after the acquisition but before that time. Discharge of notional loan 446U 1 The notional loan is treated as discharged when— a the employment-related securities are disposed of otherwise than to an associated person, ... b if there is an outstanding or contingent liability to pay for the employment-related securities, that liability is released, extinguished, transferred or adjusted so as no longer to bind any associated person (except in circumstances in which subsection (4)(aa) applies), or c something which affects the employment-related securities is done as part of a scheme or arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax or national insurance contributions. 1A Subsection (1)(a) does not apply if, at the time of the acquisition, there was an actual or contingent liability to make one or more further payments equal to the amount initially outstanding for the employment-related securities. 2 If the notional loan is discharged as the result of an event specified in subsection (1), the amount of the notional loan outstanding immediately before the occurrence of the event counts as employment income of the employee for the relevant tax year (whether or not the employment has terminated before or since the acquisition). 3 The “ relevant tax year ” is the tax year in which the notional loan is treated as discharged. 4 The notional loan is also treated as discharged when— a payments or further payments for the employment-related securities equal to the amount initially outstanding in relation to them have been made by an associated person, ... aa the employment-related securities, together with the liability to make such further payment or payments, are disposed of otherwise than to an associated person and for consideration of an amount that reflects the transfer of the liability, or b the employee dies. Pre-acquisition avoidance cases 446UA 1 Sections 446S to 446U do not apply if the main purpose (or one of the main purposes) of the arrangements under which the right or opportunity to acquire the employment-related securities is made available is the avoidance of tax or national insurance contributions. 2 But instead an amount equal to what would (apart from this section) be the amount of the notional loan initially outstanding by virtue of sections 446S and 446T counts as employment income of the employee for the tax year in which the acquisition takes place. Chapter to be additional to other income tax charges 446V This Chapter does not affect any liability to income tax arising in respect of the acquisition under— a Chapter 1 of Part 3 (earnings), b Chapter 10 of Part 3 (taxable benefits: residual liability to charge), ba section 226A (employee shareholder shares: amount treated as earnings), c Chapter 3 of this Part (acquisition by conversion), d Chapter 3A of this Part (securities with artificially depressed market value), ... e Chapter 5 of this Part (acquisition of securities pursuant to securities option) , or f Chapter 2 of Part 7A (employment income provided through third parties) Definitions 446W 1 In this Chapter— “ interest ”, in relation to securities, “ securities ”, “ securities option ”, and “ shares ”, have the meaning indicated in section 420. 2 In this Chapter “ market value ” has the meaning indicated in section 421(1). 3 In this Chapter “ the acquisition ” has the meaning indicated in section 421B(8) (but subject to section 446Q(4)). 4 In this Chapter— “ the employment ”, “ the employee ” (except in section 446R), “ the employer ”, and “ employment-related securities ”, have the meaning indicated in section 421B(8). 5 In this Chapter “ associated person ” has the meaning indicated in section 421C. 6 In this Chapter— “ associated company ”, and “ employee-controlled ”, have the meaning indicated in section 421H. 7 In this Chapter “ the notional loan ” has the meaning indicated in section 446S(1). Chapter 3D Securities disposed of for more than market value Application of this Chapter 446X This Chapter applies if— a employment-related securities are disposed of by an associated person so that no associated person is any longer beneficially entitled to them, and b the disposal is for a consideration which exceeds the market value of the employment-related securities at the time of the disposal. Amount treated as income 446Y 1 Where this Chapter applies the amount determined under subsection (3) counts as employment income of the employee for the relevant tax year. 2 The “ relevant tax year ” is the tax year in which the disposal occurs. 3 The amount is— CD - MV - DA where— CD is the amount of the consideration given on the disposal, MV is the market value of the employment-related securities at the time of the disposal, and DA is the amount of any expenses incurred in connection with the disposal. Definitions 446Z 1 In this Chapter “ market value ” has the meaning indicated in section 421(1). 2 For the purposes of this Chapter sections 421(2) and 421A apply for determining the amount of the consideration given for anything. 3 In this Chapter— “ the employee ”, and “ employment-related securities ”, have the meaning indicated in section 421B(8). 4 In this Chapter “ associated person ” has the meaning indicated in section 421C. Chapter 4 Post-acquisition benefits from securities Charge on other chargeable benefits from securities 447 1 This Chapter applies if an associated person receives a benefit in connection with employment-related securities . 2 The taxable amount determined under section 448 counts as employment income of the employee for the relevant tax year. 3 The “ relevant tax year ” is the tax year in which the benefit is received. 4 If the benefit is otherwise chargeable to income tax this section does not apply unless something has been done which affects the employment-related securities as part of a scheme or arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax or national insurance contributions. 5 This section is subject to section 449 (case outside this Chapter). Amount of charge 448 The taxable amount for the purposes of section 447 (charge on other chargeable benefits) is the amount or market value of the benefit. Case outside this Chapter 449 1 This Chapter does not apply if— a the employment-related securities are shares (or an interest in shares) in a company of a class, b a similar benefit is received by the owners of all the company’s shares of the class, ba subsection (1A) is satisfied, and c subsection (2) or (3) is satisfied. 1A This subsection is satisfied unless something which affects the employment-related securities has been done as part of a scheme or arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax or national insurance contributions. 2 This subsection is satisfied if, immediately before the receipt of the benefit, the company is employee-controlled by virtue of holdings of shares of the class. 3 This subsection is satisfied if, immediately before the receipt of the benefit, the majority of the company’s shares of the class are not employment-related securities. 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Definitions 450 1 In this Chapter— “ interest ”, in relation to shares, and “ shares ”, have the meaning indicated in section 420(8). 2 In this Chapter “ market value ” has the meaning indicated in section 421(1). 3 In this Chapter— “ the employee ” (except in section 449), and “ employment-related securities ”, have the meaning indicated in section 421B(8). 4 In this Chapter “ associated person ” has the meaning indicated in section 421C. 5 In this Chapter— “ associated company ”, and “ employee-controlled ”, have the meaning indicated in section 421H. Tax charge where restrictions or rights varied Amount of charge 451 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cases outside charge under section 449 452 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax charge on increase in value of shares of dependent subsidiaries Charge on increase in value of shares of dependent subsidiary 453 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chargeable increases 454 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amount of charge 455 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cases outside charge under section 453 456 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax charge on other benefits from shares Charge on other chargeable benefits from shares 457 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chargeable benefits 458 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amount of charge 459 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cases outside charge under section 457 460 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supplementary provisions Related acquisitions of additional shares 461 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Company reorganisations etc. 462 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Disposals of shares to connected persons etc. ignored 463 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Application to interests in shares 464 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Duty to notify acquisitions of shares or interests in shares 465 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Duty to notify chargeable events and chargeable benefits 466 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interpretation Meaning of “dependent subsidiary” 467 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “employee-controlled” 468 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares “held by outside shareholders” 469 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minor definitions 470 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 4A Shares in research institution spin-out companies Introduction Application of this Chapter 451 1 This Chapter applies where— a an agreement is made for one or more transfers of intellectual property (an “ intellectual property agreement ”) from one or more research institutions to a company (a “ spin-out company ”), b a person acquires shares (or an interest in shares) in the spin-out company before the intellectual property agreement is made or within the period of 183 days beginning with the date on which it is made, c the right or opportunity to acquire the shares (or interest in shares) was available by reason of employment by the research institution (or any of them) or by the spin-out company, and d the person is involved in research in relation to any of the intellectual property that is the subject of the intellectual property agreement. 2 But this Chapter does not apply if the avoidance of tax or national insurance is the main purpose (or one of the main purposes) of the arrangements under which the right or opportunity to acquire the shares (or interest in shares) is made available. Tax relief on acquisition Market value on acquisition 452 1 For the relevant tax purposes the market value of the shares (or interest in shares) at the time of the acquisition is to be calculated disregarding the effect on that market value of the intellectual property agreement and any transfer of intellectual property pursuant to it. 2 For the purposes of subsection (1) “the relevant tax purposes” are— a determining any amount that is to constitute earnings from the employment under Chapter 1 of Part 3 (earnings), b determining the amount of any gain realised on the occurrence of an event that is a chargeable event by virtue of section 439(3)(a) (conversion), c operating Chapter 3C of this Part (acquisition of securities for less than market value), ... d determining any amount that counts as employment income of the employee under Chapter 5 of this Part (securities acquired pursuant to securities option) , and e determining any amount that counts as employment income of the employee in respect of the employment under Chapter 2 of Part 7A (employment income provided through third parties) Tax relief following acquisition Taxable amount under Chapter 4 453 1 If the shares are (or interest in shares is) acquired before the intellectual property agreement is made, or before any transfer of intellectual property pursuant to it, and any benefit deriving from the intellectual property agreement or any such transfer is received by the employee in connection with the shares (or interest in shares), the taxable amount determined under section 448 (post-acquisition benefits from securities: amount of charge) is to be treated as nil. 2 But this section does not apply if something which affects the shares (or interest in shares) has been done (at or before the time when the intellectual property agreement is made or intellectual property is transferred) as part of a scheme or arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax or national insurance contributions. Disapplication of Chapters 2 and 3B Deemed election for disapplication of Chapter 2 454 1 If the shares are restricted securities (or the interest in shares is a restricted interest in securities), the employer and the employee are to be treated as making an election under section 431(1) (election for disapplication of Chapter 2) in relation to the shares (or interest in shares). 2 But the employer and the employee may agree that subsection (1) is not to apply in relation to the shares (or interest in shares). 3 An agreement under subsection (2) is irrevocable and— a must be made in a form approved by the Board of the Inland Revenue, and b may not be made more than 14 days after the acquisition. 4 If the employer and the employee make an agreement under subsection (2) in relation to the shares (or interest in shares), subsection (5) applies for the purposes of determining the taxable amount for the purposes of section 426 (charge on occurrence of chargeable event) on the occurrence on any chargeable event in relation to the shares (or interest in shares). 5 In determining under section 428(3) (amount of charge) what would have been the market value of the shares (or interest in shares) at the time of the acquisition but for any restrictions (IUMV), that market value is to be calculated disregarding the effect on that market value of the intellectual property agreement and any transfer of intellectual property pursuant to it. Disapplication of Chapter 3B 455 For the purposes of Chapter 3B (securities with artificially enhanced market value) neither the intellectual property agreement nor any transfer of intellectual property pursuant to it are things done otherwise than for genuine commercial purposes. Supplementary Meaning of “intellectual property” and “transfer” 456 1 In this Chapter “ intellectual property ” means— a any patent, trade mark, registered design, copyright or design right, plant breeders' rights or rights under section 7 of the Plant Varieties Act 1997, b any right under the law of a country or territory outside the United Kingdom corresponding to, or similar to, a right within paragraph (a), c any information or technique not protected by a right within paragraph (a) or (b) but having industrial, commercial or other economic value, d any licence or other right in respect of anything within paragraph (a), (b) or (c), or e any goodwill (having the meaning that it has for accounting purposes) associated with anything within paragraphs (a) to (d). 2 The Treasury may by order amend the definition of “intellectual property” in subsection (1). 3 For the purposes of this Chapter a transfer of intellectual property includes— a a sale of the intellectual property, b the grant of a licence or other right in respect of it, and c the assignment of a licence or other right in respect of it. Meaning of “research institution” 457 1 In this Chapter “ research institution ” means— a any university or other institution receiving a grant (including a recurrent grant towards its costs), loan, financial support, financial assistance, financial resources or payment under— i section 65 of the Further and Higher Education Act 1992, ii regulations made under section 485 of the Education Act 1996, iii section 34 of the Learning and Skills Act 2000, iv section 14 of the Education Act 2002, v section 86 of the Education Act 2005, vi section 100 of the Apprenticeships, Skills, Children and Learning Act 2009, or vii section 39 or 97 of the Higher Education and Research Act 2017, aa any institution maintained by a local authority in England or Wales in the exercise of their further and higher education functions, ab any institution within the higher education sector for the purposes of the Further and Higher Education (Scotland) Act 1992, ac any college of further education within the meaning of section 36(1) of the Further and Higher Education (Scotland) Act 1992, ad any central institution within the meaning of section 135(1) of the Education (Scotland) Act 1980, ae the Queen’s University of Belfast or the University of Ulster, af a college of education in Northern Ireland within the meaning of Article 2(2) of the Education and Libraries (Northern Ireland) Order 1986 ( S.I. 1986/594 (N.I. 3) ), or ag any institution providing in Northern Ireland further education as defined in Article 3 of the Further Education (Northern Ireland) Order 1997 ( S.I. 1997/1772 (N.I. 15) ), or b any institution that carries out research activities otherwise than for profit and that is neither controlled nor wholly or mainly funded by a person who carries on activities for profit. 2 The Treasury may by order amend subsection (1) to include in or exclude from the definition of “research institution” a person specified in the order or persons of a description specified in the order. Meaning of “involved in research” 458 For the purposes of this Chapter a person is involved in research in relation to any intellectual property transferred or to be transferred from one or more research institutions if— a he has been actively engaged for the research institution (or any of them) in connection with research (whether as an employee or otherwise), and b that research is relevant to anything to which the intellectual property relates. Transfer of intellectual property by controlled company 459 1 For the purposes of this Chapter where a research institution has control of a company, a transfer of intellectual property from the company is to be treated as a transfer from the research institution. 2 For the purposes of this Chapter where two or more research institutions together have control of a company, a transfer of intellectual property from the company is to be treated as a transfer from those research institutions. 3 In this section “ control ” means control within the meaning given by sections 450 and 451 of CTA 2010 . Definitions 460 1 In this Chapter— “ interest ”, in relation to shares, and “ shares ”, have the meaning indicated in section 420. 2 In this Chapter “ market value ” has the meaning indicated in section 421(1). 3 In this Chapter— “ the acquisition ”, “ the employee ”, and “ the employer ”, have the meaning indicated in section 421B(8). 4 In this Chapter— “ restricted interest in securities ”, and “ restricted securities ”, have the meaning indicated in sections 423 and 424. Chapter 5 Securities options Introduction Options to which this Chapter applies 471 1 This Chapter applies to a securities option acquired by a person where the right or opportunity to acquire the securities option is available by reason of an employment of that person or any other person. 2 For the purposes of subsection (1) “ employment ” includes a former or prospective employment. 3 A right or opportunity to acquire a securities option made available by a person’s employer, or a person connected with a person’s employer, is to be regarded for the purposes of subsection (1) as available by reason of an employment of that person unless— a the person by whom the right or opportunity is made available is an individual, and b the right or opportunity is made available in the normal course of the domestic, family or personal relationships of that person. 4 A right or opportunity to acquire a securities option available by reason of holding employment-related securities is to be regarded for the purposes of subsection (1) as available by reason of the same employment as that by reason of which the right or opportunity to acquire the employment-related securities was available. 5 In this Chapter— “ the acquisition ”, in relation to an employment-related securities option, means the acquisition of the employment-related securities option pursuant to the right or opportunity available by reason of the employment, “ the employment ” means the employment by reason of which the right or opportunity to acquire the employment-related securities option is available (“the employee” and “the employer” being construed accordingly), and “ employment-related securities option ” means a securities option to which this Chapter applies. Associated persons 472 1 For the purposes of this Chapter the following are “ associated persons ” in relation to an employment-related securities option— a the person who acquired the employment-related securities option on the acquisition, b (if different) the employee, and c any relevant linked person. 2 A person is a relevant linked person if— a that person (on the one hand), and b either the person who acquired the employment-related securities option on the acquisition or the employee (on the other), are or have been connected or (without being or having been connected) are or have been members of the same household. 3 But a company which would otherwise be a relevant linked person is not if it is— a the employer, b the person from whom the employment-related securities option was acquired, or c the person by whom the right or opportunity to acquire the employment-related securities option was made available. Introduction to taxation of securities options 473 1 The starting-point is that section 475 contains an exemption from the liability to tax that might otherwise arise under— a Chapter 1 of Part 3 (earnings), or b Chapter 10 of that Part (taxable benefits: residual liability to charge), when an employment-related securities option is acquired. 2 Liability to tax may arise, when securities are acquired pursuant to the employment-related securities option, under— a section 446B (charge on acquisition where market value of securities or interest artificially depressed), b Chapter 3C of this Part (acquisition of securities for less than market value), or c section 476 (acquisition of securities pursuant to securities option). 3 Liability to tax may also arise by virtue of section 476 when— a the employment-related securities option is assigned or released, or b a benefit is received in connection with the employment-related securities option. 4 There are special rules relating to share options acquired under— a Schedule 3 SAYE option schemes (see Chapter 7 of this Part), b Schedule 4 CSOP schemes (see Chapter 8 of this Part), or c enterprise management incentives (see Chapter 9 of this Part). Cases where this Chapter does not apply 474 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax relief on acquisition of option No charge in respect of acquisition of option 475 1 No liability to income tax arises in respect of the acquisition of an employment-related securities option. 2 Subsection (1) is subject to section 526 ( ... CSOP schemes: charge where share option granted at a discount). Tax charge on post-acquisition chargeable events Charge on occurrence of chargeable event 476 1 If a chargeable event occurs in relation to an employment-related securities option, the taxable amount counts as employment income of the employee for the relevant tax year. 2 For this purpose— a “ chargeable event ” has the meaning given by section 477, b “ the taxable amount ”is the amount determined under section 478, and c “ the relevant tax year ”is the tax year in which the chargeable event occurs. 3 Relief under section 481 or 482 (relief for secondary Class 1 contributions or special contribution met by employee) may be available against an amount counting as employment income under this section. 5 If the employee has been divested of the employment-related securities option by operation of law— a income tax is charged on the amount determined under section 478, and b the person liable for any tax so charged is the relevant person in relation to the chargeable event (see section 477(7)). 5A An amount charged under subsection (5)(a) is treated for income tax purposes as an amount of income. 6 This section is subject to— section 519 ( ... SAYE option schemes: no charge in respect of exercise of share option by employee), section 524 ( ... CSOP schemes: no charge in respect of exercise of share option by employee), and section 530 (enterprise management incentives: no charge on exercise by employee of option to acquire shares at market value). Chargeable events 477 1 This section applies for the purposes of section 476 (charge on occurrence of chargeable event). 2 Any of the events mentioned in subsection (3) is a “ chargeable event ” in relation to the employment-related securities option unless it occurs on or after the death of the employee. 3 The events are— a the acquisition of securities pursuant to the employment-related securities option by an associated person, b the assignment for consideration of the employment-related securities option by an associated person otherwise than to another associated person or the release for consideration of the employment-related securities option by an associated person, or c the receipt by an associated person of a benefit in connection with the employment-related securities option (other than one within paragraph (a) or (b)). 4 For the purposes of subsection (3)(a) securities are acquired at the time when a beneficial interest is acquired (and not, if different, the time when the securities are conveyed or transferred). 5 A benefit received on account of any disability (within the meaning of the Equality Act 2010 in England and Wales and Scotland, or the Disability Discrimination Act 1995) of the employee is to be disregarded for the purposes of subsection (3)(c). 6 A benefit in money or money’s worth received in consideration for or otherwise in connection with— a failing or undertaking not to acquire securities pursuant to the employment-related securities option, or b granting or undertaking to grant to another person a right to acquire securities which are subject to the employment-related securities option or any interest in them, is to be regarded for the purposes of subsection (3)(c) as received in connection with the employment-related securities option. 7 For the purposes of section 476(5) (charge to income tax) the relevant person in relation to a chargeable event is— a in the case of an event that is a chargeable event by virtue of subsection (3)(a), the person by whom the securities are acquired, and b in the case of an event that is a chargeable event by virtue of subsection (3)(b) or (c), the person by whom the consideration or benefit is received. Amount of charge 478 1 The taxable amount for the purposes of section 476 (charge on occurrence of chargeable event) is— AG - DA where— AG is the amount of any gain realised on the occurrence of the chargeable event, and DA is the total of any deductible amounts. 2 Section 479 explains what is the amount of any gain realised on the occurrence of a chargeable event. 3 Section 480 specifies what are deductible amounts. Amount of gain realised on occurrence of chargeable event 479 1 This section applies for the purposes of section 478 (amount of charge on occurrence of chargeable event). 2 The amount of the gain realised on the occurrence of an event that is a chargeable event by virtue of section 477(3)(a) (acquisition of securities) is (subject to subsection (4))— MV - C 3 In subsection (2)— MV is the market value of the securities that are acquired at the time when they are acquired, and C is the amount of any consideration given for the securities that are acquired. 3A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 But the amount of the gain realised on the occurrence of an event that is a chargeable event by virtue of section 477(3)(a) (acquisition of securities) is calculated— a if section 531 (enterprise management incentives: limitation of charge on exercise of option to acquire shares below market value) applies, in accordance with that section, and b if section 532 (enterprise management incentives: modified tax consequences following disqualifying events) applies, in accordance with that section. 5 The amount of the gain realised on the occurrence of an event that is a chargeable event by virtue of section 477(3)(b) (assignment or release of option) is the amount of the consideration given for the assignment or release. 6 The amount of the gain realised on the occurrence of an event that is a chargeable event by virtue of section 477(3)(c) (receipt of benefit in connection with option) is the amount or market value of the benefit. 7 But if— a the consideration mentioned in subsection (5), or b the benefit mentioned in subsection (6), consists (in whole or in part) in the provision of securities or an interest in securities the market value of which has been reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes within the period of 7 years ending with the receipt of the consideration or benefit, its market value is to be taken to be what it would be but for the reduction. 8 The following are among the things that are, for the purposes of subsection (7), done otherwise than for genuine commercial purposes— a anything done as part of a scheme or arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax or national insurance contributions, and b any transaction between companies which are members of the same group on terms which are not such as might be expected to be agreed between persons acting at arm’s length (other than a payment for group relief). 9 In subsection (8)(b)— a “ group ” means a company and its 51% subsidiaries, and b “ group relief ” has the same meaning as in section 183(1) of CTA 2010 . Deductible amounts 480 1 This section applies for the purposes of section 478 (amount of charge on occurrence of chargeable event). 2 The amount of— a any consideration given for the acquisition of the employment-related securities option, and b the amount of any expenses incurred in connection with the acquisition of securities, assignment, release or receipt which constitutes the chargeable event, is a deductible amount. 3 Where in consequence of— a the acquisition of the employment-related securities option, b the acquisition of securities pursuant to the employment-related securities option, or c a transaction of which the acquisition of the employment-related securities option or the acquisition of securities pursuant to the employment-related securities option forms part, there is a reduction in the market value of any employment-related securities to which an associated person is beneficially entitled, the amount of the reduction is to be treated for the purposes of subsection (2) as consideration (or additional consideration) given for the acquisition of the employment-related securities option. 4 If an amount counts as employment income of the employee under section 526 ( ... CSOP schemes: charge where option granted at a discount) in respect of the employment-related securities option, so much of that amount as is attributable to the shares in question is a deductible amount. 5 The following are also deductible amounts— a any amount that constituted earnings from the employment under Chapter 1 of Part 3 (earnings) in respect of the acquisition of the employment-related securities option (other than an amount of exempt income) , b any amount that was treated as earnings from the employment under Chapter 10 of that Part (taxable benefits: residual liability to charge) in respect of the acquisition of the employment-related securities option, ... c the amount of any gain by a previous holder on an assignment of the employment-related securities option which would have been a deductible cost by virtue of subsection (2)(c) of section 479 (as originally enacted) on an exercise of the option at a time when that section was in force , and d any amount that has counted as employment income of the employee in respect of the employment under Chapter 2 of Part 7A in relation to the employment-related securities option or to any sum of money or asset held solely for the purposes of the option. 5A In subsection (5)(a) the reference to an amount of exempt income, in a case in which the amount that constituted earnings in respect of the acquisition was not an amount of general earnings to which any of the charging provisions of Chapters 4 and 5 of Part 2 applied, includes any amount that would have been an amount of exempt income if any of those charging provisions had applied. 6 If there has been a previous chargeable event in relation to the employment-related securities option (or if section 476 or 477 as originally enacted applied to the option by virtue of an earlier event), so much of any deductible amount as was deducted in calculating the taxable amount on the occasion of that event is to be regarded as not being a deductible amount. 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Relief for secondary Class 1 contributions met by employee 481 1 Relief is available under this section against an amount counting as employment income under section 476 if — a an agreement having effect under paragraph 3A of Schedule 1 to the Contributions and Benefits Act has been entered into allowing the secondary contributor to recover from the employee the whole or part of any secondary Class 1 contributions in respect of the gain, or b an election having effect under paragraph 3B of Schedule 1 to that Act is in force which has the effect of transferring to the employee the whole or part of the liability to pay secondary Class 1 contributions in respect of the gain. 2 The amount of the relief is the total of — a any amount that under the agreement referred to in subsection (1)(a) is recovered in respect of the gain by the secondary contributor before 5th June in the tax year following that in which the gain is realised, and b the amount of any liability in respect of the gain that, by virtue of the election referred to in subsection (1)(b), has become the employee’s liability. 3 If notice of withdrawal of approval of the election is given, the amount of any liability in respect of the gain for the purposes of subsection (2)(b) is limited to the amount of the liability met before 5th June in the tax year following that in which the gain is realised. 4 Subsection (1) does not apply in respect of a liability to pay Class 1 contributions which is prevented from arising by virtue of section 2(1)(a) of the Social Security Contributions (Share Options) Act 2001 (liability to pay Class 1 contributions in respect of gains replaced by liability to pay special contribution). 4A Relief under this section is given by way of deduction from the amount otherwise counting as employment income. 4B Relief under this section does not affect the amount to be taken into account— a as employment income in determining contributions payable under the Contributions and Benefits Act, or b as relevant employment income for the purposes of paragraph 3A or 3B of Schedule 1 to that Act. 5 In this section— “ approval ”, in relation to an election, means approval by the Commissioners for Her Majesty’s Revenue and Customs under paragraph 3B of Schedule 1 to the Contributions and Benefits Act, and “ secondary contributor ” has the same meaning as in that Act (see section 7). Relief for special contribution met by employee 482 1 Relief is available under this section against an amount counting as employment income under section 476 if conditions A to D are met. 2 Condition A is that a notice in respect the employment-related securities option was given to the Commissioners for Her Majesty’s Revenue and Customs in accordance with section 1 of the Social Security Contributions (Share Options) Act 2001 before 11th August 2001. 3 Condition B is that the person, or one of the persons, who gave that notice is a person who (apart from that Act) was liable, or would have become liable, by virtue of an election under paragraph 3B of Schedule 1 to the Contributions and Benefits Act, to pay secondary Class 1 contributions in respect of an event which is a chargeable event for the purposes of section 476. 4 Condition C is that that person became liable to pay a special contribution under section 2 of the Social Security Contributions (Share Options) Act 2001 in respect of the employment-related securities option. 5 Condition D is that that person met that liability before 11th August 2001 or before the end of such further period as the Commissioners for Her Majesty’s Revenue and Customs directed under section 2(5) of that Act. 6 The amount of the relief is the amount of the liability referred to in subsection (4). 7 Relief under this section is given by way of deduction from the amount otherwise counting as employment income. Supplementary provisions Application of this Chapter where option exchanged for another 483 1 This section applies if— a the employment-related securities option (the “ old option ”) is assigned or released, and b the whole or part of the consideration for the assignment or release consists of or includes another securities option (the “ new option ”). 2 For the purposes of section 479(5) (amount of gain realised by assigning or releasing option) the new option is not to be treated as consideration given for the assignment or release of the old option. 3 This Chapter applies to the new option as it applies to the old option. 4 For the purposes of section 480(2) (consideration for acquisition of option) the amount of the consideration given for the acquisition of the new option is to be treated as being the sum of— a the amount by which the amount of the consideration given for the acquisition of the old option exceeds the amount of any consideration given for the assignment or release of the old option, apart from the new option, and b any valuable consideration given for the acquisition of the new option, apart from the old option. 5 Two or more transactions are to be treated for the purposes of subsection (1) as a single transaction by which one option is assigned for a consideration which consists of or includes another option if— a the transactions result in— i a person ceasing to hold an option, and ii that person or a connected person coming to hold another option, and b one or more of the transactions is effected under arrangements to which two or more persons holding options, in respect of which there may be liability to tax under this Chapter, are parties. 6 Subsection (5) applies regardless of the order in which the assignments and the acquisition occur. Definitions 484 1 In this Chapter— “ securities ”, and “ securities option ”, have the meaning indicated in section 420. 2 In this Chapter “ market value ” has the meaning indicated in section 421(1). 3 For the purposes of this Chapter sections 421(2) and 421A apply for determining the amount of consideration given for anything. 4 In this Chapter “ employment-related securities ” has the same meaning as in Chapter 1 of this Part (see section 421B(8)). 5 In this Chapter— “ the acquisition ”, “ the employee ”, “ the employer ”, “ the employment ”, and “ employment-related securities option ”, have the meaning indicated in section 471(5). 6 In this Chapter “ associated person ” has the meaning indicated in section 472. 7 In this Chapter— “ secondary Class 1 contributions ” has the same meaning as in the Contributions and Benefits Act (see section 1 of that Act), ... ... Supplementary provisions Application of this Chapter where share option exchanged for another 485 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Duty to notify matters relating to share options 486 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minor definitions 487 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 6 ... share incentive plans Introduction ... Share incentive plans (SIPs) 488 1 This Chapter provides— a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b for exemptions from income tax in connection with shares obtained under share incentive plans (“SIPs”) which are Schedule 2 SIPs , c for amounts to count as employment income in certain circumstances in connection with such plans, and d for the making of PAYE deductions in connection with such amounts. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 The provisions of— a this and the following sections of this Chapter, b Schedule 2, and c the provisions mentioned in section 515 (tax advantages and charges under other Acts), together constitute “the SIP code”. 4 In the SIP code— ... “ PAYE deduction ” means a deduction required by PAYE regulations; “ Schedule 2 SIP ” is to be read in accordance with paragraph 1 and Part 10 of Schedule 2; a “ share incentive plan ” (or “ SIP ” for short) means a plan established by a company providing— for shares to be appropriated to employees without payment (“free shares”), or for shares to be acquired on behalf of employees out of sums deducted from their salary (“partnership shares”). 5 Other expressions used in the SIP code and contained in the index at the end of Schedule 2 have the meaning indicated by the index. Scope of tax advantages Operation of tax advantages in connection with Schedule 2 SIP 489 1 Sections 490 to 499 apply for income tax purposes in connection with shares awarded under a Schedule 2 SIP. 2 But those sections do not apply to an individual if, at the time of the award of shares in question, the earnings from the eligible employment are not (or would not be if there were any) general earnings to which any of the charging provisions of Chapter 4 or 5 of Part 2 apply. 3 “ The eligible employment ” means the employment which results in the individual meeting the employment requirement in relation to the plan. 4 And those sections do not apply if the main purpose (or one of the main purposes) of the arrangements under which the shares in question are awarded or acquired is the avoidance of tax or national insurance contributions. Tax advantages connected with award of shares No charge on award or acquisition of shares: general 490 1 This section applies— a on the award to an employee of free, matching or partnership shares under the plan, or b on the acquisition on behalf of an employee of dividend shares under the plan. 2 The employee is not liable to income tax on the value of the beneficial interest in the shares that passes to the employee at the time of the award or acquisition. No charge on award of shares as taxable benefit 491 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . No charge on partnership share money deducted from salary 492 1 An employee is not liable to income tax under Part 2 on any amount of the employee’s salary which is deducted as partnership share money under a partnership share agreement. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . No charge on acquisition of dividend shares 493 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1105(3) of CTA 2010 (information relating to distributions to be provided by nominee) does not apply to any amount applied by the trustees in acquiring dividend shares on behalf of a participant. 3A For the exemption of such amounts from income tax, see section 770 of ITTOIA 2005 (amounts applied by SIP trustees acquiring dividend shares or retained for reinvestment). 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Subsection (3) is subject to paragraph 80(4)(c) of Schedule 2 (information required where dividend shares cease to be subject to plan). Tax advantages connected with holding of shares No charge on removal of restrictions applying to shares 494 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . No charge on increase in value of shares of dependent subsidiary 495 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . No charge on cash dividend retained for reinvestment 496 For the exemption from income tax of amounts retained under paragraph 68(2) of Schedule 2 (amount of cash dividend not reinvested), see section 770 of ITTOIA 2005 (amounts applied by SIP trustees acquiring dividend shares or retained for reinvestment). Tax advantages connected with shares ceasing to be subject to plan Limitations on charges on shares ceasing to be subject to plan 497 1 No liability to income tax arises on free or matching shares ceasing to be subject to the plan, except as provided by— a section 505 (charge on free or matching shares ceasing to be subject to plan), or b section 507 (charge on disposal of beneficial interest during holding period). 2 No liability to income tax arises on partnership shares ceasing to be subject to the plan, except as provided by section 506 (charge on partnership shares ceasing to be subject to plan). 3 No liability to income tax arises on dividend shares ceasing to be subject to the plan, except under Chapter 3 or 4 of Part 4 of ITTOIA 2005 (dividends etc. from UK or non-UK resident companies etc. ) as a result of section 394(2) or 407(2) of that Act (distribution or dividend payment when dividend shares cease to be subject to plan). No charge on shares ceasing to be subject to plan in certain circumstances 498 1 A participant is not liable to income tax on shares ceasing to be subject to the plan if— a they cease to be so subject on the participant ceasing to be in relevant employment, and b subsection (2) applies. 2 This subsection applies if the participant ceases to be in relevant employment— a because of injury or disability, b on being dismissed by reason of redundancy, c by reason of a relevant transfer within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006 , d if the relevant employment is employment by an associated company (see paragraph 95(2) of Schedule 2), by reason of a change of control or other circumstances ending that company’s status as an associated company, e by reason of the participant’s retirement ..., or f on the participant’s death. 3 A participant is not liable to income tax on shares (“the relevant shares”) in a company (“ the relevant company ”) being withdrawn from the plan if— a the withdrawal of the relevant shares from the plan relates to— i a transaction resulting from a compromise, arrangement or scheme falling within subsection (9), ii an offer forming part of a general offer falling within subsection (10), or iii the application of sections 979 to 982 or 983 to 985 of the Companies Act 2006 in the case of a takeover offer (as defined in section 974 of that Act) falling within subsection (13), and b as a result of, as the case may be— i the transaction, ii the offer, or iii the application of sections 979 to 982 or 983 to 985 of the Companies Act 2006, the participant receives cash (and no other assets) in exchange for the relevant shares. 4 For the purposes of subsection (3)(b) it does not matter if the participant receives other assets in exchange for shares other than the relevant shares. 5 Subsection (3) does not apply to the relevant shares (or to a proportion of them) if in connection with, as the case may be— a the compromise, arrangement or scheme, b the general offer, or c the takeover offer, a course of action was open to the participant which, had it been followed, would have resulted in other assets being received in exchange for the relevant shares (or the proportion of them) instead of cash. 6 Subsection (3) does not apply to the relevant shares (or to a proportion of them) if it is reasonable to suppose that the relevant shares (or the proportion of them) would not have been awarded to the participant— a had, as the case may be— i the compromise, arrangement or scheme, ii the general offer, or iii the takeover offer, not been made, or b had any arrangements for the making of— i a compromise, arrangement or scheme which would fall within subsection (9), ii a general offer which would fall within subsection (10), or iii a takeover offer (as defined in section 974 of the Companies Act 2006) which would fall within subsection (13), which were in place or under consideration at any time not been in place or under consideration. 7 In subsection (6) the reference to shares being awarded to the participant is to be read, in the case of dividend shares, as a reference to the shares being acquired by the trustees on the participant's behalf. 8 In subsection (6)(b) “ arrangements ” includes any plan, scheme, agreement or understanding, whether or not legally enforceable. 9 A compromise, arrangement or scheme falls within this subsection if it is applicable to or affects— a all the ordinary share capital of the relevant company or all the shares of the same class as the relevant shares, or b all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employment or their participation in a Schedule 2 SIP. 10 A general offer falls within this subsection if— a it is made to holders of shares of the same class as the relevant shares or to holders of shares in the relevant company, and b it is made in the first instance on a condition such that if it is satisfied the person making the offer will have control of the relevant company. 11 For the purposes of subsection (10) it does not matter if the general offer is made to different shareholders by different means. 12 In subsection (10)(b) “ control ” has the meaning given by sections 450 and 451 of CTA 2010. 13 A takeover offer falls within this subsection if— a it relates to the relevant company, and b where there is more than one class of share in the relevant company, the class or classes to which it relates is or include the class of the relevant shares. Tax advantages: supplementary No charge in respect of incidental expenditure 499 An employee is not liable to income tax in respect of incidental expenditure of— a the trustees, b the company which established the plan, or c (if different) the employer, in operating the plan. Scope of tax charges Operation of tax charges in connection with Schedule 2 SIP 500 1 Sections 501 to 508 apply for income tax purposes in connection with shares awarded under a Schedule 2 SIP. 2 But those sections do not apply to an individual if, at the time of the award of shares in question, the earnings from the eligible employment are not (or would not be if there were any) general earnings to which any of the charging provisions of Chapter 4 or 5 of Part 2 apply. 3 “ The eligible employment ” means the employment which results in the individual meeting the employment requirement in relation to the plan. Charges connected with holding of shares Charge on capital receipts in respect of plan shares 501 1 This section applies if conditions A and B are met. 2 Condition A is that a capital receipt is received by a participant in respect of, or by reference to, any of the participant’s plan shares. 3 Condition B is that the plan shares in respect of, or by reference to, which the capital receipt is received are— a free, matching or partnership shares that were awarded to the participant less than 5 years before the participant received the capital receipt, or b dividend shares that were acquired on behalf of the participant less than 3 years before the participant received the capital receipt. 4 If this section applies, the amount or value of the capital receipt counts as employment income of the participant for the relevant tax year. 5 The “ relevant tax year ” is the tax year in which the participant receives the capital receipt. 6 This section does not apply if the capital receipt is received by the participant’s personal representatives after the death of the participant. 7 Section 502 explains what is meant by a “capital receipt”. Meaning of “capital receipt” in section 501 502 1 This section applies for determining whether any money or money’s worth is a “ capital receipt ” for the purposes of section 501. 2 The general rule is that any money or money’s worth is a “ capital receipt ” for the purposes of section 501. 3 The general rule is subject to the following exceptions. 4 Money or money’s worth is not a capital receipt for the purposes of section 501 to the extent that— a it constitutes income in the hands of the recipient for the purposes of income tax or would do so but for sections 489 to 498 (SIPs: tax advantages) or section 770 of ITTOIA 2005 (exemption for amounts applied by SIP trustees acquiring dividend shares or retained for reinvestment) , b it consists of the proceeds of disposal of the plan shares mentioned in section 501, or c it consists of new shares within the meaning of paragraph 87 of Schedule 2 (company reconstructions). 5 If, as a result of a direction given by or on behalf of the participant for the purposes of paragraph 77 of Schedule 2 (power of trustees to raise funds to subscribe for rights issues), the trustees— a dispose of some of the rights under a rights issue, and b use the proceeds of that disposal to exercise other such rights, the money or money’s worth constituting the proceeds of that disposal is not a capital receipt for the purposes of section 501. Charge on partnership share money paid over to employee 503 1 Any amount paid over to an individual under any of the provisions of Schedule 2 mentioned in subsection (2) counts as employment income of the individual for the relevant tax year. 2 The provisions are— paragraph 46(5) (deductions in excess of permitted maximum amount), paragraph 50(5)(b) or paragraph 52(6)(b) (surplus partnership share money remaining after acquisition of shares), paragraph 52(7) (partnership share money paid over on individual ceasing to be in relevant employment), paragraph 52(8) (partnership share money paid over where accumulation period brought to an end by event specified in plan), paragraph 55(3) (partnership share money paid over on withdrawal from partnership share agreement), or paragraph 56 (partnership share money paid over on plan ceasing to be a Schedule 2 SIP or termination of plan). 3 The “ relevant tax year ” is the tax year in which the amount is paid over. Charge on cancellation payments in respect of partnership share agreement 504 1 This section applies if an individual who has entered into a partnership share agreement receives any money or money’s worth in respect of the cancellation of the agreement. 2 The amount of the money or the value of the money’s worth counts as employment income of the individual for the relevant tax year. 3 The “ relevant tax year ” is the tax year in which the individual receives the money or money’s worth. Charges connected with shares ceasing to be subject to plan Charge on free or matching shares ceasing to be subject to plan 505 1 When free or matching shares cease to be subject to the plan, there may be an amount that counts as employment income of the participant depending on the period that has elapsed between— a the date when the shares were awarded to the participant (“the award date”), and b the date when they cease to be subject to the plan (“the exit date”). 2 If the period is less than 3 years, the market value of the shares at the exit date counts as employment income of the participant for the relevant tax year (see subsection (5)). 3 If the period is 3 years or more but less than 5 years, whichever is the lesser of— a the market value of the shares at the award date, and b the market value of the shares at the exit date, counts as employment income of the participant for the relevant tax year (see subsection (5)). 4 Where— a subsection (3) applies, and b the applicable amount is the market value of the shares at the award date, the tax due is reduced by the amount or aggregate amount of any tax paid by virtue of section 501 (charge on capital receipts in respect of plan shares) on any capital receipts in respect of the shares. 4A Any tax due under subsection (2) or (3) is reduced by the amount or aggregate amount of any tax paid by virtue of Chapter 3B of this Part in relation to the shares. 5 The “ relevant tax year ” is the tax year in which the exit date falls. 6 No liability to tax arises by virtue of this section— a on the forfeiture of free or matching shares, b if section 498 (no charge on shares ceasing to be subject to plan in certain circumstances) applies, or c if section 507 (charge on disposal of beneficial interest in holding period) applies. Charge on partnership shares ceasing to be subject to plan 506 1 When partnership shares cease to be subject to the plan, there may be an amount that counts as employment income of the participant depending on the period that has elapsed between— a the acquisition date in respect of those shares (as defined by paragraph 50(4) or, as the case may be, paragraph 52(5) of Schedule 2), and b the date when they cease to be subject to the plan (“the exit date”). 2 If the period is less than 3 years, the relevant amount counts as employment income of the participant for the relevant tax year (see subsection (5)). 2A Subject to subsection (2B), in subsection (2) “ the relevant amount ” means the market value of the shares at the exit date. 2B If the shares cease to be subject to the plan by virtue of a provision of the kind mentioned in paragraph 43(2B) of Schedule 2 (provision requiring partnership shares to be offered for sale), in subsection (2) “ the relevant amount ” means the lesser of— a the amount of partnership share money used to acquire the shares, and b the market value of the shares at the time they are offered for sale. 2C Paragraph 92(2) of Schedule 2 (market value of shares subject to a restriction) applies for the purposes of subsection (2B)(b). 3 If the period is 3 years or more but less than 5 years, whichever is the lesser of— a the amount of partnership share money used to acquire the shares, and b the market value of the shares at the exit date, counts as employment income of the participant for the relevant tax year (see subsection (5)). 3A If the shares cease to be subject to the plan by virtue of a provision of the kind mentioned in paragraph 43(2B) of Schedule 2, in subsection (3)(b) the reference to the market value of the shares at the exit date is to be read as a reference to the market value of the shares at the time they are offered for sale (as determined in accordance with paragraph 92(2) of Schedule 2 if relevant). 4 Where— a subsection (3) applies, and b the applicable amount is the amount of partnership share money used to acquire the shares, the tax due is reduced by the amount or aggregate amount of any tax paid by virtue of section 501 (charge on capital receipts in respect of plan shares) on any capital receipts in respect of the shares. 4A Any tax due under subsection (2) or (3) is reduced by the amount or aggregate amount of any tax paid by virtue of Chapter 3B of this Part in relation to the shares. 5 The “ relevant tax year ” is the tax year in which the exit date falls. 6 No liability to income tax arises by virtue of this section if section 498 (no charge on shares ceasing to be subject to plan in certain circumstances) applies. Charge on disposal of beneficial interest during holding period 507 1 This section applies if— a free or matching shares cease to be subject to the plan at any time during the holding period for those shares, and b this occurs as a result of the participant assigning, charging or otherwise disposing of the participant’s beneficial interest in the shares in breach of obligations under paragraph 36(1)(b) of Schedule 2 (restrictions relating to disposals within holding period). 2 The market value of the shares at the date when they cease to be subject to the plan counts as employment income of the participant for the relevant tax year. 3 The “ relevant tax year ” is the tax year in which that date falls. Identification of shares ceasing to be subject to plan 508 1 For the purpose of determining any liability to tax arising by virtue of the SIP code in respect of any of a participant’s shares ceasing to be subject to the plan— a shares are to be taken as ceasing to be subject to the plan in the order in which they were awarded to the participant under the plan, and b where shares are awarded to the participant on the same day, the shares are to be treated as ceasing to be subject to the plan in the order which gives rise to the lowest charge to income tax on the participant. 2 For the purposes of subsection (1) dividend shares are “awarded” to a participant when the trustees acquire them on behalf of, or appropriate them to, the participant. PAYE Modification of section 696 where charge on shares ceasing to be subject to plan 509 1 Where— a as a result of shares ceasing to be subject to a Schedule 2 SIP, there is an amount that counts as employment income of a participant by virtue of the SIP code, and b the shares are readily convertible assets, section 696 (readily convertible assets) applies as follows. 2 Section 696 applies as if the participant (“P”) were being provided with PAYE income in the form of those shares— a at the time when the shares cease to be subject to the plan, and b in respect of the relevant employment in which P is employed at that time (or, if P is not then employed in relevant employment, the relevant employment in which P was last employed before that time). 3 In addition, subsection (2) of section 696 applies as if the reference in that subsection to the amount of income likely to be PAYE income in respect of the provision of the asset were a reference to the amount which is likely to count as employment income by virtue of the SIP code as a result of the shares ceasing to be subject to the plan. 4 In this section “ readily convertible asset ” has the same meaning as in section 696 (see sections 701 and 702), but this is subject to subsections (5) and (6) . 5 In determining for the purposes of this section (and of section 696 in its application in accordance with this section) whether the shares are readily convertible assets, any market for the shares which— a is created by virtue of the trustees acquiring shares for the purposes of the plan, and b exists solely for the purposes of the plan, is to be disregarded. 6 In determining for the purposes of this section (and of section 696 in its application in accordance with this section) whether the shares are readily convertible assets, section 702 has effect with the omission of subsections (5A) to (5D). Payments by trustees to employer company on shares ceasing to be subject to plan 510 1 This section applies if, as a result of any shares (“the relevant shares”) ceasing to be subject to a Schedule 2 SIP— a there is an amount that counts as employment income of a participant by virtue of the SIP code, and b an obligation to make a PAYE deduction arises in respect of that amount. 2 The trustees must pay to the employer company a sum which is sufficient to enable the employer company to discharge that obligation. 3 Subsection (2) is subject to— a subsection (4), and b section 511 (PAYE deductions to be made by trustees on shares ceasing to be subject to plan). 4 Subsection (2) only applies if, or to the extent that, the plan does not require the participant to pay the employer company a sum which is sufficient to discharge the obligation mentioned in subsection (1)(b). 5 Section 710(1) (notional payments: accounting for tax) has effect as if it required the deduction of income tax to be made from any sum or sums received by the employer company— a from the trustees under subsection (2), or b from the participant in accordance with a requirement of the plan, as mentioned in subsection (4). 6 After making the necessary PAYE deduction from the sum or sums received as mentioned in subsection (5), the employer company must pay any remaining amount to the participant. 7 In this section “ the employer company ” means— a the company which employs the participant in relevant employment at the time when the relevant shares cease to be subject to the plan, or b if the participant is not then employed in relevant employment, the company which last employed the participant in relevant employment before that time, so long as that company is one to which PAYE regulations apply at that time. PAYE deductions to be made by trustees on shares ceasing to be subject to plan 511 1 This section applies if, as a result of any shares ceasing to be subject to a Schedule 2 SIP— a there is an amount that counts as employment income of a participant by virtue of the SIP code, and b condition A or B is met. 2 Condition A is that an officer of Revenue and Customs — a is of the opinion that it is impracticable for the employer company (within the meaning of section 510) to make a PAYE deduction, and b accordingly directs that this section is to apply. 3 Condition B is that there is no company that qualifies as the employer company (within the meaning of that section). 4 If this section applies— a section 510(2) does not apply, and b the trustees must make a PAYE deduction in respect of the taxable equivalent as if the participant were a former employee of the trustees. 5 The “ taxable equivalent ” means an amount equal to that mentioned in subsection (1). 6 If this section applies, section 689 (employee of non-UK employer) does not apply. Disposal of beneficial interest by participant 512 1 This section applies if— a a participant (“P”) disposes of P’s beneficial interest in any of P’s plan shares to the trustees, and b the trustees are, as a result of paragraph 6 of Schedule 7D to TCGA 1992 (deemed disposal by trustees on disposal of beneficial interest), treated as having disposed of the shares in question. 2 If this section applies, sections 510 and 511 apply as if the consideration payable by the trustees to the participant on the disposal had been received by the trustees as the proceeds of disposal of plan shares. Capital receipts: payments by trustees to employer company 513 1 This section applies if the trustees receive a sum of money which constitutes (or forms part of) a capital receipt which, by virtue of the SIP code, counts as employment income of a participant when it is received by the participant. 2 Out of that sum of money the trustees must pay to the employer company an amount equal to the amount of employment income. 3 The employer company must then pay over that amount to the participant, but when doing so must make a PAYE deduction. 4 This section is subject to section 514 (capital receipts: deductions to be made by trustees). 5 In this section “ the employer company ” means— a the company which employs the participant in relevant employment at the time when the trustees receive the sum mentioned in subsection (1), or b if the participant is not then employed in relevant employment, the company which last employed the participant in relevant employment before that time, so long as that company is one to which PAYE regulations apply at that time. Capital receipts: PAYE deductions to be made by trustees 514 1 This section applies if— a the trustees receive a sum of money which constitutes (or forms part of) a capital receipt which, by virtue of the SIP code, counts as employment income of a participant when it is received by the participant, and b either condition A or B is met. 2 Condition A is that an officer of Revenue and Customs — a is of the opinion that it is impracticable for the employer company (within the meaning of section 513) to make a PAYE deduction, and b accordingly directs that this section is to apply. 3 Condition B is that there is no company that qualifies as the employer company (within the meaning of that section). 4 If this section applies, the trustees must, when paying the capital receipt over to the participant, make a PAYE deduction in respect of the taxable equivalent as if the participant were a former employee of the trustees. 5 The “ taxable equivalent ” means an amount equal to the amount which counts as employment income as mentioned in subsection (1)(a). 6 If this section applies, section 689 (employee of non-UK employer) does not apply. Other tax consequences Tax advantages and charges under other Acts 515 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 SIPs are also dealt with in— a Part 1 of Schedule 7D to TCGA 1992 (which provides for relief from capital gains tax for the trustees and for participants in relation to a Schedule 2 SIP in certain circumstances, including where shares cease to be subject to the plan), ... b section 95 of FA 2001 (which contains relief from stamp duty and stamp duty reserve tax for transfers of partnership or dividend shares) , ... c sections 392 to 395 and 405 to 408 of ITTOIA 2005 (SIPs: special rules for charges under Chapters 3 and 4 of Part 4 of that Act (dividends etc. from UK or non-UK resident companies etc. )) and section 770 of that Act (exemption for amounts applied by SIP trustees acquiring dividend shares or retained for reinvestment) , ... d Chapter 5 of Part 9 of ITA 2007 (which provides for section 479 of that Act not to apply to income of the trustees of a Schedule 2 SIP in certain circumstances) , and e Chapter 1 of Part 11 of CTA 2009 (share incentive plans) 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 7 ... SAYE option schemes Introduction ... SAYE option schemes 516 1 This Chapter provides— a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b for exemptions from income tax in connection with share options granted under SAYE option schemes which are Schedule 3 SAYE option schemes. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 The provisions of— a this and the following sections of this Chapter, b Schedule 3, and c Part 2 of Schedule 7D to TCGA 1992 ( Schedule 3 SAYE option schemes: amount of consideration on exercise of option), together constitute “the SAYE code”. 4 In the SAYE code— ... “ SAYE option scheme ” means a scheme (commonly referred to as an SAYE share option scheme) which is established by a company and provides— for share options to be granted to employees and directors, and for the shares acquired by the exercise of the share options to be paid for in the way mentioned in paragraph 24 of Schedule 3 (payments for shares to be linked to approved savings arrangements ); “ Schedule 3 SAYE option scheme ” is to be read in accordance with paragraph 1 and Part 8 of Schedule 3; “ share option ” means a right to acquire shares in a company; “ shares ” includes stock. 5 Other expressions used in the SAYE code and contained in the index at the end of Schedule 3 have the meaning indicated by the index. Share options to which this Chapter applies 517 1 This Chapter applies to a share option granted to an individual— a in accordance with the provisions of a Schedule 3 SAYE option scheme, and b by reason of the individual’s office or employment as a director or employee of a company. 2 The individual may be a director or employee of the company whose shares are the subject of the share option, or of some other company. Tax advantages No charge in respect of receipt of option 518 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . No charge in respect of exercise of option 519 1 No liability to income tax arises in respect of the exercise of the share option if— a the individual exercises it in accordance with the provisions of the SAYE option scheme at a time when the scheme is a Schedule 3 SAYE option scheme , ... b condition A or B is met and c the avoidance of tax or national insurance contributions is not the main purpose (or one of the main purposes) of any arrangements under which the option was granted or is exercised. 2 Condition A is that the option is exercised on or after the third anniversary of the date on which it was granted. 3 Condition B is that the option— a is exercised before the third anniversary of the date on which it was granted, and b is so exercised otherwise than by virtue of a provision included in the scheme under— paragraph 34(5) of Schedule 3 (exercise of option where scheme-related employment ends), or paragraph 37 of that Schedule (exercise of option where certain company events occur). 3A In relation to any shares acquired by the exercise of the share option, no liability to income tax arises in respect of its exercise if— a the individual exercises the option before the third anniversary of the date on which the option was granted at a time when the SAYE option scheme is a Schedule 3 SAYE option scheme , b the option is exercised by virtue of a provision included in the scheme— i under paragraph 37(1) of Schedule 3 where the relevant date is the relevant date for the purposes of paragraph 37(2) , (4) or (4A) , or ii under paragraph 37(6) of Schedule 3, c as a result of, as the case may be— i the general offer, ii the compromise or arrangement, ... iia the non-UK company reorganisation arrangement, or iii the takeover offer, the individual receives cash (and no other assets) in exchange for the shares, d when the decision to grant the option was taken— i the general offer, ii the compromise or arrangement, ... iia the non-UK company reorganisation arrangement, or iii the takeover offer, as the case may be, had not been made, e when that decision was taken, no arrangements were in place or under consideration for— i the making of a general offer which would fall within subsection (3D), ii the making of any compromise or arrangement which would fall within subsection (3H), ... iia the making of any non-UK company reorganisation arrangement which would fall within subsection (3H), or iii the making of a takeover offer (as defined in section 974 of the Companies Act 2006) which would fall within subsection (3I), f if the scheme includes a provision under paragraph 38 of Schedule 3 (“the paragraph 38 provision”), in connection with— i the general offer, ii the compromise or arrangement, ... iia the non-UK company reorganisation arrangement, or iii the takeover offer, as the case may be, no course of action was open to the individual which, had it been followed, would have resulted in the individual making an agreement under the paragraph 38 provision which would have prevented the individual from acquiring the shares by the exercise of the option, and g the avoidance of tax or national insurance contributions is not the main purpose (or one of the main purposes) of any arrangements under which the option was granted or is exercised. 3B In subsection (3A)(c)(iii), (d)(iii) and (f)(iii) “ the takeover offer ” means the takeover offer (as defined in section 974 of the Companies Act 2006) giving rise to the application of sections 979 to 982 or 983 to 985 of that Act. 3C In subsection (3A)(e) “ arrangements ” includes any plan, scheme, agreement or understanding, whether or not legally enforceable. 3D A general offer falls within this subsection if it is— a a general offer to acquire the whole of the issued ordinary share capital of the relevant company which is made on a condition such that, if it is met, the person making the offer will have control of the relevant company, or b a general offer to acquire all the shares in the relevant company which are of the same class as those acquired by the exercise of the option. 3E In subsection (3D)(a) the reference to the issued ordinary share capital of the relevant company does not include any capital already held by the person making the offer or a person connected with that person and in subsection (3D)(b) the reference to the shares in the relevant company does not include any shares already held by the person making the offer or a person connected with that person. 3F For the purposes of subsection (3D)(a) and (b) it does not matter if the general offer is made to different shareholders by different means. 3G For the purposes of subsection (3D)(a) a person is to be treated as obtaining control of a company if that person and others acting in concert together obtain control of it. 3H A compromise or arrangement or a non-UK company reorganisation arrangement falls within this subsection if it is applicable to or affects— a all the ordinary share capital of the relevant company or all the shares of the same class as those acquired by the exercise of the option, or b all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employment or directorships or their participation in a Schedule 3 SAYE option scheme. 3I A takeover offer falls within this subsection if— a it relates to the relevant company, and b where there is more than one class of share in the relevant company, the class or classes to which it relates is or include the class of the shares acquired by the exercise of the option. 3J In subsections (3D), (3H) and (3I) “ the relevant company ” means the company whose shares are acquired by the exercise of the option. 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 In Schedule 3— a paragraph 32 provides for the exercise of an option where the holder has died, and b paragraphs 40H(4) and 40I(9) provide for an SAYE option scheme to be treated as a Schedule 3 SAYE option scheme at the time when an option is exercised even though the scheme is not a Schedule 3 SAYE option scheme . No charge in respect of post-acquisition benefits 520 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 8 ... CSOP schemes Introduction ... CSOP schemes 521 1 This Chapter provides— a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b for exemptions from income tax in connection with share options granted under CSOP schemes which are Schedule 4 CSOP schemes, and c for amounts to count as employment income in certain circumstances in connection with such options. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 The provisions of— a this and the following sections of this Chapter, b Schedule 4, and c Part 3 of Schedule 7D to TCGA 1992 ( Schedule 4 CSOP schemes: amount of consideration on exercise of option), together constitute “the CSOP code”. 4 In the CSOP code— ... “ CSOP scheme ” means a scheme (commonly referred to as a company share option plan) which— is established by a company, provides for share options to be granted to employees and directors, and is not an SAYE option scheme (within the meaning of the SAYE code: see section 516(4)); “ Schedule 4 CSOP scheme ” is to be read in accordance with paragraph 1 and Part 7 of Schedule 4; “ share option ” means a right to acquire shares in a company; “ shares ” includes stock. 5 Other expressions used in the CSOP code and contained in the index at the end of Schedule 4 have the meaning indicated by the index. Share options to which this Chapter applies 522 1 This Chapter applies to a share option granted to an individual— a in accordance with the provisions of a Schedule 4 CSOP scheme, and b by reason of the individual’s office or employment as a director or employee of a company. 2 The individual may be a director or employee of the company whose shares are the subject of the share option, or of some other company. Tax advantages No charge in respect of receipt of option 523 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . No charge in respect of receipt of option 524 1 No liability to income tax arises in respect of the exercise of the share option if— a the individual exercises it in accordance with the provisions of the CSOP scheme at a time when the scheme is a Schedule 4 CSOP scheme , ... b Condition A or B is met and c the avoidance of tax or national insurance contributions is not the main purpose (or one of the main purposes) of any arrangements under which the option was granted or is exercised. 2 Condition A is that the option is exercised— a on or after the third anniversary of the date on which it was granted, but b not later than the tenth anniversary of that date. 2A Condition B is that the option— a is exercised before the third anniversary of the date on which it was granted, and b is so exercised by virtue of a provision included in the scheme under paragraph 24 of Schedule 4 (exercise of options after ceasing to be director or employee) in circumstances in which subsection (2B) applies. 2B This subsection applies if the individual exercising the option— a has ceased to be in qualifying employment because of— i injury, disability, redundancy or retirement, ii a relevant transfer within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006, or iii in the case of a group scheme where the qualifying employment is as a director or employee of a constituent company, that company ceasing to be controlled by the scheme organiser, and b exercises the option within 6 months of the day on which he ceases to be such a director or employee. 2BA For the purposes of subsection (2B) an individual is in “qualifying employment” if the individual is a full-time director or qualifying employee (as defined in paragraph 8(2) of Schedule 4) of— a the scheme organiser, or b in the case of a group scheme, a constituent company. 2C In subsection (2B)(a)(i) — “ redundancy ” means redundancy within the meaning of ERA 1996 or ER( NI )O 1996, ... 2D Subsection (2B)(a)(iii) does not cover a case where the constituent company was controlled by the scheme organiser by virtue of paragraph 34 of Schedule 4 (jointly owned companies). 2E In relation to any shares acquired by the exercise of the share option, no liability to income tax arises in respect of its exercise if— a the individual exercises the option before the third anniversary of the date on which the option was granted at a time when the CSOP scheme is a Schedule 4 CSOP scheme , b the option is exercised by virtue of a provision included in the scheme under paragraph 25A of Schedule 4, c as a result of, as the case may be— i the general offer, ii the compromise or arrangement, ... iia the non-UK company reorganisation arrangement, or iii the takeover offer, the individual receives cash (and no other assets) in exchange for the shares, d when the decision to grant the option was taken— i the general offer, ii the compromise or arrangement, ... iia the non-UK company reorganisation arrangement, or iii the takeover offer, as the case may be, had not been made, e when that decision was taken, no arrangements were in place or under consideration for— i the making of a general offer which would fall within subsection (2H), ii the making of any compromise or arrangement which would fall within subsection (2L), ... iia the making of any non-UK company reorganisation arrangement which would fall within subsection (2L), or iii the making of a takeover offer (as defined in section 974 of the Companies Act 2006) which would fall within subsection (2M), f if the scheme includes a provision under paragraph 26 of Schedule 4 (“the paragraph 26 provision”), in connection with— i the general offer, ii the compromise or arrangement, ... iia the non-UK company reorganisation arrangement, or iii the takeover offer, as the case may be, no course of action was open to the individual which, had it been followed, would have resulted in the individual making an agreement under the paragraph 26 provision which would have prevented the individual from acquiring the shares by the exercise of the option, and g the avoidance of tax or national insurance contributions is not the main purpose (or one of the main purposes) of any arrangements under which the option was granted or is exercised. 2F In subsection (2E)(c)(iii), (d)(iii) and (f)(iii) “ the takeover offer ” means the takeover offer (as defined in section 974 of the Companies Act 2006) giving rise to the application of sections 979 to 982 or 983 to 985 of that Act. 2G In subsection (2E)(e) “ arrangements ” includes any plan, scheme, agreement or understanding, whether or not legally enforceable. 2H A general offer falls within this subsection if it is— a a general offer to acquire the whole of the issued ordinary share capital of the relevant company which is made on a condition such that, if it is met, the person making the offer will have control of the relevant company, or b a general offer to acquire all the shares in the relevant company which are of the same class as those acquired by the exercise of the option. 2I In subsection (2H)(a) the reference to the issued ordinary share capital of the relevant company does not include any capital already held by the person making the offer or a person connected with that person and in subsection (2H)(b) the reference to the shares in the relevant company does not include any shares already held by the person making the offer or a person connected with that person. 2J For the purposes of subsection (2H)(a) and (b) it does not matter if the general offer is made to different shareholders by different means. 2K For the purposes of subsection (2H)(a) a person is to be treated as obtaining control of a company if that person and others acting in concert together obtain control of it. 2L A compromise or arrangement or a non-UK company reorganisation arrangement falls within this subsection if it is applicable to or affects— a all the ordinary share capital of the relevant company or all the shares of the same class as those acquired by the exercise of the option, or b all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employment or directorships or their participation in a Schedule 4 CSOP scheme. 2M A takeover offer falls within this subsection if— a it relates to the relevant company, and b where there is more than one class of share in the relevant company, the class or classes to which it relates is or include the class of the shares acquired by the exercise of the option. 2N In subsections (2H), (2L) and (2M) “ the relevant company ” means the company whose shares are acquired by the exercise of the option. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Paragraph 25 of Schedule 4 provides for the exercise of an option where the holder has died. No charge in respect of post-acquisition benefits 525 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax charge Charge where option granted at a discount 526 1 This section applies if, at the time when the share option is granted to the individual, the aggregate of— a the amount or value of any consideration given by the individual for the grant of the option, and b the amount payable by the individual, on exercising the option, in order to acquire the maximum number of shares that may be acquired under it, is less than the market value of the same quantity of issued shares of the same class. 2 The amount of the difference counts as employment income of the individual for the relevant tax year. 3 The “ relevant tax year ” is the tax year in which the option is granted to the individual. 4 Section 480(4) (gain realised on acquisition of securities pursuant to option etc ) provides for a deduction to be made to take account of amounts that count as employment income under this section. Chapter 9 Enterprise management incentives Introduction Enterprise management incentives: qualifying options 527 1 This Chapter provides— a for share options notified to an officer of Revenue and Customs to be qualifying options for the purposes of the EMI code, and b for exemptions and reliefs from income tax in connection with qualifying options. 2 Schedule 5 contains the requirements that have to be met for a share option to be a qualifying option, together with the notification procedure. 3 The provisions of— a this and the following sections of this Chapter, and b Schedule 5, ... c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . together constitute “the EMI code”. 4 In the EMI code— “ qualifying option ” means a share option— in relation to which the requirements of Schedule 5 are met at the time when the option is granted, and which is notified to an officer of Revenue and Customs in accordance with Part 7 of that Schedule; “ replacement option ” means an option within paragraph 41(4) of that Schedule (grant of replacement option in connection with company reorganisations); “ share option ” means a right to acquire shares in a company; and any reference to the requirements of Schedule 5 is to the requirements set out in paragraph 1(3) of that Schedule. 5 Other expressions used in the EMI code and contained in the index at the end of Schedule 5 have the meaning indicated by the index. Tax advantages: receipt of option No charge on receipt of qualifying option 528 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax advantages: exercise of option Scope of tax advantages: option must be exercised within 10 years 529 1 Sections 530 to 540 apply in connection with the exercise of a qualifying option. 2 But those sections only apply in cases where the option is exercised on or before the tenth anniversary of— a the date of the grant of the option, or b if it is a replacement option, the date of the grant of the original option. 3 In the EMI code “ the original option ” means— a where there has been one replacement option, the option that that option replaced, or b where there have been two or more replacement options, the option that the first of them replaced. No charge on exercise of option to acquire shares at market value 530 1 This section applies if the option is to acquire shares at not less than their market value— a at the time when the option is granted, or b if it is a replacement option, at the time when the original option was granted. 2 If this section applies, no liability to income tax arises by virtue of section 476 (charge on exercise etc. of option by employee) in respect of the exercise of the option. 3 This section has effect subject to section 532 (modified tax consequences following disqualifying events). Limitation of charge on exercise of option to acquire shares below market value 531 1 This section applies if the option is to acquire shares at less than their market value— a at the time when the option is granted, or b if it is a replacement option, at the time when the original option was granted, or at nil cost. 2 If this section applies, the section 476 gain is— CMV - ( ACO + ACS ) where— CMV is the chargeable market value, ACO is the amount or value of the consideration given for the grant of the option, and ACS is the amount, if any, for which the shares are acquired. 3 “ The chargeable market value ” means— a the market value of the shares— i at the time when the option was granted, or ii if it is a replacement option, at the time when the original option was granted, or b the market value of the shares at the time when the option is exercised, whichever is lower. 3A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 In this section “ the section 476 gain ” means the amount under section 478 (amount of charge under section 476) is to be regarded as the taxable amount for the purposes of section 476 in respect of the acquisition of the shares pursuant to the option. 5 This section has effect subject to section 532 (modified tax consequences following disqualifying events). Tax advantages where disqualifying events Modified tax consequences following disqualifying events 532 1 This section applies where— a a disqualifying event (see section 533) occurs in relation to a qualifying option before the option is exercised, and b the option is exercised later than 90 days after the day on which the event occurred. 2 If the option is within section 530(1) (option to acquire shares at market value), the section 476 gain is— PEG - ACO (see subsection (4)). 3 If the option is within section 531(1) (option to acquire shares at less than market value), the section 476 gain is— ( CMV + PEG ) - ( ACO + ACS ) (see subsection (4)). 4 For the purposes of subsections (2) and (3)— ACO is the amount or value of the consideration given for the grant of the option, ACS is the amount, if any, for which the shares are acquired, CMV is the chargeable market value (as defined by section 531(3)), and PEG is the post-event gain, that is the amount (if any) by which the market value of the shares at the time when the option is exercised exceeds their market value immediately before the disqualifying event. 4A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 In subsections (2) and (3) “ the section 476 gain ” means the amount under section 478 (amount of charge under section 476) is to be regarded as the taxable amount for the purposes of section 476 in respect of the acquisition of the shares pursuant to the option. 6 Nothing in the following provisions— a subsections (2) and (3) above, or b sections 530 and 531, applies if the amount that counts as employment income by virtue of section 476 in respect of the exercise of the option would, in the absence of those provisions, be less than the amount that counts as such income as a result of those provisions. Disqualifying events 533 1 The following provisions deal with the events that are (or are to be treated as) disqualifying events in relation to a qualifying option— a section 534 (events relating to the relevant company), b section 535 (events relating to the employee), and c section 536 (other disqualifying events), read with sections 537 to 539 (which contain supplementary provisions). 2 In the provisions mentioned in subsection (1) “ the employee ” means the person holding the qualifying option and “ the relevant company ” means the company whose shares are the subject of the option (see paragraph 1(3) of Schedule 5). Disqualifying events relating to relevant company 534 1 The following events relating to the relevant company are disqualifying events in relation to a qualifying option— a when the relevant company becomes a 51% subsidiary of another company; b when the relevant company comes under the control of— i another company, or ii another company and any other person connected with that other company, without becoming a 51% subsidiary of that other company; c when the relevant company ceases to meet the trading activities requirement (see paragraphs 13 to 23 of Schedule 5). 2 But where a replacement option has been granted, an event within subsection (1)(a) or (b) is not a disqualifying event in relation to the old option (see paragraph 41(2) of Schedule 5) if the event occurs at any time during the period— a beginning at the same time as the period within which the replacement option had to be granted (see paragraph 42 of Schedule 5), and b ending with the release of the rights under the old option. 3 A disqualifying event is to be treated as occurring in relation to a qualifying option if the circumstances mentioned in subsection (4) arise. 4 The circumstances are that— a the relevant company was a qualifying company at the time when the option was granted as a result only of preparations to carry on a qualifying trade; and b either— i the preparations cease to be carried on, or ii the initial period comes to an end, without the relevant company (or, if it is a parent company, any member of the group) beginning to carry on that qualifying trade. 5 “ The initial period ” means the period of two years after the date when the option was granted. 6 Paragraph 41(5)(b) of Schedule 5 has the effect that a replacement option is to be treated as granted on the date when the original option was granted. 7 Subsection (1)(a) and (b) do not apply where the relevant company is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2). Disqualifying events relating to employee 535 1 The following events relating to the employee are disqualifying events in relation to a qualifying option— a when the employee ceases to be an eligible employee in relation to the relevant company as a result of ceasing to meet the requirement in paragraph 25 of Schedule 5 (the employment requirement); b when the employee ceases to be such an employee as a result of ceasing to meet the requirement in paragraph 26 of that Schedule (the requirement as to commitment of working time). 2 In addition, a disqualifying event is to be treated as occurring in relation to a qualifying option at the end of any tax year if, during that year, the average amount per week of the employee’s reckonable time in relevant employment was less than the statutory threshold. 3 An employee’s “ reckonable time in relevant employment ” means the time which the employee in fact spent, as an employee in relevant employment— a on the business of the relevant company, or b if that company is a parent company, on the business of the group, together with any time which the employee would, as such an employee, have spent on that business but for any of the reasons set out in paragraph 26(3)(a) to (d) of Schedule 5 (requirement as to commitment of working time). 4 The “ statutory threshold ” means— a 25 hours, or b if less, 75% of the employee’s working time. 5 For the purpose of applying subsection (2) to the tax year in which the option was granted, any part of that year which preceded the date on which it was granted is to be disregarded in calculating the average amount mentioned in that subsection. 6 In this section— a “ relevant employment ” means employment— i by the relevant company, or ii if that company is a parent company, by any member of the group; b “ working time ” has the meaning given by paragraph 27 of Schedule 5 (meaning of “working time”). Other disqualifying events 536 1 The following are also disqualifying events in relation to a qualifying option— a any variation of the terms of the option whose effect is either— i to increase the market value of the shares that are the subject of the option, or ii that the requirements of Schedule 5 would no longer be met in relation to the option; b any alteration to the share capital of the relevant company— i to which subsection (2) (share values affected by alteration of rights or restrictions) of section 537 applies, and ii whose effect is that the requirements of Schedule 5 would no longer be met in relation to the option; c any alteration to the share capital of the relevant company to which— i subsection (2) (share values affected by alteration of rights or restrictions), and ii subsection (3) (alteration designed to increase share values), of section 537 apply; d a conversion of any of the shares to which the option relates into shares of a different class, except in a case within section 538(2); and e the grant to the employee of a relevant CSOP option, if immediately after it is granted the employee holds unexercised employee options in respect of shares with a total value of more than £250,000 . 2 In subsection (1)(e)— “relevant CSOP option”, and “employee option”, have the meaning given by section 539 (CSOP and other options relevant for purposes of this section); and sub-paragraphs (6) to (8) of paragraph 5 of Schedule 5 (determination of value of shares) apply for the purposes of subsection (1)(e) as they apply for the purposes of paragraph 5. Alterations of share capital for purposes of section 536 537 1 This section has effect for the purposes of section 536(1)(b) and (c) (other disqualifying events: alterations of share capital of relevant company). 2 This subsection applies to an alteration of the share capital of the relevant company if— a the alteration affects (or but for the occurrence of some other event would affect) the value of the shares to which the option relates; and b it consists of or includes— i the creation, variation or removal of a right relating to any shares in the relevant company, ii the imposition of a restriction relating to any such shares, or iii the variation or removal of a restriction to which any such shares are subject. 3 This subsection applies to an alteration of the share capital of the relevant company if the effect of the alteration is to increase the market value of the shares to which the option relates and either— a it is not made by the relevant company for commercial reasons, or b the main purpose (or one of the main purposes) for making it is to increase the market value of those shares. 4 In this section any reference to— a a restriction relating to shares or to which shares are subject, or b a right relating to shares, is a reference to such a restriction imposed or right conferred by any contract or arrangement or in any other way. Share conversions excluded for purposes of section 536 538 1 This section has effect for the purposes of section 536(1)(d) (other disqualifying events: share conversions). 2 A conversion of shares is not a disqualifying event if— a it is a conversion of shares of one class only (“the original class”) into shares of one other class only (“the new class”); b all the shares of the original class are converted into shares of the new class; and c one of the conditions in subsection (3) is met. 3 The conditions are— a that immediately before the conversion the majority of the relevant company’s shares of the original class are held otherwise than by or for the benefit of— i directors or employees of the relevant company, ii an associated company of the relevant company, or iii directors or employees of such an associated company; b that immediately before the conversion the relevant company is employee-controlled as a result of holdings of shares of the original class. 4 “ associated company ” has the meaning given by section 449 of CTA 2010 , “ director ” has the same meaning as in the benefits code (see section 67) but also includes a person who is to be or has been a director, “ employee ” includes a person who is to be or has been an employee, and “ employee-controlled ” has the same meaning as in Chapters 1 to 4 of this Part (see section 421H(1)). CSOP and other options relevant for purposes of section 536 539 1 This section has effect for the purposes of section 536(1)(e) (other disqualifying events: grant of CSOP option). 2 A “ relevant CSOP option ” means a CSOP option granted to the employee by reason of the employee’s employment— a with the employer company, or b if it is a member of a group of companies, with any member of that group. 3 A share option is an “employee option” if it is— a the qualifying option mentioned in section 536(1), or b another qualifying option granted to the employee by reason of the employee’s employment as mentioned in subsection (2)(a) or (b) above, or c a relevant CSOP option. 4 In this section a “ CSOP option ” means an option to acquire shares under a scheme which is a Schedule 4 CSOP scheme (see Schedule 4) . Tax advantages: taxable benefits No charge on acquisition of shares as taxable benefit 540 1 ... Chapter 3C of this Part (taxable benefits: notional loans in respect of acquisitions of shares) does not apply in relation to the acquisition of shares by the exercise of a qualifying option. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other income tax consequences Effects on other income tax charges 541 1 Nothing in the EMI code affects— a the operation of Chapters 2 to 4 of this Part in relation to shares acquired under a qualifying option, or b the operation of Chapter 5 of this Part otherwise than in relation to the acquisition of shares under a qualifying option. 2 But in calculating the taxable amount for the purposes of section 426 (post-acquisition charge on restricted securities) in respect of shares acquired under a qualifying option, the amount of relief on the exercise of the option is to be regarded as a deductible amount for the purposes of section 428 (amount of charge). 3 “ The amount of relief on the exercise of the option ” means the difference between— a the amount that would have counted as employment income by virtue of section 476 in respect of the exercise of the option apart from the EMI code, and b the amount (if any) that in fact counts as such income in accordance with the EMI code. Chapter 10 Priority share allocations Exemption where offer made to both public and employees Exemption: offer made to public and employees 542 1 This section applies if— a there is a genuine offer to the public of shares in a company at a fixed price or by tender, b a director or employee of the company, or of another company or person, is entitled by reason of the office or employment to an allocation of the shares in priority to members of the public, and c conditions A to C are met. 2 No liability to income tax in respect of earnings arises by virtue of any benefit derived by the director or employee from the entitlement. 3 Condition A is that the aggregate number of shares subject to the offer that may be allocated as mentioned in subsection (1)(b) (“priority shares”) does not exceed— a if the offer is part of arrangements which include one or more other offers to the public of shares of the same class, either of the limits in subsection (4), or b in any other case, 10% of the shares subject to the offer (including the priority shares). 4 The limits referred to in subsection (3)(a) are— a 40% of the shares subject to the offer (including the priority shares), and b 10% of all the shares of the class in question that are subject to any of the offers forming part of the arrangements (including the priority shares). 5 Condition B is that all the persons entitled to an allocation of priority shares are entitled to it on similar terms (see section 546). 6 Condition C is that those persons are not restricted wholly or mainly to directors or to those whose remuneration exceeds a particular level. 7 This section has effect subject to section 543 (discount not covered by exemption in this section). Discount not covered by exemption in section 542 543 1 This section applies if the total of— a the price payable by the director or employee for the shares of the company allocated to the director or employee under the offer, and b the amount or value of any registrant discount made to the director or employee in respect of the shares, is less than the fixed price or the lowest price successfully tendered. 2 Section 542(2) (exemption: offer made to public and employees) does not apply to the benefit (if any) represented by the difference. Exemption where different offers made to public and employees Exemption: different offers made to public and employees 544 1 This section applies if— a there is a genuine offer to the public of a combination of shares in two or more companies at a fixed price or by tender (“the public offer”), b there is at the same time an offer (“the employee offer”) of shares, or of a combination of shares, in one or more, but not all, of those companies— i to directors or employees of any of those companies, or of any other company or person, or ii to those directors or employees and to other persons, c any of those directors or employees is entitled by reason of the office or employment to an allocation of shares under the employee offer in priority to any allocation to members of the public under the public offer, and d conditions A to C are met. 2 No liability to income tax in respect of earnings arises by virtue of any benefit derived by the director or employee from the entitlement. 3 Condition A is that for each company whose shares are subject to the employee offer, the aggregate number of shares subject to that offer that may be allocated as mentioned in subsection (1)(c) (“priority shares”) does not exceed— a if the public offer and the employee offer are part of arrangements which include one or more other offers to the public of shares in the company of the same class, either of the limits in subsection (4), or b in any other case, 10% of the shares in the company that are subject to the public offer or the employee offer (including the priority shares). 4 The limits referred to in subsection (3)(a) are— a 40% of the shares in the company that are subject to the public offer or the employee offer (including the priority shares), and b 10% of all the shares in the company of the class in question that are subject to any of the offers forming part of the arrangements (including the priority shares). 5 Condition B is that all the persons entitled to an allocation of priority shares are entitled to it on similar terms (see section 546). 6 Condition C is that those persons are not restricted wholly or mainly to directors or to those whose remuneration exceeds a particular level. 7 This section has effect subject to section 545 (discount not covered by exemption in this section). Discount not covered by exemption in section 544 545 1 This section applies if the total of— a the price payable by the director or employee for the shares of a company allocated to the director or employee under the employee offer, and b the amount or value of any registrant discount made to the director or employee in respect of the shares, is not the same as, or as near as reasonably practicable to, the appropriate notional price for the shares of the company. 2 Section 544(2) (exemption: different offers made to public and employees) does not apply to the benefit (if any) represented by the amount by which the appropriate notional price exceeds the total referred to in subsection (1). 3 The “appropriate notional price” for the shares of a company is— a if subsection (4) applies, the amount given by the formula in subsection (6), and b in any other case, the notional price. 4 This subsection applies if shares of the company are subject to the public offer and there is a difference between CP and AFP— a CP being the price for the combination of shares subject to the public offer determined by aggregating the notional prices for each one of the shares comprised in the combination, and b AFP being the actual fixed price or (as the case may be) the lowest successfully tendered price for that combination of shares. 5 The “notional price” for the shares of a company is the price that might reasonably have been expected to be the fixed price for the shares of the company under a separate offer of those shares if— a the shares of the company, and of each of the other companies had, instead of being subject to the public offer and the employee offer, been subject to separate offers to the public in respect of each company at fixed prices, and b those separate offers had been made at the time at which the public offer was in fact made. 6 The formula referred to in subsection (3)(a) is— NP × AFP CP where— NP is the notional price for the shares of the company, and AFP and CP have the same meanings as in subsection (4). Supplementary provisions Meaning of being entitled “on similar terms” 546 1 This section applies for the purposes of sections 542(5) and 544(5) (condition that entitlements to allocation of priority shares must be on similar terms). 2 The fact that different provision is made for persons according to— a the levels of their remuneration, b the length of their service, or c similar factors, does not mean that they are not entitled to an allocation on similar terms. 3 The fact that the allocations of shares in a company to which non-company employees are entitled are smaller than those to which company employees are entitled does not mean that they are not entitled on similar terms, if conditions A and B are met. 4 Condition A is that each non-company employee is also entitled by reason of the office or employment and in priority to members of the public, to an allocation of shares in another company or companies which are offered to the public at a fixed price or by tender at the same time as the shares in the company. 5 Condition B is that in the case of each non-company employee the aggregate value of all the shares included in the allocations to which the non-company employee is entitled is the same, or as nearly the same as is reasonably practicable, as that of the shares in the company included in the entitlement of a comparable company employee. 6 For the purposes of subsection (5), the value of shares is to be measured by reference to the fixed price or the lowest price successfully tendered. 7 In this section— “ company employee ”, in relation to a company, means a director or employee of the company, and “ non-company employee ”, in relation to a company, means a director or employee of another company or person. Meaning and amount or value of “registrant discount” 547 1 For the purposes of this Chapter there is a “registrant discount” in respect of the shares of a company if conditions A to C are met. 2 Condition A is that members of the public who comply with such requirements as may be imposed in connection with the offer or, if section 544 applies, the public offer are, or may become, entitled to a discount in respect of the whole or part of the shares of the company allocated to them. 3 Condition B is that at least 40% of the shares of the company allocated to members of the public are allocated to individuals who are or become entitled to— a the discount, or b some other benefit of similar value for which they may elect as an alternative to the discount. 4 Directors and employees who are entitled by reason of their office or employment to an allocation of the shares in priority to members of the public are not to be treated as members of the public for the purposes of subsection (3). 5 Condition C is that subscribing employees are, or may become, entitled to the same discount in respect of the shares of the company as any other members of the public to whom shares of the company are allocated under the offer. 6 In subsection (5) a “ subscribing employee ” means a director or employee who— a subscribes for shares— i if section 542 (offer made to public and employees) applies, under the offer as a member of the public, or ii if section 544 (different offers made to public and employees) applies, under the public offer as a member of the public or under the employee offer as a director or employee, and b complies (or, in the case of a requirement to register, is taken under the terms of the offer to comply) with the requirements mentioned in subsection (2). 7 For the purposes of this Chapter, the “amount or value” of any registrant discount made to a director or employee means— a the amount of any such discount made to the director or employee as is mentioned in subsection (5), or b the value of any such other benefit as is mentioned in subsection (3)(b) which is conferred on the director or employee as an alternative to the discount. Minor definitions 548 1 In this Chapter— “ director ” means— in relation to a company whose affairs are managed by a board of directors or similar body, a member of that body, in relation to a company whose affairs are managed by a single director or similar person, that director or person, and in relation to a company whose affairs are managed by the members themselves, a member of the company, and includes any person in accordance with whose directions or instructions the directors of the company (as defined in paragraphs (a) to (c)) are accustomed to act and a person who is to be, or has ceased to be, a director (as so defined); “ employee ” includes a person who is to be or has been an employee; “ shares ” includes stock; “the employee offer” and “the public offer” have the meanings given by section 544(1). 2 For the purposes of subsection (1) a person is not to be regarded as a person in accordance with whose directions or instructions the directors of the company are accustomed to act merely because the directors act on advice given by that person in a professional capacity. 3 References in this Chapter— a to the employment, in relation to an employee, are to the employment of that employee, and b to the office, in relation to a director, are to the office of that director. Chapter 11 Supplementary provisions about employee benefit trusts Introduction Application of this Chapter 549 1 This Chapter applies for the purposes of any listed provision in circumstances where— a an individual (“B”) is interested as a beneficiary of an employee benefit trust in shares or obligations of a particular company (“ the company ”), and b the question arises under that provision whether the trustees of the trust are, as a result of B’s being so interested, to be regarded as associates of B’s for the relevant purposes. The relevant purposes are those of the operation, in relation to the company, of the “no material interest” requirement contained in the Schedule to this Act in which the listed provision appears. 2 In this Chapter “ listed provision ” means any of the following provisions (under which trustees of an employee benefit trust are not to be regarded as associates if specified limits relating to share ownership are not exceeded)— a paragraph 23(2) of Schedule 2 ( ... SIPs), b paragraph 15(2) of Schedule 3 ( ... SAYE option schemes), c paragraph 13(2) of Schedule 4 ( ... CSOP schemes), or d paragraph 32(2) of Schedule 5 (enterprise management incentives). 3 The general effect of this Chapter is that if the provisions of— a sections 552 and 553 (attribution of interest in company to beneficiary or associate), or b section 554 (attribution of further interest), apply in relation to B or an associate of B's, B or the associate is to be treated for the purposes of the listed provision as having been the beneficial owner of a particular percentage of the company’s ordinary share capital on a particular date. 4 In this Chapter, in relation to an individual, “associate”— a has the meaning given by section 448 of CTA 2010 (close companies: meaning of “associate”) , but b does not include the trustees of an employee benefit trust as a result only of the individual’s having (as mentioned in subsection (1)(a)) an interest in shares or obligations of the company which are subject to the trust. 5 In this Chapter “ employee ” means the holder of a taxable employment under Part 2 (as defined in section 66(3)), and accordingly includes an office-holder whose office is within the scope of that definition as a result of section 5(1). Employee benefit trusts Meaning of “employee benefit trust” 550 1 In this Chapter “ employee benefit trust ”, in relation to a company, means a trust where conditions A and B are met. 2 Condition A is that all or most of the employees of the company are eligible to benefit under the trust. 3 Condition B is that after 13th March 1989 either— a there has been no disposal of any of the property subject to the trust, or b any disposal of any of that property was a disposal within subsection (4). 4 The disposals within this subsection are— a disposals in the ordinary management of the trust, or b qualifying disposals (within the meaning given by section 551). 5 In this section and section 551 “ disposal ” means disposal by sale, loan or otherwise. “Qualifying disposals” for purposes of section 550 551 1 For the purposes of section 550 (meaning of “employee benefit trust”) a “qualifying disposal” is a disposal of property consisting of— a any of the ordinary share capital of the company, or b money paid outright, where any of conditions 1, 2 and 3 is met. 2 Condition 1 is that the property has been applied for the benefit of— a individual employees or former employees of the company, b spouses or civil partners , former spouses or civil partners , widows or widowers or surviving civil partners of employees or former employees of the company, c dependants of persons within paragraph (a), or d relatives, or spouses or civil partners of relatives, of persons within paragraph (a) or (b). 3 In subsection (2) each reference to the company includes a reference to a company controlled by the company. 4 Condition 2 is that the property has been applied for charitable purposes. 5 Condition 3 is that the property has been transferred to— a the trustees of another employee benefit trust, b the trustees of a qualifying employee share ownership trust (within the meaning of Schedule 5 to FA 1989), or c the trustees of a profit sharing scheme approved under Schedule 9 to ICTA (approved share option schemes and profit sharing schemes). 6 In this section “ relative ” means— a parent, child or remoter relation in the direct line, or b brother, sister, uncle, aunt, nephew or niece. Attribution of interests in company Attribution of interest in company to beneficiary or associate 552 1 This section applies if— a after 13th March 1989 B, or an associate of B's, has received a payment (“the relevant payment”) from the trustees of the employee benefit trust, and b at any time during the period of 3 years ending with the day on which the relevant payment was received (“the payment date”), the property subject to the trust consisted of or included any part of the ordinary share capital of the company. 2 In such a case B or the associate is to be treated for the purposes of the listed provision as having been the beneficial owner of the appropriate percentage of the ordinary share capital of the company on the payment date. 3 This is in addition to any percentage of that share capital of which B or the associate was actually the beneficial owner on that date. 4 Section 553 explains what is meant by “the appropriate percentage”. Meaning of “appropriate percentage” for purposes of section 552 553 1 For the purposes of section 552 “the appropriate percentage” is— P × 100 D where P and D have the meaning given by the following provisions. 2 Unless subsection (3) applies, P is the aggregate of the relevant payment and any other payments received by B or associates of B’s from the trustees of the trust during the period of 12 months ending with the payment date. 3 If— a any distributions were made to the trustees of the trust by the company in respect of its ordinary share capital during the period of 3 years ending with the payment date, and b the aggregate of those distributions is less than the aggregate mentioned in subsection (2), P is the aggregate of those distributions. 4 Unless subsection (5) applies, D is the amount determined as follows— Step 1 Calculate the aggregate of— a any distributions made by the company in respect of its ordinary share capital during the period of 12 months ending with the payment date, b any distributions so made during the period of 12 months immediately preceding that mentioned in paragraph (a), and c any distributions so made during the period of 12 months immediately preceding that mentioned in paragraph (b). Step 2 Divide the aggregate so calculated by the number of the periods mentioned in paragraphs (a) to (c) in which distributions were so made. 5 If no distributions were so made during any of those periods, D is 1. 6 In this section “ the payment date ” and “ the relevant payment ” have the meaning indicated in section 552(1). Attribution of further interest in company 554 1 This section applies if— a B or an associate of B’s is (apart from this section) to be treated by virtue of section 552(2) as having been the beneficial owner of a percentage of the ordinary share capital of the company as a result of receiving the relevant payment from the trustees of an employee benefit trust, and b B or an associate of B’s has, during the period of 12 months ending with the payment date, received one or more payments from the trustees of any other employee benefit trust or trusts connected with the company. 2 In such a case section 552 applies to B or (as the case may be) the associate mentioned in subsection (1)(a) as if B or the associate had received— a any payment from the trustees of a trust as mentioned in subsection (1)(b), or b where more than one payment has been received from the trustees of a trust, the last of the payments, on the payment date. 3 B or the associate is accordingly to be treated for the purposes of the listed provision as having been the beneficial owner on the payment date of both— a the percentage of the ordinary share capital of the company mentioned in subsection (1)(a), and b the appropriate percentage of that share capital as determined in accordance with subsection (2). 4 This is in addition to any percentage of that share capital of which B or the associate was actually the beneficial owner on that date. 5 For the purposes of this section a trust is “connected with” the company if, at any time during the period of 3 years ending with the payment date, the property subject to the trust consisted of or included any part of the ordinary share capital of the company. 6 In this section “ the payment date ” and “ the relevant payment ” have the meaning indicated in section 552(1). Part 7A Employment income provided through third parties CHAPTER 1 Application etc Application : main case Application of Chapter 2 : main case 554A 1 Chapter 2 applies if— a a person (“A”) is an employee, or a former or prospective employee, of another person (“B”), b there is an arrangement (“the relevant arrangement”) to which A is a party or which otherwise (wholly or partly) covers or relates to A, c it is reasonable to suppose that, in essence— i the relevant arrangement, or ii the relevant arrangement so far as it covers or relates to A, is (wholly or partly) a means of providing, or is otherwise concerned (wholly or partly) with the provision of, rewards or recognition or loans in connection with A's employment, or former or prospective employment, with B, d a relevant step is taken by a relevant third person, and e it is reasonable to suppose that, in essence— i the relevant step is taken (wholly or partly) in pursuance of the relevant arrangement, or ii there is some other connection (direct or indirect) between the relevant step and the relevant arrangement. 2 In this Part “ relevant step ” means a step within section 554B, 554C or 554D , or paragraph 1 or 1A of Schedule 11 to F( No. 2)A 2017 (including such a step where the taking of the step, or some aspect of the taking of the step, constitutes a breach of trust or is a constituent part of a breach of trust, and even if the step or aspect is void as a result of breach of trust).. 3 Subsection (1) is subject to subsection (4) and sections 554E to 554Y. 4 Chapter 2 does not apply by reason of— a a relevant step taken on or after A's death if— i the relevant step is within section 554B, or ii the relevant step is within section 554C by virtue of subsection (1)(ab) of that section, b a relevant step within paragraph 1 of Schedule 11 to F(No.2)A 2017 which is treated as being taken on or after A's death, or c a relevant step within paragraph 1A of Schedule 11 to F(No.2)A 2017 in a case where the initial step (within the meaning given by sub-paragraph (1)(a) of that paragraph) is treated as being taken on or after A's death. 5 In subsection (1)(b) and (c)(ii) references to A include references to any person linked with A. 5A Subsections (5B) and (5C) apply where— a a payment to a person other than A, or to A as a trustee, is of earnings from A's employment with B, and b the earnings are, in whole or part, charged to tax under the employment income Parts otherwise than by virtue of this Part, and for this purpose it does not matter whether all or some only or none of the tax is paid (but see sections 554Z5 and 554Z11B). 5B For the purposes of subsection (5C), an arrangement is a “redirected-earnings arrangement” if it (wholly or partly) covers or relates to redirected earnings; and for the purposes of this subsection and subsection (5C) “ redirected earnings ” means— a the payment mentioned in subsection (5A)(a), or b any sum or other property which (directly or indirectly)— i represents, or ii is derived from, that payment. 5C The circumstances mentioned in subsection (5A)— a do not prevent a redirected-earnings arrangement being within subsection (1)(b), and b do not prevent rewards or recognition or loans being in connection with A's employment with B for the purposes of subsection (1)(c) where there is use of redirected earnings for the provision of the whole, or part, of the rewards or recognition or loans. 6 For the purposes of subsection (1)(c) it does not matter if the relevant arrangement does not include details of the steps which will or may be taken in connection with providing, in essence, rewards or recognition or loans as mentioned (for example, details of any sums of money or assets which will or may be involved or details of how or when or by whom or in whose favour any step will or may be taken). 7 In subsection (1)(d) “ relevant third person ” means— a A acting as a trustee, b B acting as a trustee, or c any person other than A and B. 8 If B is a company and is a member of a group of companies at the time the relevant step is taken, in subsection (7) references to B are to be read as including references to any other company which is a member of that group at that time. 9 If B is a limited liability partnership, in subsection (7) 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 at the time the relevant step is taken. 10 Neither subsection (8) nor subsection (9) applies if there is a connection (direct or indirect) between the relevant step and a tax avoidance arrangement. 11 For the purposes of subsection (1)(e)— a the relevant step is connected with the relevant arrangement if (for example) the relevant step is taken (wholly or partly) in pursuance of an arrangement at one end of a series of arrangements with the relevant arrangement being at the other end, and b it does not matter if the person taking the relevant step is unaware of the relevant arrangement. 12 For the purposes of subsection (1)(c) and (e) in particular, all relevant circumstances are to be taken into account in order to get to the essence of the matter. Application: close companies Application of Chapter 2: close companies 554AA 1 Chapter 2 applies if— a there is an arrangement (“the relevant arrangement”) to which an individual (“A”) is a party or which otherwise (wholly or partly) covers or relates to A, b it is reasonable to suppose that, in essence— i the relevant arrangement, or ii the relevant arrangement so far as it covers or relates to A, is (wholly or partly) a means of providing, or is otherwise concerned (wholly or partly) with the provision of, A-linked payments or benefits or loans, c a close company (“B”) enters into a relevant transaction (see section 554AB), d it is reasonable to suppose that, in essence— i the relevant transaction is entered into (wholly or partly) in pursuance of the relevant arrangement, or ii there is some other connection (direct or indirect) between the relevant transaction and the relevant arrangement, e at the time B enters into the relevant transaction, or at any earlier time in the 3 years ending with the date of the transaction, A is a director or an employee of B, f at the time B enters into the relevant transaction, or at any earlier time in the 3 years ending with the date of the transaction, A has a material interest in B (see section 554AE), g a relevant step is taken by a relevant third person, h it is reasonable to suppose— i that the sum of money or asset which is the subject of the relevant step represents (directly or indirectly), or has arisen or derives from, the sum of money or asset which is the subject of the relevant transaction, or ii that the sum of money or asset which is the subject of the relevant transaction represents (directly or indirectly), or has arisen or derives from, the sum of money or asset which is the subject of the relevant step, and i there is a time in the relevant period when the main purpose, or one of the main purposes, of operating, implementing, maintaining or terminating the relevant arrangement so far as it covers or relates to— i the relevant transaction, and the relevant step so far as related to the relevant transaction, or ii the relevant step, and the relevant transaction so far as related to the relevant step, is the avoidance of? income tax, national insurance contributions, corporation tax or a charge to tax under section 455 of CTA 2010. 2 In this section “ close company ” includes a company that would be a close company but for section 442(a) of CTA 2010 (exclusion of companies not resident in the United Kingdom). 3 For the purposes of subsection (1)(b), a payment or benefit or loan is “A-linked” if— a it is being provided to A, or a person chosen by A or within a class of persons chosen by A, b it is being provided to a person on A's behalf, or at A's direction or request, or c it is being provided to a person linked with A and it is reasonable to suppose that the main reason, or one of the main reasons, for it being provided is that the person is linked with A. 4 For the purposes of subsection (1)(i), the “relevant period” consists of the time of the relevant transaction, the time of the relevant step, the times around each of those two times, and any other times between those two times. 5 Subsections (6) and (7) apply where— a a payment to a person other than A, or to A as a trustee, is of earnings from— i A's employment with B, or ii A's office as a director of B, and b the earnings are, in whole or part, charged to tax under the employment income Parts otherwise than by virtue of this Part, and for this purpose it does not matter whether all or some only or none of the tax is paid (but see sections 554Z5 and 554Z11B). 6 For the purposes of subsection (7), an arrangement is a “redirected-earnings arrangement” if it (wholly or partly) covers or relates to redirected earnings; and for the purposes of this subsection and subsection (7) “ redirected earnings ” means— a the payment mentioned in subsection (5)(a), or b any sum or other property which (directly or indirectly)— i represents, or ii is derived from, that payment. 7 The circumstances mentioned in subsection (5)— a do not prevent a redirected-earnings arrangement being within subsection (1)(a), b do not prevent payments or benefits or loans being A-linked for the purposes of subsection (1)(b) where there is use of redirected earnings for the provision of the whole, or part, of the payments or benefits or loans, and c do not prevent the making of the payment mentioned in subsection (5)(a) being entry into a relevant transaction. 8 In this section and in section 554AB “ relevant third person ” means— a A acting as a trustee, b B acting as a trustee, or c any person other than A or B. 9 See also sections 554AD to 554AF (further interpretation and supplementary provision). Meaning of “relevant transaction” 554AB 1 For the purposes of section 554AA(1), B enters into a relevant transaction if— a B enters into a transaction within subsection (2), and b the transaction is not an excluded transaction (see section 554AC). 2 B enters into a transaction within this subsection if B— a pays a sum of money to a relevant third person (see section 554AA(8)), b acquires a right to a payment of a sum of money, or to a transfer of assets, where there is a connection (direct or indirect) between the acquisition of the right and— i a payment made, by way of a loan or otherwise, to a relevant third person, or ii a transfer of assets to a relevant third person, c releases or writes off the whole or a part of— i a loan made to a relevant third person, or ii an acquired right of the kind mentioned in paragraph (b), d transfers an asset to a relevant third person, e takes a step by virtue of which a third person acquires an asset within subsection (4), f makes available a sum of money or asset for use, or makes it available under an arrangement which permits its use— i as security for a loan made or to be made to a relevant third person, or ii otherwise as security for the meeting of any liability, or the performance of any undertaking, which a relevant third person has or will have, or g grants to a relevant third person a lease of any premises the effective duration of which is likely to exceed 21 years. 3 For the purposes of subsection (2) “ loan ” includes— a any form of credit, and b a payment that is purported to be made by way of a loan. 4 The following assets are within this subsection— a securities, b interests in securities, and c securities options, as defined in section 420 for the purposes of Chapters 1 to 5 of Part 7; and in subsection (2)(e) “ acquires ” is to be read in accordance with section 421B(2)(a). 5 For the purposes of subsection (2)(f)— a references to making a sum of money or asset available are references to making it available in any way, however informal, b it does not matter if the relevant third person has no legal right to have the sum of money or asset used as mentioned, and c it does not matter if the sum of money or asset is not actually used as mentioned. 6 Subsections (7) and (8) apply, for the purposes of subsection (2)(g), for the purpose of determining the likely effective duration of a lease of any premises granted to a relevant third person (“the original lease”). 7 If there are circumstances which make it likely that the original lease will be extended for any period, the effective duration of the original lease is to be determined on the assumption that the original lease will be so extended. 8 Further, if— a the relevant third person, A or a person linked with A is, or is likely to become, entitled to a later lease, or the grant of a later lease, of the same premises, or b it is otherwise likely that the relevant third person, A or a person linked with A will be granted a later lease of the same premises, the original lease is to be treated as continuing until the end of the later lease (and subsection (7) also applies for the purpose of determining the duration of the later lease). 9 In this section “ lease ” and “ premises ” have the same meaning as they have in Chapter 4 of Part 3 of ITTOIA 2005. Meaning of “excluded transaction” 554AC 1 In section 554AB “ excluded transaction ” means— a a distribution made by B, b a transaction that— i is entered into by B in the ordinary course of B's business, and ii is on terms that would have been made between persons not connected with each other dealing at arm's length, or c a transaction entered into in order to facilitate the disposal, on terms that would have been made between persons not connected with each other dealing at arm's length, of shares in B. 2 But the distribution or transaction is not an “excluded transaction” if the avoidance of tax is the main purpose, or one of the main purposes, of (as the case may be)— a making the distribution, or b the transaction. 3 Part 23 of CTA 2010 has effect for determining the meaning of “distribution” in this section as if— a section 1000(1) of CTA 2010 included a paragraph specifying any distribution made in a winding up of the company, and b sections 1030 to 1030B of that Act were omitted. Section 554AA: meaning of “director” 554AD 1 For the purposes of section 554AA(1)(e) “ director ” means— a in relation to a company whose affairs are managed by a board of directors or similar body, a member of that body, b in relation to a company whose affairs are managed by a single director or similar person, that director or person, and c in relation to a company whose affairs are managed by the members themselves, a member of the company, and includes any person in accordance with whose directions or instructions the directors of the company (as defined in this subsection) are accustomed to act. 2 For the purposes of subsection (1) a person is not to be regarded as a person in accordance with whose directions or instructions the directors of the company are accustomed to act merely because the directors act on advice given by that person in a professional capacity. 3 For the purposes of section 5 as it applies to this Part, a person who is a director within the meaning of subsection (1) is to be treated (where it would not otherwise be the case) as holding an office. Section 554AA: meaning of “material interest” 554AE 1 Section 68 (meaning of “material interest” in a company) applies for the purposes of section 554AA and, subject to subsection (2), does so as it applies for the purposes of the benefits code. 2 In section 68 as it applies for the purposes of section 554AA— a each of the following is to be treated as “an associate” of A— i a person (“the promoter”) who, for the purposes of Part 5 of FA 2014, is carrying on business as a promoter in relation to the relevant arrangement, and ii where the promoter is a company, any company which is an associated company of the promoter; b “participator”— i 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 ii 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. 3 In subsection (2)(a)(ii) “ associated company ” has the same meaning as it has for the purposes of Part 10 of CTA 2010 (see section 449 of that Act). Section 554AA: supplementary 554AF 1 Section 554AA(1) is subject to subsection (2) and sections 554E to 554Y. 2 Chapter 2 does not apply by reason of section 554AA(1) in relation to a relevant step taken on or after A's death if— a the relevant step is within section 554B, or b the relevant step is within section 554C by virtue of subsection (1)(ab) of that section. 3 In section 554AA(1)(a) and (b) references to A include references to a person linked with A. 4 For the purposes of section 554AA(1)(b) it does not matter if the relevant arrangement does not include details of the steps which will or may be taken in connection with providing, in essence, payments or benefits or loans as mentioned (for example, details of any sums of money or assets which will or may be involved or details of how or when or by whom or in whose favour any step will or may be taken). 5 For the purposes of section 554AA(1)(b) and (d) in particular, all relevant circumstances are to be taken into account in order to get to the essence of the matter. Relevant steps Relevant steps: earmarking etc of sum of money or asset 554B 1 A person (“P”) takes a step within this section if— a a sum of money or asset held by or on behalf of P is earmarked (however informally) by P with a view to a later relevant step being taken by P or any other person (on or following the meeting of any condition or otherwise) in relation to— 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 P, specifically with a view, so far as P is concerned, to a later relevant step being taken by P or any other person (on or following the meeting of any condition or otherwise) in relation to— 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)(a) and (b) it does not matter— a if details of the later relevant step have not been worked out (for example, details of the sum of money or asset which will or may be the subject of the step or details of how or when or by whom or in whose favour the step will or may be taken), b if any condition which would have to be met before the later relevant step is taken might never be met, or c if A, or any person linked with A, has no legal right to have a relevant step taken in relation to any sum of money or asset mentioned in subsection (1)(a)(i) or (ii) or (b)(i) or (ii) (as the case may be). 3 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 P on a basis which is different to that mentioned in subsection (1)(b). Relevant steps: payment of sum, transfer of asset etc 554C 1 A person (“P”) takes a step within this section if P— a pays a sum of money to a relevant person, aa acquires a right to a payment of a sum of money, or to a transfer of assets, where there is a connection (direct or indirect) between the acquisition of the right and— i a payment made, by way of a loan or otherwise, to a relevant person, or ii a transfer of assets to a relevant person, ab releases or writes off the whole or a part of— i a loan made to a relevant person, or ii an acquired right of the kind mentioned in paragraph (aa),”. b transfers an asset to a relevant person, c takes a step by virtue of which a relevant person acquires an asset within subsection (4), d makes available a sum of money or asset for use, or makes it available under an arrangement which permits its use— i as security for a loan made or to be made to a relevant person, or ii otherwise as security for the meeting of any liability, or the performance of any undertaking, which a relevant person has or will have, or e grants to a relevant person a lease of any premises the effective duration of which is likely to exceed 21 years. 2 In subsection (1) “relevant person”— a means A or a person chosen by A or within a class of person chosen by A, and b includes, if P is taking a step on A's behalf or otherwise at A's direction or request, any other person. 3 In subsection (2) references to A include references to any person linked with A. 3A For the purposes of subsection (1) “ loan ” includes— a any form of credit, and b a payment that is purported to be made by way of a loan. 3B Subsection (3C) applies where a person (“T”) acquires from another person (“L”) (whether or not for consideration)— a a right to payment of the whole or part of a loan where T is the person liable (at the time of the acquisition of the right) to repay the loan, or b a right to payment of a sum of money, or to a transfer of assets, where T is the person liable (at the time of the acquisition of the right) to pay the sum, or transfer the assets. 3C L is to be treated for the purposes of subsection (1)(ab) as releasing— a in a case within subsection (3B)(a), the loan or the relevant part of it; b in a case within subsection (3B)(b), the right or the relevant part of it. 4 The following assets are within this subsection— a securities, b interests in securities, and c securities options, as defined in section 420 for the purposes of Chapters 1 to 5 of Part 7; and in subsection (1)(c) “ acquires ” is to be read in accordance with section 421B(2)(a). 5 For the purposes of subsection (1)(d)— a references to making a sum of money or asset available are references to making it available in any way, however informal, b it does not matter if the relevant person has no legal right to have the sum of money or asset used as mentioned, and c it does not matter if the sum of money or asset is not actually used as mentioned. 6 Subsections (7) and (8) apply for the purpose of determining the likely effective duration of a lease of any premises granted to a relevant person (“the original lease”) for the purposes of subsection (1)(e). 7 If there are circumstances which make it likely that the original lease will be extended for any period, the effective duration of the original lease is to be determined on the assumption that the original lease will be so extended. 8 Further, if— a A is, or is likely to become, entitled to a later lease, or the grant of a later lease, of the same premises, or b it is otherwise likely that A will be granted a later lease of the same premises, the original lease is to be treated as continuing until the end of the later lease (and subsection (7) also applies for the purpose of determining the duration of the later lease). 9 In subsection (8)— a references to A include references to— i any person linked with A, and ii the person to whom the original lease was granted where the original lease was not granted to A or any person linked with A, and b references to the same premises include references to any premises which include the whole or part of the same premises. 10 In this section “ lease ” and “ premises ” have the same meaning as they have in Chapter 4 of Part 3 of ITTOIA 2005. Relevant steps: making asset available 554D 1 A person (“P”) takes a step within this section if, without transferring the asset to the relevant person, P— a at any time, makes an asset available for a relevant person to benefit from in a way which is substantially similar to the way in which the relevant person would have been able to benefit from the asset had the asset been transferred to the relevant person at that time, or b at or after the end of the relevant period, makes an asset available for a relevant person to benefit from. 2 If— a before the end of the relevant period, P makes available an asset for a relevant person to benefit from, and b at the end of the relevant period, P continues to make the asset available for the relevant person to benefit from, P is treated as taking a step within this section by virtue of subsection (1)(b) at the end of the relevant period. 3 For the purposes of subsections (1) and (2)— a references to making an asset available are references to making it available in any way, however informal, b it does not matter if the relevant person has no legal right to benefit from the asset, and c it does not matter if the relevant person does not actually benefit from the asset. 4 In subsections (1) and (2) “ the relevant period ” means the period of two years starting with the day on which A's employment with B ceases. 5 In subsections (1) and (2) “relevant person”— a means A or a person chosen by A or within a class of person chosen by A, and b includes, if P is taking a step on A's behalf or otherwise at A's direction or request, any other person. 6 In subsection (5) references to A include references to any person linked with A. 7 The following factors (among others) may be taken into account in determining whether a step within this section is taken by virtue of subsection (1)(a)— a any limitations on the way in which the relevant person may benefit from the asset, b the period over which the asset is being made available and (if relevant) the extent to which that period covers the expected remaining useful life of the asset, c the extent to which the relevant person has, or is to have, a say over the disposal of the asset, and d the extent to which the relevant person may benefit from any proceeds arising from the disposal of the asset or otherwise have a say in the way the proceeds are used. Exclusions Exclusions: steps under certain schemes etc 554E 1 Chapter 2 does not apply by reason of a relevant step if the step is taken under any of the following— a a Schedule 2 SIP (within the meaning of Chapter 6 of Part 7), b a Schedule 3 SAYE option scheme (within the meaning of Chapter 7 of Part 7), c a Schedule 4 CSOP scheme (within the meaning of Chapter 8 of Part 7), d an arrangement the sole purpose of which is the provision of excluded benefits (as defined in section 393B(3)), e an arrangement the sole purpose of which is the making of payments which are to be disregarded in the calculation mentioned in regulation 25 of the Social Security (Contributions) Regulations 2001 ( S.I. 2001/1004) by virtue of paragraph 12 of Part 10 of Schedule 3 to those Regulations (as that paragraph has effect by virtue of regulation 2(3) of the Social Security (Contributions) (Amendment No. 9) Regulations 2007 ( S.I. 2007/2905)), f a pension scheme set up by a government outside the United Kingdom for the benefit of its employees or primarily for their benefit, g a registered pension scheme, or h an arrangement the sole purpose of which is the making of payments (within the meaning of Chapter 3 of Part 4 of FA 2004 (see section 161(2) of that Act))— i to which section 161(4) of FA 2004 applies in relation to a registered pension scheme (or a registered pension scheme which has been wound up), and ii which are authorised in relation to that scheme by section 160(1) of FA 2004. 2 Subject to subsection (4), subsection (3) applies to a relevant step taken by a person (“P”) if— a the relevant step is not taken under an arrangement mentioned in subsection (1)(a) to (c), and b there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement. 3 Chapter 2 does not apply by reason of the relevant step if the step is taken solely for the purpose of— a acquiring or holding shares— i to be awarded under a Schedule 2 SIP , or ii to be provided pursuant to options granted under a Schedule 3 SAYE option scheme or a Schedule 4 CSOP scheme, or b providing shares pursuant to— i an award of shares under a Schedule 2 SIP , or ii an option granted under a Schedule 3 SAYE option scheme or a Schedule 4 CSOP scheme. 4 Subsection (3) does not apply to the relevant step if, immediately before or after the step is taken— a the total number of shares of any type held, in relation to the Schedule 2 SIP , the Schedule 3 SAYE option scheme or the Schedule 4 CSOP scheme, by P and any other persons for purposes within subsection (3)(a) and (b), exceeds b the maximum number of shares of that type which might reasonably be expected to be required, in relation to the Schedule 2 SIP , the Schedule 3 SAYE option scheme or the Schedule 4 CSOP scheme, for those purposes over the period of ten years starting with the day on which the relevant step is taken. 5 Terms used in subsections (2) to (4) have the same meaning as they have in Chapter 6, 7 or 8 of Part 7 (as the case may be). 6 Chapter 2 does not apply by reason of a relevant step taken by a person (“P”) if— a the relevant step is taken for the sole purpose of— i granting qualifying options under an EMI arrangement, ii acquiring or holding shares to be provided pursuant to qualifying options granted under an EMI arrangement, or iii providing shares pursuant to qualifying options granted under an EMI arrangement, and b there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement. 7 But subsection (6) does not apply to the relevant step if, immediately before or after the step is taken— a the total number of shares of any type held, in relation to the EMI arrangement, by P and any other persons for purposes within subsection (6)(a)(i) to (iii), exceeds b the maximum number of shares of that type which might reasonably be expected to be required, in relation to the EMI arrangement, for those purposes over the period of ten years starting with the day on which the relevant step is taken. 8 In subsections (6) and (7) “ EMI arrangement ” means an arrangement under which qualifying options are granted. 9 Terms used in subsections (6) to (8) have the same meaning as in Chapter 9 of Part 7. 10 Subsection (11) applies if— a a person (“P”) takes a relevant step within section 554B by reason of which Chapter 2 would apply apart from subsection (3) or (6), and b at any time (“ the relevant time ”) the sum of money or asset (or any part of it) which is the subject of the relevant step— i ceases to be held by or on behalf of P solely for purposes within subsection (3)(a) and (b) or (6)(a)(i) to (iii), but ii continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b). 11 This Part has effect as if a relevant step within section 554B were taken at the relevant time— a the subject of which is the sum of money or asset (or the part of it) mentioned in subsection (10)(b), and b by reason of which Chapter 2 is to apply (subject only to section 554A(4)). 12 Chapter 2 does not apply by reason of a relevant step taken by the Independent Parliamentary Standards Authority in relation to a member of the House of Commons. Exclusions: commercial transactions 554F 1 Chapter 2 does not apply by reason of a relevant step which is the payment of a sum of money by way of a loan if— a the loan is a loan on ordinary commercial terms within the meaning of section 176, ignoring conditions B and C in that section, and b there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement. 2 Chapter 2 does not apply by reason of a relevant step taken by a person (“P”), which is not the payment of a sum of money by way of a loan, if— a the step is taken for the sole purpose of a transaction which P has with A and which P entered into in the ordinary course of P's business, b a substantial proportion of P's business involves similar transactions with members of the public, c the terms on which P entered into the transaction with A are substantially the same as the terms on which P normally enters into similar transactions with members of the public, and d there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement. 3 For the purposes of subsection (2)(b) and (c) a transaction is “similar” if it is of the same or a similar type to the transaction which P has with A. 4 In subsection (2)(b) and (c) “ members of the public ” means members of the public at large with whom P deals at arm's length. 5 In this section references to A include references to any person linked with A. 6 See paragraph 25 of Schedule 11 to F( No. 2)A 2017 for provision about exclusions where a loan is made on ordinary commercial terms and the relevant step is within paragraph 1 of that Schedule. Exclusions: transactions under employee benefit packages 554G 1 Chapter 2 does not apply by reason of a relevant step taken by a person (“P”) if— a the step is not taken under a pension scheme, b the step is taken for the sole purpose of a transaction which P has with A and which P entered into in the ordinary course of P's business, c if the step is the payment of a sum of money by way of a loan— i a substantial proportion of P's business involves making similar loans to members of the public, ii the transaction with A is part of a package of benefits which is available to a substantial proportion of B's employees, and iii subsection (3) does not apply, d if the step is not the payment of a sum of money by way of a loan, the transaction with A is part of a package of benefits which is available— i to a substantial proportion of B's employees, or ii to a substantial proportion of those employees of B whose status as employees of B is comparable with A's status as an employee of B (taking into account (for example) levels of seniority, types of duties and levels of remuneration), e the terms on which similar transactions are offered by P under the package of benefits mentioned in paragraph (c)(ii) or (d) (as the case may be) are generous enough to enable substantially all of the employees of B to whom the package is available to take advantage of what is offered (if they want to), f the terms on which P entered into the transaction with A are substantially the same as the terms on which P normally enters into similar transactions with employees of B under the package of benefits, g if B is a company, a majority of B's employees to whom the package of benefits is available do not have a material interest (as defined in section 68) in B, and h there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement. 2 For the purposes of subsection (1)(c)(i)— a a loan is “similar” if it is made for the same or similar purposes as the loan which is the subject of the relevant step, and b “ members of the public ” means members of the public at large with whom P deals at arm's length. 3 This subsection applies if any feature of the package of benefits mentioned in subsection (1)(c)(ii) has or is likely to have the effect that, of the employees of B to whom the package is available, it is employees within subsection (4) on whom benefits under the package will be wholly or mainly conferred. 4 The employees within this subsection are— a directors, b senior employees, c employees who receive, or as a result of the package of benefits are likely to receive, the higher or highest levels of remuneration, and d if B is a company and is a member of a group of companies, any employees not within paragraph (b) or (c) who— i are senior employees in the group, or ii receive, or as a result of the package of benefits are likely to receive, the higher or highest levels of remuneration in the group. 5 For the purposes of subsection (1)(e) and (f) a transaction is “similar” if it is of the same or a similar type to the transaction which P has with A. 6 If the relevant step is not the payment of a sum of money by way of a loan, in this section references to employees of B are references to those employees of B whose duties of employment are performed in the United Kingdom; and for this purpose duties performed outside the United Kingdom the performance of which is merely incidental to the performance of duties in the United Kingdom are to be treated as performed in the United Kingdom. 7 In this section (apart from subsection (1)(d)(ii)) references to A include references to any person linked with A. 8 See paragraph 29 of Schedule 11 to F( No. 2)A 2017 for provision about exclusions for transactions under employee benefit packages in a case in which the relevant step is within paragraph 1 of that Schedule. Exclusions: earmarking of deferred remuneration 554H 1 This section applies if— a on a date (“the award date”) A is awarded remuneration (“the deferred remuneration”) in respect of A's employment with B, b the main purpose of the award is not the provision of relevant benefits (within the meaning of Chapter 2 of Part 6, but ignoring section 393B(2)(a)), c the deferred remuneration is awarded on terms (“the deferred remuneration terms”) the main purpose of which is to defer the provision to A of the deferred remuneration to a specified date (“the vesting date”) which is after the award date, while providing that the award of the deferred remuneration is revoked if specified conditions are not met on or before the vesting date, d the vesting date is not more than five years after the award date, e as at the award date, there is a reasonable chance that the award of the deferred remuneration will be revoked because not all the specified conditions will be met on or before the vesting date, f if the deferred remuneration were to be provided to A by any person on the award date, that action would, for the purposes of Part 11, be a payment of PAYE employment income of A in respect of A's employment with B, g before the end of the vesting date, a person (“P”) takes a relevant step within section 554B by reason of which Chapter 2 would apply apart from this section, h on the taking of the relevant step, the sum of money or asset which is the subject of the step represents the deferred remuneration or any part of it (and nothing else), and i there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement. 2 In addition to the provision relating to revocation required by subsection (1)(c) (which must be included), the deferred remuneration terms may also provide that the award of the deferred remuneration is partly revoked if specified conditions are not met on or before the vesting date. 3 Chapter 2 does not apply by reason of the relevant step mentioned in subsection (1)(g). 4 In the following subsections “ the earmarked deferred remuneration ” means the deferred remuneration so far as, on the taking of the relevant step mentioned in subsection (1)(g), it is represented by the sum of money or asset which is the subject of the step as mentioned in subsection (1)(h). 5 Subsection (6) applies if, at any time (“ the relevant time ”)— a any sum of money or asset held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b) which represents any of the earmarked deferred remuneration ceases to represent that earmarked deferred remuneration or a part of it (because the remuneration is to be provided to A in another way or its award has been revoked or for any other reason), but b the sum of money or asset continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b). 6 This Part has effect as if a relevant step within section 554B were taken at the relevant time— a the subject of which is— i the sum of money or asset mentioned in subsection (5), and ii a just and reasonable proportion of any relevant income (see subsection (12)), and b by reason of which Chapter 2 is to apply (subject only to section 554A(4)). 7 Subsection (8) applies if neither subsection (10) nor subsection (11) applies to the earmarked deferred remuneration or to a part of it. 8 This Part has effect as if a relevant step within section 554B were taken at the end of the vesting date— a the subject of which is— i a sum of money of the notional PAYE amount, and ii a just and reasonable proportion of any relevant income (see subsection (12)), and b by reason of which Chapter 2 is to apply (subject only to section 554A(4)). 9 In subsection (8)(a) “ the notional PAYE amount ” means the amount which the payment of PAYE employment income would have been had, as the case may be— a the earmarked deferred remuneration, or b the part of it to which neither subsection (10) nor subsection (11) applies, been provided to A at the end of the vesting date in a way which is, for the purposes of Part 11, a payment of PAYE employment income of A in respect of A's employment with B. 10 This subsection applies to the earmarked deferred remuneration so far as it is provided to A before the end of the vesting date in a way which is, for the purposes of Part 11, a payment of PAYE employment income of A in respect of A's employment with B. 11 This subsection applies to the earmarked deferred remuneration so far as, before the end of the vesting date, the award of the earmarked deferred remuneration is revoked in accordance with the deferred remuneration terms. 12 In subsections (6)(a)(ii) and (8)(a)(ii) “ relevant income ” means any income— a which, before the relevant time or the end of the vesting date (as the case may be)— i arises (directly or indirectly) from a sum of money or asset held by or on behalf of P representing any of the earmarked deferred remuneration, and ii is the subject of a relevant step within section 554B taken by P by reason of which Chapter 2 would apply apart from section 554Q, and b which, at the relevant time or the end of the vesting date (as the case may be), continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b). Exclusions: introduction to sections 554J to 554M 554I 1 Sections 554J and 554K are about steps within section 554B taken in relation to awards of certain shares or securities or of sums of money determined by reference to the market value of certain shares or securities. 2 Sections 554L and 554M are about steps within section 554B taken in relation to grants of rights to acquire certain shares or securities or to receive sums of money determined by reference to the market value of certain shares or securities. 3 Sections 554J to 554M apply only if B is a company. 4 In those sections— “ relevant benefits ” has the same meaning as in Chapter 2 of Part 6, but ignoring section 393B(2)(a), “ relevant shares ” means— shares (including stock) in B, instruments issued by B which are securities for the purposes of Chapters 1 to 5 of Part 7 within section 420(1)(b), or units in a collective investment scheme (as defined in section 420(2)) managed by B which are securities for the purposes of Chapters 1 to 5 of Part 7 within section 420(1)(e), and “ trading company ” means a company the business of which consists wholly or mainly in the carrying on of a trade. 5 If B is a member of a group of companies, in the definition of “relevant shares” in subsection (4) references to B are to be read as including references to any other company which is a member of that group. 6 For the purposes of sections 554K and 554M an exit event occurs if— a shares in the relevant company are admitted to trading on a stock exchange, b all the shares in the relevant company, or a substantial proportion of them, are disposed of to persons none of whom is connected with any of the persons making any disposal, c if the relevant company is a trading company (as defined in subsection (4)), the company's trade, or a substantial proportion of it, is transferred to a person who is not a relevant connected person, d the relevant company's assets, or a substantial proportion of them, are disposed of to a person who is not a relevant connected person, e the winding up of the relevant company starts, or f a person (“P”) who controls the relevant company ceases to control it, so long as no person connected with P starts to control it. 7 For the purposes of subsection (6)— a “ the relevant company ” means— i if the relevant shares mentioned in section 554K(1)(a)(i) or (ii) or 554M(1)(a)(i) or (ii) are shares (including stock), the company in which they are shares, or ii if the relevant shares so mentioned are instruments within paragraph (b) of the definition of “relevant shares” in subsection (4), the company by which those instruments are issued, b “ relevant connected person ” means a person who— i is connected with the relevant company, or ii is a shareholder in the relevant company or is connected with a shareholder in the relevant company, c the relevant company's trade, or a substantial proportion of it, is transferred to another person if— i the relevant company ceases to carry on the trade or the proportion of it, and ii on that occurring, the other person starts to carry on the trade or the proportion of it, and d section 12(7) of CTA 2009 applies for the purpose of determining when the winding up of the relevant company starts. Exclusions: earmarking for employee share schemes (1) 554J 1 This section applies if— a there is an arrangement (“B's employee share scheme”) under which, in respect of A's employment with B, an award may be made to A of— i relevant shares, or ii 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, b the main purpose of the award of the relevant shares or sum of money would not be the provision of relevant benefits, c the award of the relevant shares or sum of money would be on terms (“the deferred award terms”) the main purpose of which is to defer the receipt of the shares by A, or the payment of the sum of money to A, to a specified date (“the vesting date”) which is after the date (“the award date”) on which the award is made, while providing that the award is revoked if specified conditions are not met on or before the vesting date, d the vesting date would not be more than ten years after the award date, and e as at the award date, there would be a reasonable chance that the award of the relevant shares or sum of money will be revoked because not all the specified conditions will be met on or before the vesting date. 2 In addition to the provision relating to revocation required by subsection (1)(c) (which must be included), the deferred award terms may also provide that the award of the relevant shares or sum of money is partly revoked if specified conditions are not met on or before the vesting date. 3 Chapter 2 does not apply by reason of a relevant step within section 554B (by reason of which it would otherwise apply) taken by a person (“P”) if— a the subject of the relevant step is relevant shares (“earmarked shares”) which are earmarked, or otherwise start being held, solely with a view to the meeting of— i an award of relevant shares or a sum of money made to A under B's employee share scheme as mentioned in subsection (1)(a) in relation to which the requirements of subsection (1)(b) to (e) are met, or ii an award of relevant shares or a sum of money which is expected to be made to A under B's employee share scheme as mentioned in subsection (1)(a) and in relation to which the requirements of subsection (1)(b) to (e) would be met, b 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 meeting the award or expected award, and c there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement. 4 If the relevant step mentioned in subsection (3) is taken in relation to an expected award as mentioned in subsection (3)(a)(ii), subsection (5) applies if— a the award is not made before the end of the date (“the final award date”) falling immediately after the period of three months starting with the date on which P takes the relevant step, and b as at the end of the final award date, any of the earmarked shares continue to be held by or on behalf of P solely on the basis mentioned in subsection (3)(a). 5 This Part has effect as if a relevant step within section 554B were taken at the end of the final award date— a the subject of which is— i the shares which continue to be held as mentioned in subsection (4)(b), and ii any relevant income in relation to those shares (see subsection (13)), and b by reason of which Chapter 2 is to apply (subject only to section 554A(4)). 6 Subsection (7) applies if, at any time (“ the relevant time ”)— a any of the earmarked shares cease to be held by or on behalf of P solely on the basis mentioned in subsection (3)(a), 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 relevant time— a the subject of which is— i the shares mentioned in subsection (6), and ii any relevant income in relation to those shares (see subsection (13)), and b by reason of which Chapter 2 is to apply (subject only to section 554A(4)). 8 Subsection (9) applies if— a the relevant step mentioned in subsection (3) is taken in relation to an award which has been made as mentioned in subsection (3)(a)(i), or b the relevant step mentioned in subsection (3) is taken in relation to an expected award as mentioned in subsection (3)(a)(ii) and the award is made before the end of the final award date. 9 This Part has effect as if a relevant step within section 554B were taken at the end of the vesting date— a the subject of which is— i any of the earmarked shares to which none of subsections (10) to (12) applies, and ii any relevant income in relation to any of the earmarked shares mentioned in sub-paragraph (i) (see subsection (13)), and b by reason of which Chapter 2 is to apply (subject only to section 554A(4)). 10 This subsection applies to any earmarked shares if— a A receives the shares before the end of the vesting date, and b the receipt of the shares by A gives rise to employment income of A which is chargeable to income tax or which is exempt income. 11 This subsection applies to any earmarked shares if— a the sum of money mentioned in subsection (1)(a)(ii) (or a part of it) is paid to A before the end of the vesting date, b the payment of the sum to A gives rise to employment income of A which is chargeable to income tax or which is exempt income, and c the payment represents the proceeds of the disposal of the shares, or the payment is made from another source and, correspondingly, the shares are no longer held by any person in relation to the award. 12 This subsection applies to any earmarked shares if— a before the end of the vesting date, the award (or any part of it) is revoked in accordance with the deferred award terms, and b correspondingly, the shares are no longer held by any person in relation to the award. 13 In subsections (5)(a)(ii), (7)(a)(ii) and (9)(a)(ii) “ relevant income ”, in relation to any earmarked shares, means any income— a which, before the relevant step is treated as being taken by subsection (5), (7) or (9) (as the case may be)— i arises (directly or indirectly) from the shares, and ii is the subject of a relevant step within section 554B taken by P by reason of which Chapter 2 would apply apart from section 554Q, and b which, at the time the relevant step is treated as being taken, continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b). Exclusions: earmarking for employee share schemes (2) 554K 1 This section applies if— a there is an arrangement (“B's employee share scheme”) under which, in respect of A's employment with B, an award may be made to A of— i relevant shares, or ii 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, b the main purpose of the award would not be the provision of relevant benefits, c the relevant shares would be— i shares (including stock) in, or ii instruments within paragraph (b) of the definition of “relevant shares” in section 554I(4) issued by, a trading company or a company which controls a trading company, d the award would be on terms the main purpose of which is to ensure— i that the relevant shares are received, or ii that the sum of money is paid, only if a specified exit event, or an exit event within a specified description, occurs, and e as at the time the award is made, there would be a reasonable chance that the specified exit event, or an exit event within the specified description, will occur. 2 Chapter 2 does not apply by reason of a relevant step within section 554B (by reason of which it would otherwise apply) taken by a person (“P”) if— a the subject of the relevant step is relevant shares (“earmarked shares”) which are earmarked, or otherwise start being held, solely with a view to the meeting of— i an award of relevant shares or a sum of money made to A under B's employee share scheme as mentioned in subsection (1)(a) in relation to which the requirements of subsection (1)(b) to (e) are met, or ii an award of relevant shares or a sum of money which is expected to be made to A under B's employee share scheme as mentioned in subsection (1)(a) and in relation to which the requirements of subsection (1)(b) to (e) would be met, b 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 meeting the award or expected award, and c there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement. 3 If the relevant step mentioned in subsection (2) is taken in relation to an expected award as mentioned in subsection (2)(a)(ii), subsection (4) applies if— a the award is not made before the end of the date (“the final award date”) falling immediately after the period of three months starting with the date on which P takes the relevant step, and b as at the end of the final award date, any of the earmarked shares continue to be held by or on behalf of P solely on the basis mentioned in subsection (2)(a). 4 This Part has effect as if a relevant step within section 554B were taken at the end of the final award date— a the subject of which is— i the shares which continue to be held as mentioned in subsection (3)(b), and ii any relevant income in relation to those shares (see subsection (12)), and b by reason of which Chapter 2 is to apply (subject only to section 554A(4)). 5 Subsection (6) applies if, at any time (“ the relevant time ”)— a any of the earmarked shares cease to be held by or on behalf of P solely on the basis mentioned in subsection (2)(a), 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). 6 This Part has effect as if a relevant step within section 554B were taken at the relevant time— a the subject of which is— i the shares mentioned in subsection (5), and ii any relevant income in relation to those shares (see subsection (12)), and b by reason of which Chapter 2 is to apply (subject only to section 554A(4)). 7 Subsection (8) applies if— a the relevant step mentioned in subsection (2) is taken in relation to an award which has been made as mentioned in subsection (2)(a)(i), or b the relevant step mentioned in subsection (2) is taken in relation to an expected award as mentioned in subsection (2)(a)(ii) and the award is made before the end of the final award date, and the specified exit event, or an exit event within the specified description, occurs. 8 This Part has effect as if a relevant step within section 554B were taken at the end of the exit period— a the subject of which is— i any of the earmarked shares to which neither subsection (9) nor subsection (10) applies, and ii any relevant income in relation to any of the earmarked shares mentioned in sub-paragraph (i) (see subsection (12)), and b by reason of which Chapter 2 is to apply (subject only to section 554A(4)). 9 This subsection applies to any earmarked shares if— a A receives the shares before the end of the exit period, and b the receipt of the shares by A gives rise to employment income of A which is chargeable to income tax or which is exempt income. 10 This subsection applies to any earmarked shares if— a the sum of money mentioned in subsection (1)(a)(ii) (or a part of it) is paid to A before the end of the exit period, b the payment of the sum to A gives rise to employment income of A which is chargeable to income tax or which is exempt income, and c the payment represents the proceeds of the disposal of the shares, or the payment is made from another source and, correspondingly, the shares are no longer held by any person in relation to the award. 11 In subsections (8), (9)(a) and (10)(a) “ the exit period ” means the period of six months starting with the date on which the exit event occurs. 12 In subsections (4)(a)(ii), (6)(a)(ii) and (8)(a)(ii) “ relevant income ”, in relation to any earmarked shares, means any income— a which, before the relevant step is treated as being taken by subsection (4), (6) or (8) (as the case may be)— i arises (directly or indirectly) from the shares, and ii is the subject of a relevant step within section 554B taken by P by reason of which Chapter 2 would apply apart from section 554Q, and b which, at the time the relevant step is treated as being taken, continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b). Exclusions: earmarking for employee share schemes (3) 554L 1 This section applies if— a 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, b the main purpose of the grant of the relevant share option would not be the provision of relevant benefits, c the grant would be made on terms (“the deferred grant terms”) the main purpose of which is to ensure that the relevant share option is not exercisable by A before a specified date (“the vesting date”) which is after the date (“the grant date”) on which the grant is made, while providing that the relevant share option is not to be exercisable at all by A if specified conditions are not met on or before the vesting date, d the vesting date would not be more than ten years after the grant date, and e as at the grant date, there would be a reasonable chance that the relevant share option will not be exercisable at all by A because not all the specified conditions will be met on or before the vesting date. 2 In addition to the provision relating to revocation required by subsection (1)(c) (which must be included), the deferred grant terms may also provide that the relevant share option may be exercised by A only in part if specified conditions are not met on or before the vesting date. 3 Chapter 2 does not apply by reason of a relevant step within section 554B (by reason of which it would otherwise apply) taken by a person (“P”) if— a 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 relevant 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 subsection (1)(a) in relation to which the requirements of subsection (1)(b) to (e) 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 subsection (1)(a) and in relation to which the requirements of subsection (1)(b) to (e) would be met, b 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 c there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement. 4 If the relevant step mentioned in subsection (3) is taken in relation to an expected grant of a relevant share option as mentioned in subsection (3)(a)(ii), subsection (5) 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 P takes the relevant step, 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 (3)(a). 5 This Part has effect as if a relevant step within section 554B were taken at the end of the final grant date— a the subject of which is— i the shares which continue to be held as mentioned in subsection (4)(b), and ii any relevant income in relation to those shares (see subsection (15)), and b by reason of which Chapter 2 is to apply (subject only to section 554A(4)). 6 Subsection (7) applies if, at any time (“ the relevant time ”)— a any of the earmarked shares cease to be held by or on behalf of P solely on the basis mentioned in subsection (3)(a), 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 relevant time— a the subject of which is— i the shares mentioned in subsection (6), and ii any relevant income in relation to those shares (see subsection (15)), and b by reason of which Chapter 2 is to apply (subject only to section 554A(4)). 8 Subsection (9) applies if— a the relevant step mentioned in subsection (3) is taken in relation to a grant of a relevant share option made as mentioned in subsection (3)(a)(i), or b the relevant step mentioned in subsection (3) is taken in relation to an expected grant of a relevant share option as mentioned in subsection (3)(a)(ii) and the grant is made before the end of the final grant date. 9 This Part has effect as if a relevant step within section 554B were taken at the end of the final exercise date— a the subject of which is— i any of the earmarked shares to which none of subsections (10) to (13) applies, and ii any relevant income in relation to any of the earmarked shares mentioned in sub-paragraph (i) (see subsection (15)), and b by reason of which Chapter 2 is to apply (subject only to section 554A(4)). 10 This subsection applies to any earmarked shares if— a the relevant share option becomes exercisable (in whole or in part) by A before the end of the vesting date, b A exercises the option (wholly or partly) before the end of the final exercise date and, as a result, receives the shares, and c the receipt of the shares gives rise to employment income of A— i which is chargeable to income tax or would be chargeable apart from Chapter 5B of Part 2 , or ii which is exempt income. 11 This subsection applies to any earmarked shares if— a the relevant share option becomes exercisable (in whole or in part) by A before the end of the vesting date, b A exercises the option (wholly or partly) before the end of the final exercise date and, as a result, a sum of money is paid to A as mentioned in subsection (1)(a)(ii), c the payment of the sum gives rise to employment income of A— i which is chargeable to income tax or would be chargeable apart from section 474, or ii which is exempt income, and d the payment represents the proceeds of the disposal of the shares, or the payment is made from another source and, correspondingly, the shares are no longer held by any person in relation to the relevant share option. 12 This subsection applies to any earmarked shares if— a in accordance with the deferred grant terms, before the end of the vesting date, the relevant share option ceases to be exercisable by A (in whole or in part), and b correspondingly, the shares are no longer held by any person in relation to the relevant share option. 13 This subsection applies to any earmarked shares if— a the relevant share option becomes exercisable by A (in whole or in part) before the end of the vesting date but the option lapses (in whole or in part) before the end of the final exercise date, and b correspondingly, the shares are no longer held by any person in relation to the relevant share option. 14 In subsections (9) to (13) “ the final exercise date ” means the date which is ten years after the grant date. 15 In subsections (5)(a)(ii), (7)(a)(ii) and (9)(a)(ii) “ relevant income ”, in relation to any earmarked shares, means any income— a which, before the relevant step is treated as being taken by subsection (5), (7) or (9) (as the case may be)— i arises (directly or indirectly) from the shares, and ii is the subject of a relevant step within section 554B taken by P by reason of which Chapter 2 would apply apart from section 554Q, and b which, at the time the relevant step is treated as being taken, continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b). Exclusions: earmarking for employee share schemes (4) 554M 1 This section applies if— a 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, b the main purpose of the grant of the relevant share option would not be the provision of relevant benefits, c the relevant shares would be— i shares (including stock) in, or ii instruments within paragraph (b) of the definition of “relevant shares” in section 554I(4) issued by, a trading company or a company which controls a trading company, d the grant would be made on terms (“the deferred grant terms”) the main purpose of which is to ensure that the relevant share option is exercisable by A only if a specified exit event, or an exit event within a specified description, occurs, and e as at the time the grant is made, there would be a reasonable chance that the specified exit event, or an exit event within the specified description, will occur. 2 Chapter 2 does not apply by reason of a relevant step within section 554B (by reason of which it would otherwise apply) taken by a person (“P”) if— a 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 relevant 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 subsection (1)(a) in relation to which the requirements of subsection (1)(b) to (e) 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 subsection (1)(a) and in relation to which the requirements of subsection (1)(b) to (e) would be met, b 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 c there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement. 3 If the relevant step mentioned in subsection (2) is taken in relation to an expected grant of a relevant share option as mentioned in subsection (2)(a)(ii), subsection (4) 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 P takes the relevant step, 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 (2)(a). 4 This Part has effect as if a relevant step within section 554B were taken at the end of the final grant date— a the subject of which is— i the shares which continue to be held as mentioned in subsection (3)(b), and ii any relevant income in relation to those shares (see subsection (14)), and b by reason of which Chapter 2 is to apply (subject only to section 554A(4)). 5 Subsection (6) applies if, at any time (“ the relevant time ”)— a any of the earmarked shares cease to be held by or on behalf of P solely on the basis mentioned in subsection (2)(a), 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). 6 This Part has effect as if a relevant step within section 554B were taken at the relevant time— a the subject of which is— i the shares mentioned in subsection (5), and ii any relevant income in relation to those shares (see subsection (14)), and b by reason of which Chapter 2 is to apply (subject only to section 554A(4)). 7 Subsection (8) applies if— a the relevant step mentioned in subsection (2) is taken in relation to a grant of a relevant share option made as mentioned in subsection (2)(a)(i), or b the relevant step mentioned in subsection (2) is taken in relation to an expected grant of a relevant share option as mentioned in subsection (2)(a)(ii) and the grant is made before the end of the final grant date, and the specified exit event, or an exit event within the specified description, occurs. 8 This Part has effect as if a relevant step within section 554B were taken at the end of the exit period— a the subject of which is— i any of the earmarked shares to which none of subsections (9) to (11) applies, and ii any relevant income in relation to any of the earmarked shares mentioned in sub-paragraph (i) (see subsection (14)), and b by reason of which Chapter 2 is to apply (subject only to section 554A(4)). 9 This subsection applies to any earmarked shares if— a A exercises the relevant share option (wholly or partly) before the end of the exit period and, as a result, receives the shares, and b the receipt of the shares gives rise to employment income of A— i which is chargeable to income tax or would be chargeable apart from Chapter 5B of Part 2 , or ii which is exempt income. 10 This subsection applies to any earmarked shares if— a A exercises the relevant share option (wholly or partly) before the end of the exit period and, as a result, a sum of money is paid to A as mentioned in subsection (1)(a)(ii), b the payment of the sum gives rise to employment income of A— 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 c the payment represents the proceeds of the disposal of the shares, or the payment is made from another source and, correspondingly, the shares are no longer held by any person in relation to the relevant share option. 11 This subsection applies to any earmarked shares if— a the relevant share option becomes exercisable by A before the end of the exit period but the option lapses (in whole or in part) at or before the end of that period, and b correspondingly, the shares are no longer held by any person in relation to the relevant share option. 12 In subsections (8), (9)(a), (10)(a) and (11)(a) “ the exit period ” means— a the period of six months starting with the date on which the exit event occurs, or b if it ends earlier, the period during which the relevant share option is exercisable by A in accordance with the deferred grant terms. 13 If the exit event is an event within section 554I(6)(a), in subsection (12)(a) the reference to six months is to be read as a reference to five years. 14 In subsections (4)(a)(ii), (6)(a)(ii) and (8)(a)(ii) “ relevant income ”, in relation to any earmarked shares, means any income— a which, before the relevant step is treated as being taken by subsection (4), (6) or (8) (as the case may be)— i arises (directly or indirectly) from the shares, and ii is the subject of a relevant step within section 554B taken by P by reason of which Chapter 2 would apply apart from section 554Q, and b which, at the time the relevant step is treated as being taken, continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b). Exclusions: other cases involving employment-related securities etc 554N 1 Chapter 2 does not apply by reason of a relevant step the subject of which is employment-related securities if— a by virtue of the step, the securities are acquired by a person, and b section 425(2) applies ... to the acquisition. 2 Chapter 2 does not apply by reason of a relevant step the subject of which is an employment-related securities option if— a by virtue of the step, the option is acquired by a person, and b section 475(1) applies ... to the acquisition. 3 Terms used in subsection (1) or (2) have the same meaning as they have in Chapter 2 or 5 of Part 7 (as the case may be). 4 Chapter 2 does not apply by reason of an event within subsection (5) if by virtue of the event an amount counts as employment income of A in respect of A's employment with B. 5 The events within this subsection are— a a chargeable event for the purposes of section 426, 438 or 476, b an event which gives rise to the discharge of a notional loan for the purposes of section 446U, or c a disposal to which Chapter 3D of Part 7 applies. 6 Chapter 2 does not apply by reason of an event to which subsection (4) would apply apart from section 421B(6), ... 429, 430A(5)(b), 443 ... or 477(2) or apart from an election under section 430 or 431. 7 Subsection (11) applies if there is an acquisition of an asset within section 554C(4)(a) or (b) (“the relevant asset”) and— a relevant consideration is given by A for the relevant asset of an amount equal to or greater than the market value of the relevant asset at the time of the acquisition, or b ignoring any relevant consideration given for the relevant asset, the acquisition gives rise (or would give rise) to earnings of A within Chapter 1 of Part 3 , or an amount treated under section 226A as earnings of A, from A's employment with B— i the amount of which is equal to or greater than the market value of the relevant asset at the time of the acquisition, and ii which are not exempt income. 8 In subsection (7) “relevant consideration”— a means consideration— i which is given before, or at or about, the time of the acquisition, and ii which is money or money's worth, but b does not include— i a promise to do anything, or ii the performance of any duties of, or in connection with, an employment. 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 c the acquisition is a chargeable event for the purposes of section 476 .... 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), c the exercise of the option by A gives rise to employment income of A in respect of A's employment with B— 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 c by reason of which Chapter 2 is to apply. 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. Exclusions: employee car ownership schemes 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 c by reason of which Chapter 2 is to apply. 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, and is 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 c Schedule 2 to that Act. 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. Exclusions: transfer of employment-related loans 554OA 1 Chapter 2 does not apply by reason of a relevant step taken by a person (“P”) if— a the step is acquiring a right to payment of an amount equal to the whole or part of a payment made by way of a loan to a relevant person (the “borrower”), b the loan, at the time it was made, was an employment-related loan, c at the time the relevant step is taken, the section 180 threshold is not exceeded in relation to the loan, d at the time the relevant step is taken, the borrower is an employee, or a prospective employee, of P, and e there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement. 2 For the purposes of this section, the section 180 threshold is not exceeded in relation to a loan if, at all times in the relevant tax year— a the amount outstanding on the loan, or b if two or more employment-related loans are made by the same employer, the aggregate of the amount outstanding on them, does not exceed the amount specified at the end of section 180(2) (normal threshold for benefit of a loan to be treated as earnings). 3 Subsection (4) applies if— a two or more employment-related loans are made by the same employer, and b during the relevant tax year, a person acquires a right to payment of an amount (the “transfer amount”) equal to the whole or part of the payment made by way of any of the loans. 4 The transfer amount is to be treated as an “amount outstanding” on that loan for the purposes of subsection (2)(b). 5 In this section— a “ employment-related loan ” has the same meaning as it has for the purposes of Chapter 7 of Part 3; b “ relevant tax year ” means the tax year in which the relevant step is taken. 6 See paragraph 27 of Schedule 11 to F(No. 2)A 2017 for provision about exclusions where a loan is an employment-related loan and the relevant step is within paragraph 1 of that Schedule. Exclusions: employment income exemptions under Part 4 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. Exclusions: income arising from earmarked sum or asset 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 c when the income arises, it— 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. Exclusions: acquisitions out of sums or assets 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, c sum or asset T is not acquired (directly or indirectly) from A or any person linked with A, and 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). Exclusions: relevant repayments 554RA 1 This section applies (subject to subsection (5)) if— a a right to repayment of principal under a relevant loan (the “repayment right”) is held by or on behalf of a person (“P”), and b on or after 9 December 2010, a sum of money (the “repayment sum”) is acquired by or on behalf of P by way of repayment of principal under the relevant loan. 2 In this section “ relevant loan ” means a loan made on or after 6 April 1999. 3 Subsection (4) applies if— a on its acquisition, the repayment sum is the subject of a relevant step within section 554B taken by P, or b for the sole purpose of the acquisition, the making of the payment of the repayment sum is a relevant step within section 554C(1)(a). 4 Chapter 2 does not apply by reason of the relevant step if, on its acquisition, the repayment sum is held by or on behalf of P on the same basis as that on which the repayment right was held by or on behalf of P immediately before the acquisition. 5 This section does not apply where there is any connection (direct or indirect) between the acquisition by or on behalf of P of the repayment sum and a tax avoidance arrangement (other than the arrangement under which the relevant loan was made). Exclusions: pension income chargeable under Part 9 etc 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. Exclusions: employee pension contributions 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), 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. Exclusions: pre-6 April 2006 contributions to employer-financed retirement benefit schemes 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. Exclusions: purchases of annuities out of pension scheme rights 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, 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. Exclusions: certain retirement benefits etc 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 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. Exclusions: transfers between certain foreign pension schemes 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, 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. Exclusions: payments in respect of a tax liability 554XA 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. Power to exclude other relevant steps 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 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. Interpretation Interpretation: general 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) , ... 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. Interpretation: persons linked with A 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 Value of relevant step to count as 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. Exception to section 554Z2(1): close companies 554Z2A 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). Value of relevant step 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. Residence issues 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, 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). Temporary non-residents 554Z4A 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. Overlap with money or asset subject to earlier tax liability 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 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. Overlap with certain earnings 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 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”. Exercise price of share options 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). Cases where consideration given for relevant step 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, ... 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. Remittance basis Remittance basis: A did not meet section 26A requirement 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. Remittance basis: A met section 26A requirement 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. Remittance basis: supplementary 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. Temporary non-residents 554Z11A 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. Double taxation: earlier income tax liability Earlier income tax liability: application of section 554Z11C 554Z11B 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). Earlier income tax liability: treatment of payments 554Z11C 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. Earlier income tax liability: provisional payments of tax 554Z11D 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. Application for provisional payments to be treated as payment of tax 554Z11E 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. Provisional payments of tax: further provision 554Z11F 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. Earlier income tax liability: supplementary provision 554Z11G 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. Supplementary Relevant step taken after A's death etc 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. Subsequent income tax liability 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. Relief where earmarking not followed by further relevant step 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. Location of employment duties 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), 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). CHAPTER 3 Undertakings given by employers etc in relation to retirement benefits etc Application 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, 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). Employer etc to be treated as relevant third person etc 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 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. Earmarking etc 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. Provision of security 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. Valuation of step within section 554Z19 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. Relief for earmarking or security not followed by contribution or relevant benefit 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). Part 8 Former employees: deductions for liabilities Deductions in calculating net income Former employee entitled to deduction in calculating net income 555 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). Deductible payments made outside the time limits allowed 556 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). Deductible payments made pursuant to tax avoidance arrangements 556A No deduction may be made under section 555 if the deductible payment is made in pursuance of arrangements the main purpose, or one of the main purposes, of which is the avoidance of tax. Deductible payments wholly or partly borne by the former employer etc. 557 1 This section applies if— a a deductible payment is made by the former employee (and not by the former employer on behalf of the former employee), but b the whole or a part of the cost of making the payment is borne— i by the former employer, or ii out of the proceeds of a contract of insurance. 2 No deduction of the amount of the cost borne as mentioned in subsection (1)(b) (the “relevant amount”) may be made under section 555. 3 But this is subject to subsection (4) if the whole or a part of the relevant amount is treated— a as a relevant retirement benefit of the former employee, or b as post-employment earnings of the former employee. 4 In such a case, a deduction of so much of the relevant amount as is treated in that way may be made under section 555. Interpretation Meaning of “deductible payment” 558 1 For the purposes of this Part each of the following is a deductible payment— A. Payment in or towards the discharge of a liability related to the former employment. B. Payment of any costs or expenses incurred in connection with— a a claim that the former employee is subject to a liability related to the former employment, or b proceedings relating to or arising out of a claim that the former employee is subject to a liability related to the former employment. BA Payment of any costs or expenses not falling within paragraph B which are incurred in connection with the former employee giving evidence about matters related to the former employment in, or for the purposes of— a a proceeding or other process (whether or not involving the former employee), or b an investigation (whether or not likely to lead to any proceeding or other process involving the former employee). BB Payment of any costs or expenses not falling within paragraph B or BA which are incurred in connection with a proceeding or other process, or an investigation, in which— a acts of the former employee related to the former employment, or b any other matters related to the former employment, are being or are likely to be considered. C. Payment of a premium under a qualifying insurance contract, but only to the extent that the premium relates to— a provision in the contract for the former employee to be indemnified against a payment falling within paragraph A, or b provision in the contract for the payment of any costs or expenses falling within paragraph B , BA or BB . 2 But a payment which falls within paragraph A B, BA or BB is not a deductible payment if it would have been unlawful for the former employer to enter into a contract of insurance in respect of the liability, or costs or expenses, in question. 3 In this Part— a “ premium ”, in relation to a qualifying insurance contract, means an amount payable to the insurer under the contract, and b where a qualifying insurance contract relates to more than one person, employment or risk, the part of the premium to be treated as relating to each of them is to be determined by apportionment on a just and reasonable basis. 4 In this section and section 560— a “ acts ” includes failures to act and acts are “related to the former employment” if the former employee was acting— i in the employee's capacity as holder of the former employment, or ii in any other capacity in which the former employee was acting in the performance of the duties of that employment, b “ giving evidence ” includes making a formal or informal statement or answering questions, c “ proceeding or other process ” includes any civil, criminal or arbitration proceedings, any disciplinary or regulatory proceedings of any kind and any process operated for resolving disputes or adjudicating on complaints, and d references to a proceeding or other process or an investigation include a reference to a proceeding or other process or an investigation that is likely to take place. Liabilities related to the former employment 559 For the purposes of this Part each of the following kinds of liability is related to the former employment— A. Liability imposed upon the former employee because he did an act, or failed to do an act— a in his capacity as holder of the former employment, or b in any other capacity in which he acted in the performance of the duties of the former employment. B. Liability imposed upon the former employee in connection with any proceedings relating to, or arising from, a claim that he is subject to a liability because he did an act, or failed to do an act— a in his capacity as holder of the former employment, or b in any other capacity in which he acted in the performance of the duties of the former employment. Meaning of “qualifying insurance contract” 560 1 In section 558 “ qualifying insurance contract ” means a contract of insurance which meets conditions A, B, C and D. 2 Condition A is that, so far as the risks insured against are concerned, the contract only relates to one or more of the following— a the indemnification of a former employee against a liability related to the former employment, b the indemnification of a person against vicarious liability in respect of a liability related to another person’s employment, c the payment of costs or expenses incurred— i in connection with a claim that a person is subject to a liability to which the insurance relates, or ii in connection with any proceedings relating to or arising out of a claim that a person is subject to a liability to which the insurance relates, ca the payment of costs or expenses incurred in connection with a former employee giving evidence about matters related to the former employment in, or for the purposes of— i a proceeding or other process (whether or not involving the former employee), or ii an investigation (whether or not likely to lead to any proceeding or other process involving the former employee). cb the payment of any costs or expenses incurred in connection with a proceeding or other process, or an investigation, in which— i acts of a former employee related to the employment, or ii any other matters related to the former employment of a former employee, are being or are likely to be considered, d the indemnification of an employer against loss from a payment made by the employer to a former employee in respect of— i a liability related to the former employment, or ii any costs or expenses incurred as mentioned in paragraph (c) , (ca) or (cb) . 3 Condition B is that— a the period of insurance under the contract does not exceed 2 years or, if it does, it does so only because of one or more renewals, each for a period of 2 years or less, and b the insured is not required to renew the contract for any period. 4 Condition C is— a that the insured is not entitled under the contract to receive any payment or other benefit in addition to— i cover for the risks insured against, and ii any right to renew the contract, or b if the insured is so entitled, that the part of the premium reasonably attributable to the entitlement is not a significant part of the whole premium. 5 Condition D is that the contract is not connected with another contract. Connected contracts 561 1 An insurance contract is connected with another contract for the purposes of section 560 if conditions E and F are met— a at the time when both contracts are first in force, or b at any time after that time. 2 Condition E is that one of the contracts was entered into— a by reference to the other, or b with a view to enabling or facilitating entry into the other on particular terms. 3 Condition F is that the terms on which one of the contracts was entered into are significantly different from what they would have been if— a it had not been entered into in anticipation of the other being entered into, or b the other had not also been entered into. 4 If— a there is only one such significant difference in terms, and b the contracts meet conditions A, B and C specified in section 560, the difference may be disregarded in the following cases. 5 The first case is where the difference is a reduction in premiums under the contract that is reasonably attributable only to the contract— a containing a right to renew, or b being entered into by way of renewal. 6 The second case is where— a two or more contracts have been entered into as part of a single transaction, and b the difference is reductions in their premiums that are reasonably attributable only to the premium under each of them having been fixed by reference to the appropriate proportion of the combined premium. 7 In subsection (6) “ the combined premium ” means the amount that would have been the total premium under a single contract relating to all the risks covered by the contracts. Meaning of “former employee” and “employment” 562 1 In this Part “ former employee ” means an individual who has ceased to hold an employment. 2 In this Part “ employment ” includes in particular— a any employment under a contract of service, b any employment under a contract of apprenticeship, and c any employment in the service of the Crown. “Employee” and “employer” have corresponding meanings. Other interpretation 563 In this Part each of the following expressions, when used in relation to a former employee, has the meaning given— “ former employment ” means the employment which the former employee has ceased to hold; “ former employer ” means— the person under whom the former employee held the former employment, a person for the time being carrying on the whole or any part of the business or other undertaking for the purposes of which the former employee held the former employment, a person who is for the time being subject to any of the liabilities with respect to that business or other undertaking of the person mentioned in paragraph (a), and a person who is connected with a person falling within paragraph (a), (b) or (c); “ post-employment earnings ” means so much of any amount received after the former employee has ceased to hold the former employment as constitutes general earnings for the purposes of the employment income Parts; “ relevant retirement benefit ” means a benefit— which is received by the former employee under an employer-financed retirement benefits scheme, and which, under Chapter 2 of Part 6, counts as employment income of the former employee. Application of this Part to office-holders 564 1 The provisions of this Part are expressed to apply to former employees but they apply equally to former office-holders. 2 In those provisions as they apply to a former office-holder— a references to holding a former employment are to holding the office; b “ former employment ” means the office held; c “ former employer ” means the person under whom the person held the office. 3 In this Part “ office ” includes in particular any position which has an existence independent of the person who holds it and may be filled by successive holders. Part 9 Pension income Chapter 1 Introduction Structure of Part 9 565 The structure of this Part is as follows— Chapter 2— a imposes the charge to tax on pension income, and b provides for deductions to be made from the amount of income chargeable; Chapters 3 to 15 set out the types of income which are charged to tax under this Part and, for each type of income, identify— a the amount of income chargeable to tax for a tax year, and b the person liable to pay any tax charged; Chapter 15A— a provides for certain amounts paid under registered pension schemes in the form of lump sums to be subject to the charge to tax on pension income, and b deals with exemptions from the charge to tax (whether under this Part or any other provision) in relation to certain other amounts paid under registered pension schemes in the form of lump sums. Chapter 2 Tax on pension income Nature of charge to tax on pension income and relevant definitions 566 1 The charge to tax on pension income under this Part is a charge to tax on that income excluding any exempt income. 2 “ Pension income ” means the pensions, annuities and income of other types to which the provisions listed in subsection (4) apply. This definition applies for the purposes of the Tax Acts. 3 “ Exempt income ” means pension income on which no liability to income tax arises as a result of any provision of Chapters 15A to 18 of this Part. This definition applies for the purposes of this Part. 4 These are the provisions referred to in subsection (2)— Provision Income Chapter (of this Part) Section 569 United Kingdom pensions Chapter 3 Section 573 Foreign pensions Chapter 4 Section 577 United Kingdom social security pensions Chapter 5 Section 579A Pensions under registered pension schemes Chapter 5A Section 609 Annuities for the benefit of dependants Chapter 10 Section 610 Annuities under sponsored superannuation schemes Chapter 10 Section 611 Annuities in recognition of another’s services Chapter 10 Section 615 Certain overseas government pensions paid in the United Kingdom Chapter 11 Section 619 The House of Commons Members' Fund Chapter 12 . . . . . . . . . Section 629 Pre-1973 pensions paid under OPA 1973 Chapter 14 Section 633 Voluntary annual payments Chapter 15 Section 637B Pensions treated as arising from payment of pension commencement excess lump sums under registered pension schemes Chapter 15A Section 637G Pensions treated as arising from payment of trivial commutation lump sums and winding-up lump sums under registered pension schemes Chapter 15A Section 637N Pensions treated as arising from payment of trivial commutation lump sum death benefits ... under registered pension schemes Chapter 15A Amount charged to tax 567 1 The amount of pension income which is charged to tax under this Part for a particular tax year is as follows. 2 In relation to each pension, annuity or other item of pension income, the amount charged to tax is the “net taxable pension income” for the tax year. 3 The net taxable pension income for a pension, annuity or other item of pension income for a tax year is given by the formula— TPI - DPI where— TPI means the amount of taxable pension income for that pension, annuity or item of pension income for that year (see subsection (4)), and DPI means the total amount of any deductions allowed from the pension, annuity or item of pension income (see subsection (5)). 4 For the purposes of this Act— a the amount of taxable pension income for a pension, annuity or other item of pension income for a tax year is determined in accordance with Chapters 3 to 15A of this Part (which contain provisions relating to this amount for each type of pension income); and b in determining the amount of taxable pension income for a pension, annuity or other item of pension income, any exempt income is to be excluded. 5 The deductions allowed from a pension, annuity or other item of pension income are those under— section 567A (deduction to avoid double taxation where Part 7A has applied to the source of the pension income); section 617 (10% deduction from an overseas government pension to which section 615 applies); Part 12 (payroll giving). Cases in which Part 7A has applied to source of pension income 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 c Chapter 2 of that Part applied by reason of the relevant step. 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. Person liable for tax 568 For the provision identifying which person is liable for any tax charged under this Part on a pension, annuity or other item of pension income, see Chapters 3 to 15A . Chapter 3 United Kingdom pensions: general rules United Kingdom pensions 569 1 This section applies to any pension paid by or on behalf of a person who is in the United Kingdom. 2 But this section does not apply to a pension if any provision of Chapters 5 to 14 of this Part applies to it. 3 For pensions paid by or on behalf of a person who is outside the United Kingdom, see Chapter 4 of this Part. “Pension”: interpretation 570 In this Chapter “ pension ” includes a pension which is paid voluntarily or is capable of being discontinued. Taxable pension income 571 If section 569 applies, the taxable pension income for a tax year is the full amount of the pension accruing in that year irrespective of when any amount is actually paid. Person liable for tax 572 If section 569 applies, the person liable for any tax charged under this Part is the person receiving or entitled to the pension. Temporary non-residents 572A 1 This section applies if an individual is temporarily non-resident. 2 Any pension within subsection (3) is to be treated for the purposes of section 571 as if it accrued in the period of return. 3 A pension is within this subsection if— a section 569 applies to it, b it is in the form of a lump sum, c it accrued in the temporary period of non-residence, and d ignoring this section— i it is not chargeable to tax under this Chapter, but ii it would be so chargeable 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 the individual from being chargeable to income tax in respect of any pension 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 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. Chapter 4 Foreign pensions: general rules Foreign pensions 573 1 This section applies to any pension paid by or on behalf of a person who is outside the United Kingdom to a person who is resident in the United Kingdom. 2 But this section does not apply to a pension if any provision of Chapters 5 to 14 of this Part applies to it. 2A This section does not apply to pension within section 574(1)(ba) if— a the pension is paid in respect of a deceased member of a pension scheme who had not reached the age of 75 at the date of death, and b no pension payments to the person entitled to the pension were made before 6 April 2015 in respect of the deceased member out of any of the following— i the fund from which the pension is paid, and ii any fund represented (to any extent) by that fund. 2B This section does not apply to pension within section 574(1)(bb) if the pension is paid in respect of a deceased individual who had not reached the age of 75 at the date of death. 2C Subsection (2A) is subject to subsection (2D). 2D This section does apply to pension within section 574(1)(ba) paid in respect of a deceased member of a pension scheme who had not reached the age of 75 at the date of death if the pension is paid in respect of sums or assets held for the purposes of the pension scheme under which the pension is paid (“ the paying scheme ”) that would, if the paying scheme were a registered pension scheme, be sums or assets— a representing unused uncrystallised funds (within the meaning of paragraph 27E(4) and (5) of Schedule 28 to FA 2004) in the deceased member's case, and b designated on or after 6 April 2015 as available for the payment of dependants' drawdown pension or nominees' drawdown pension, but c not so designated before the end of the period of two years beginning with the earlier of the day on which the scheme manager of the paying scheme first knew of the member's death and the day on which the scheme manager could first reasonably have been expected to have known of it. 2E Chapter 17 of this Part provides exemptions for certain annuities (see sections 646D and 646E: certain beneficiaries' annuities purchased out of unused or drawdown funds). 2F See also paragraph 45A of Schedule 36 to FA 2004 (exemption in certain cases for payments on or after 6 April 2015 to beneficiaries under joint-life or similar annuities purchased before 6 April 2006). 3 For pensions paid by or on behalf of a person who is in the United Kingdom, see Chapter 3 of this Part. 4 This section also applies to a pension paid by or on behalf of a person who is outside the United Kingdom to a person who is not resident in the United Kingdom if— a the pension is a relevant lump sum paid under a pension scheme to that person in respect of a member of the scheme, and b the member is, or immediately before the member's death was, resident in the United Kingdom. “Pension”: interpretation 574 1 For the purposes of this Chapter “ pension ” includes— a an annuity under, or purchased with sums or assets held for the purposes of, or representing acquired rights under, a relevant non-UK scheme or an overseas pension scheme, aa a relevant lump sum (see section 574A), b an amount paid under a relevant non-UK scheme or an overseas pension scheme which, if the scheme were a registered pension scheme, would be income withdrawal ... (within the meaning of paragraph 7 of Schedule 28 to FA 2004), ba an amount paid under a relevant non-UK scheme or an overseas pension scheme which, if the scheme were a registered pension scheme, would be dependants' income withdrawal or nominees' income withdrawal (within the meaning of paragraphs 21 and 27D of Schedule 28 to FA 2004), bb an amount paid under a relevant non-UK scheme or an overseas pension scheme which, if the scheme were a registered pension scheme, would be successors' income withdrawal (within the meaning of paragraph 27J of Schedule 28 to FA 2004), and c if conditions A and B are met, a pension which is paid voluntarily or is capable of being discontinued. 2 Condition A is that the pension is paid to— a a former employee or a former office-holder, b the widow or widower or surviving civil partner of a former employee or a former office-holder, or c any child, relative or dependant of a former employee or a former office-holder. 3 Condition B is that the pension is paid by or on behalf of— a the person— i who employed the former employee, or ii under whom the former office-holder held the office, or b the successors of that person. 4 In this section— “ office ” includes in particular any position which has an existence independent of the person who holds it and may be filled by successive holders; “ overseas pension scheme ” has the same meaning as in Part 4 of FA 2004 (see section 150(7) of that Act); “ relevant non-UK scheme ” is to be read in accordance with paragraph 1(5) of Schedule 34 to FA 2004. “Pension”: relevant lump sums 574A 1 A lump sum paid under a pension scheme to a member of the scheme, or to a person in respect of a member of the scheme, is “ a relevant lump sum ” for the purposes of this Chapter if— a the scheme is none of the following— i a registered pension scheme, ii a relevant non-UK scheme, and iii an employer-financed retirement benefits scheme established in the United Kingdom, and b the payment of the lump sum is not a relevant step by reason of which Chapter 2 of Part 7A applies. 2 A lump sum paid under a relevant non-UK scheme to a member of the scheme, or to a person in respect of a member of the scheme, is “ a relevant lump sum ” for the purposes of this Chapter if the effect of paragraphs 1 to 7 of Schedule 34 to FA 2004 is that the member payment provisions (see paragraph 1(4) of that Schedule) do not apply in relation to the payment of the lump sum. 2A A lump sum is not “a relevant lump sum” by virtue of subsection (2) if it is within paragraph 5ZA(1)(a) or (b) of Schedule 34 to FA 2004 (which specify certain lump sums paid to or in respect of transfer members of relevant non-UK schemes). 3 If section 573 applies to a relevant lump sum then, for the purposes of section 575, the full amount of the pension income arising by reason of the payment of the lump sum is the amount of the lump sum, reduced as follows— Step 1 Deduct so much of the lump sum as is payable by reason of commutation of rights to receive pension income on which no liability to tax arises as a result of any provision of Chapter 17 of this Part. Step 2 Where the lump sum is paid under a pension scheme that was an employer-financed retirement benefits scheme immediately before 6 April 2017, deduct so much of the lump sum left after Step 1 as is deductible in accordance with subsection (6). Where the lump sum is paid otherwise than under such a scheme, deduct so much of the lump sum left after Step 1 as is paid in respect of the value immediately before 6 April 2017 of rights, accrued by then, specifically to receive benefits by way of lump sum payments. Step 3 If the lump sum is paid under an overseas pension scheme, deduct so much of the lump sum left after Step 2 as would, if the scheme were a registered pension scheme, not be liable to income tax under this Part. For the purposes of this Step— treat amounts not included in taxable pension income because of section 637G(2) as being not liable to tax; assume that all of the member’s lump sum allowance is available . 4 The amount given by subsection (3) is treated for the purposes of section 575 as arising when the lump sum is paid. 5 The Commissioners may by regulations make provision (including provision amending this section) as to the assumptions to be made for the purposes of Step 3. 6 These rules apply for the purposes of the first sentence of Step 2— a “ the post-Step 1 amount ” means so much of the lump sum as is left after Step 1; b “ the relevant amount ” means so much of the post-Step 1 amount as is paid in respect of rights specifically to receive benefits by way of lump sum payments; c “ reckonable service ” means service in respect of which the rights to receive the relevant amount accrued (whether or not service in the same employment or with the same employer, and even if the rights originally accrued under a different employer-financed retirement benefits scheme established in or outside the United Kingdom); d “ pre-6 April 2017 reckonable service ” means reckonable service that is service before 6 April 2017; e “ pre-6 April 2017 reckonable foreign service ” means pre-6 April 2017 reckonable service that is foreign service; f the deductible amount is the value immediately before 6 April 2017 of the rights then accrued to payment of so much of the relevant amount as is paid in respect of pre-6 April 2017 reckonable service if— i at least 75% of pre-6 April 2017 reckonable service is made up of foreign service, or ii the period of pre-6 April 2017 reckonable service exceeds 10 years and the whole of the last 10 years of that period is made up of foreign service, or iii the period of pre-6 April 2017 reckonable service exceeds 20 years and at least 50% of that period, including any 10 of the last 20 years, is made up of foreign service; g otherwise, the deductible amount is the appropriate fraction of the value immediately before 6 April 2017 of the rights then accrued to payment of so much of the relevant amount as is paid in respect of pre-6 April 2017 reckonable service; h “the appropriate fraction” is given by— F R where— F is the period of pre-6 April 2017 reckonable foreign service, and R is the period of pre-6 April 2017 reckonable service. 7 In this section— “ employer-financed retirement benefits scheme ” has the same meaning as in Chapter 2 of Part 6 (see section 393A), “ foreign service ” has the meaning given by section 395C, “ member ”, in relation to a pension scheme, has the meaning given by section 151 of FA 2004, “ overseas pension scheme ” has the same meaning as in Part 4 of FA 2004 (see section 150(7) of that Act), “ payment ” includes a transfer of assets and any other transfer of money's worth, “ pension scheme ” has the meaning given by section 150(1) of FA 2004, and “ relevant non-UK scheme ” is to be read in accordance with paragraph 1(5) of Schedule 34 to FA 2004. Taxable pension income 575 1 If section 573 applies, the taxable pension income for a tax year is the full amount of the pension income arising in the tax year, but subject to subsections (1A) ... and (3) and section 576A . 1A If the person liable for the tax under this Part is an individual and the tax year is a split year as respects that individual, the taxable pension income for the tax year is the full amount of the pension income arising in the UK part of the year, subject to subsection (3) and section 576A. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 The full amount of the pension income arising in the tax year, or (as the case may be) the UK part of the tax year, is treated as relevant foreign income for the purposes of Chapters 2 and 3 of Part 8 of ITTOIA 2005 (relevant foreign income: remittance basis and deductions and reliefs). 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 See also Chapter 4 of that Part (unremittable income). Person liable for tax 576 If section 573 applies, the person liable for any tax charged under this Part is the person receiving or entitled to the pension. Temporary non-residents 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)). Chapter 5 United Kingdom social security pensions United Kingdom social security pensions 577 1 This section applies to— the state pension, graduated retirement benefit, industrial death benefit, widowed mother’s allowance, widowed parent’s allowance, and widow’s pension. 1A But this section does not apply to any social security pension lump sum (within the meaning of section 7 of F(No.2)A 2005). 2 In this section— “ state pension ” means any pension payable under— any provision of Part 1 of the Pensions Act 2014 or any corresponding provision under the law of Northern Ireland, section 44, 48A, 48AA, 48B, 48BB, 51 or 78 of SSCBA 1992, or section 44, 48A , 48B, 48BB, 51 or 78 of SSCB(NI)A 1992 or any provision under the law of Northern Ireland that corresponds to section 48AA of SSCBA 1992 ; “ graduated retirement benefit ” means any benefit payable under— section 36 or 37 of the National Insurance Act 1965 (c. 51), or section 35 or 36 of the National Insurance Act (Northern Ireland) 1966 (c. 6 (N.I.)); “ industrial death benefit ” means any benefit payable under— section 94 of, and Part 6 of Schedule 7 to, SSCBA 1992, or section 94 of, and Part 6 of Schedule 7 to, SSCB(NI)A 1992; “ widowed mother’s allowance ” means any allowance payable under— section 37 of SSCBA 1992, or section 37 of SSCB(NI)A 1992; “ widowed parent’s allowance ” means any allowance payable under— section 39A of SSCBA 1992, or section 39A of SSCB(NI)A 1992; “ widow’s pension ” means any pension payable under— section 38 of SSCBA 1992, or section 38 of SSCB(NI)A 1992. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Chapter 17 of this Part provides a partial exemption for a pension to which this section applies in respect of any part of the pension which is attributable to an increase in respect of a child (see section 645). Taxable pension income 578 If section 577 applies, the taxable pension income for a tax year is the full amount of the pension, benefit or allowance accruing in that year irrespective of when any amount is actually paid. Person liable for tax 579 If section 577 applies, the person liable for any tax charged under this Part is the person receiving or entitled to the pension, benefit or allowance. Chapter 5A PENSIONS UNDER REGISTERED PENSION SCHEMES Pensions 579A 1 This section applies to any pension under a registered pension scheme (but subject to subsection (2) and section 579CZA ). 2 This section does not apply to a pension under a registered pension scheme if and to the extent that, when it is paid, a liability to the unauthorised payments charge arises in respect of the amount of the payment (see section 208 of FA 2004). 3 Chapter 17 of this Part provides exemptions for certain annuities (see sections 646B and 646C: certain beneficiaries' annuities purchased out of unused or drawdown funds). Taxable pension income 579B If section 579A applies, the taxable pension income for a tax year is the full amount of the pension under the registered pension scheme that accrues in that year irrespective of when any amount is actually paid This is subject to section 579CA. Person liable for tax 579C If section 579A applies, the person liable for any tax charged under this Part is the person receiving or entitled to the pension under the registered pension scheme. Exemption for beneficiaries' income withdrawal in some cases 579CZA 1 Section 579A does not apply to dependants' income withdrawal or nominees' income withdrawal if it is paid— a in respect of a deceased member of a registered pension scheme who had not reached the age of 75 at the date of the member's death, and b to a person from the person's— i dependant's drawdown pension fund, ii dependant's flexi-access drawdown fund, or iii nominee's flexi-access drawdown fund, in respect of a money purchase arrangement under a registered pension scheme. 2 Section 579A does not apply to successors' income withdrawal if it is paid— a in respect of a deceased beneficiary of a deceased member of a registered pension scheme where the beneficiary had not reached the age of 75 at the date of the beneficiary's death, and b to a person from the person's successor's flexi-access drawdown fund in respect of a money purchase arrangement under a registered pension scheme, and here “ beneficiary ” means dependant, nominee or successor. 3 Subsection (1) is subject to the following provisions of this section. 4 Section 579A does apply to dependants' income withdrawal paid on or after 6 April 2015 to a person from the person's dependant's drawdown pension fund in respect of a money purchase arrangement under a registered pension scheme (“ the drawdown fund ”) if before 6 April 2015— a any payment of dependants' income withdrawal was made from— i the drawdown fund, or ii any fund represented (to any extent) by the drawdown fund, or b any payment was made of a dependants' short-term annuity purchased using sums or assets out of— i the drawdown fund, or ii any fund represented (to any extent) by the drawdown fund. 5 Section 579A does apply to dependants' income withdrawal paid in respect of a deceased member of a registered pension scheme to a person from the person's dependant's flexi-access drawdown fund in respect of a money purchase arrangement under a registered pension scheme (“ the new fund ”) if— a any of the sums or assets that make up the new fund— i became newly-designated dependant funds under paragraph 22A(2)(b) of Schedule 28 to FA 2004 or as a result of the operation of any of paragraphs 22B to 22D of that Schedule, or ii arise, or (directly or indirectly) derive, from any such newly-designated dependant funds or from sums or assets which so arise or derive, b before 6 April 2015— i any payment of dependants' income withdrawal in respect of the deceased member was made to the person from, or ii any payment in respect of the deceased member was made to the person of a dependants' short-term annuity purchased using sums or assets out of, the person's dependant's drawdown pension fund in respect of a money purchase arrangement under a registered pension scheme, and c any of the sums or assets that made up that fund at the time of that payment to any extent make up, or are represented by sums or assets that to any extent make up, the new fund. 6 Where relevant unused uncrystallised funds— a are designated on or after 6 April 2015 as available for the payment of dependants' drawdown pension or nominees' drawdown pension, and b as a result of the designation make up (to any extent) a person's dependant's flexi-access drawdown fund or nominee's flexi-access drawdown fund in respect of a money purchase arrangement under a registered pension scheme, but c are not so designated before the end of the relevant two-year period, section 579A does apply to dependants' income withdrawal or nominees' income withdrawal paid to the person from the fund so far as it is paid in respect of sums or assets for the time being representing the whole or any part of those relevant unused uncrystallised funds. 7 In this section— “dependant”, “nominee” and “successor” have the meaning given (respectively) by paragraphs 15, 27A and 27F of Schedule 28 to FA 2004, “dependant's drawdown pension fund”, “dependant's flexi-access drawdown fund”, “nominee's flexi-access drawdown fund” and “successor's flexi-access drawdown fund” have the meaning given (respectively) by paragraphs 22, 22A, 27E and 27K of Schedule 28 to FA 2004, “ money purchase arrangement ” has the meaning given by section 152 of FA 2004, and “ the relevant two-year period ”, in relation to relevant unused uncrystallised funds held for the purposes of a money purchase arrangement relating to a deceased individual under a registered pension scheme, means the period of two years beginning with the earlier of the day on which the scheme administrator of the scheme first knew of the individual's death and the day on which the scheme administrator could first reasonably have been expected to have known of it. 8 For the purposes of this section, sums or assets held after the death of a member of a registered pension scheme for the purposes of a money purchase arrangement relating to the member under the scheme are “relevant unused uncrystallised funds” if— a they are unused uncrystallised funds, and b the member had not reached the age of 75 at the date of the member's death. 9 Paragraph 27E(4) and (5) of Schedule 28 to FA 2004 (meaning of “unused uncrystallised funds”) apply for the purposes of subsection (8)(a). Temporary non-residents 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). Interpretation 579D In this Chapter— “ income withdrawal ” has the meaning given by paragraph 7 of that Schedule; “nominees' income withdrawal" has the meaning given by paragraph 27D of that Schedule; “successors' income withdrawal" has the meaning given by paragraph 27J of Schedule 28 to FA 2004. “ pension under a registered pension scheme ” includes— an annuity under, or purchased with sums or assets held for the purposes of, or representing acquired rights under, a registered pension scheme, and income withdrawal or dependants' income withdrawal , or nominees' income withdrawal or successors' income withdrawal, under a registered pension scheme. Chapter 6 Approved retirement benefits schemes Pensions and annuities Pensions and annuities 580 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taxable pension income 581 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Person liable for tax 582 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unauthorised payments Unauthorised payments 583 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taxable pension income 584 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Person liable for tax 585 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interpretation etc. Meaning of “retirement benefits scheme” etc. 586 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Application to marine pilots' benefit fund 587 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “employee” , “former civil partner and “ex-spouse” 588 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Regulations 589 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 7 Former approved superannuation funds Annuities Annuities 590 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taxable pension income 591 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Person liable for tax 592 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unauthorised payments Unauthorised payments: application of section 583 593 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interpretation Meaning of “former approved superannuation fund” 594 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 8 Approved personal pension schemes Annuities Annuities 595 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taxable pension income 596 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Person liable for tax 597 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income withdrawals Income withdrawals 598 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taxable pension income 599 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Person liable for tax 600 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unauthorised personal pension payments Unauthorised personal pension payments 601 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taxable pension income 602 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Person liable for tax 603 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interpretation Meaning of “personal pension scheme” and related expressions 604 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 9 Retirement annuity contracts Annuities 605 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “retirement annuity contract” 606 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taxable pension income 607 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Person liable for tax 608 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 10 Other employment-related annuities Annuities for the benefit of dependants 609 1 This section applies to any annuity which was granted for consideration consisting in whole or in part of sums — a which, in the tax year 2012-13 or an earlier tax year, satisfied the conditions for relief under section 273 of ICTA or section 459 of ITA 2007 (obligatory contributions to secure an annuity for the benefit of dependants), or b which fall within subsection (3) 2 But this section applies to an annuity which arises from a source outside the United Kingdom only if it is paid to a person resident in the United Kingdom. 3 A sum falls within this subsection if— a in the tax year 2013-14 or a later tax year, the sum is paid by an individual, or is deducted from an individual's earnings, under an Act or the individual's terms and conditions of employment, b the sum is for the purpose of— i securing a deferred annuity after the individual's death for the individual's surviving spouse or civil partner, or ii making provision after the individual's death for the individual's children, and c the individual— i is UK resident for the tax year in which the sum is paid or deducted, or ii at any time in that tax year, falls within any of paragraphs (a) to (f) of section 460(3) of ITA 2007 (matters relating to residence). 4 Subsection (3)(a) does not cover contributions paid by a person under— a Part 1 of the Social Security Contributions and Benefits Act 1992, or b Part 1 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992. 5 In subsection (3)(a) “ earnings ” has the meaning given by section 62. Annuities under non-registered occupational pension schemes 610 1 This section applies to— a any annuity paid under an occupational pension scheme that is not a registered pension scheme , and b any annuity acquired using funds held for the purposes of such an occupational pension scheme . 2 But this section applies to an annuity which arises from a source outside the United Kingdom only if it is paid to a person resident in the United Kingdom. 3 This section does not apply to an annuity to which Chapter 5A of this Part applies. 4 In this section “ occupational pension scheme ” has the same meaning as in Part 4 of FA 2004 (see section 150(5) of that Act). Annuities in recognition of another’s services 611 1 This section applies to any annuity purchased by any person in recognition of another person’s services in any office or employment. 2 But this section applies to an annuity which arises from a source outside the United Kingdom only if it is paid to a person resident in the United Kingdom. 3 This section does not apply to an annuity to which Chapter 5A of this Part applies. 4 For the purposes of this section “ office ” includes in particular any position which has an existence independent of the person who holds it and may be filled by successive holders. Exemptions from sections 609 to 611 611A 1 Chapter 17 of this Part provides exemptions for certain annuities (see sections 646B to 646E: certain beneficiaries' annuities purchased out of unused or drawdown funds). 2 See also paragraph 45A of Schedule 36 to FA 2004 (exemption in certain cases for payments on or after 6 April 2015 to beneficiaries under joint-life or similar annuities purchased before 6 April 2006). Taxable pension income: UK annuities 612 1 The taxable pension income for an annuity to which section 609, 610 or 611 applies is determined in accordance with this section if the annuity arises from a source in the United Kingdom. 2 The taxable pension income for a tax year is the full amount of the annuity arising in that year. Taxable pension income: foreign annuities 613 1 The taxable pension income for an annuity to which section 609, 610 or 611 applies is determined in accordance with this section if the annuity arises from a source outside the United Kingdom. 2 The taxable pension income for a tax year is the full amount of the annuity arising in the tax year, but subject to subsection (4). 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 The annuity is treated as relevant foreign income for the purposes of Chapters 2 and 3 of Part 8 of ITTOIA 2005 (relevant foreign income: remittance basis and deductions and reliefs). 5 But if the annuity arises in the Republic of Ireland, section 839 of that Act (annual payments payable out of relevant foreign income) applies with the omission of conditions B1 and B2 (and the reference to them in subsection (1)) and subsection (5)(a). 6 See also Chapter 4 of that Part (unremittable income). Person liable for tax 614 If section 609, 610 or 611 applies, the person liable for any tax charged under this Part is the person receiving or entitled to the annuity. Chapter 11 Certain overseas government pensions paid in the UK Certain overseas government pensions paid in the United Kingdom 615 1 This section applies to a pension if conditions A, B and C are met. 2 Condition A is that the pension— a is payable— i to a person who has been employed in overseas government service, or ii to the widow, widower, surviving civil partner, child, relative or dependant of a person who has been employed in overseas government service, and b is payable in respect of that service. 3 Condition B is that the pension— a is payable in the United Kingdom, and b is payable to a person who is resident in the United Kingdom. 4 Condition C is that the pension is payable by or on behalf of the government of— a a country which forms part of Her Majesty’s dominions, b any other country which is for the time being mentioned in Schedule 3 to the British Nationality Act 1981 (c. 61), or c any territory under Her Majesty’s protection. 5 But condition C is not met if the pension is payable out of the public revenue of the United Kingdom or Northern Ireland. 6 In condition A the references to a person being employed in overseas government service are to the person being employed outside the United Kingdom— a in the service of the Crown, or b in service under the government of a country or territory which falls within subsection (4). 7 In this Chapter “ pension ” includes a pension which is paid voluntarily or is capable of being discontinued. Taxable pension income 616 If section 615 applies, the taxable pension income for a tax year is the full amount of the pension accruing in that year irrespective of when any amount is actually paid. Deduction allowed from taxable pension income 617 A deduction of 10% is allowed from an amount of taxable pension income determined under section 616 (see section 567). Person liable for tax 618 If section 615 applies, the person liable for any tax charged under this Part is the person receiving or entitled to the pension. Chapter 12 House of Commons Members' Fund The House of Commons Members' Fund 619 This section applies to any periodical payment granted out of— a the House of Commons Members' Fund, b sums appropriated from that Fund, or c income from sums appropriated from that Fund. Meaning of “House of Commons Members' Fund” 620 In this Chapter “ House of Commons Members' Fund ” means the fund with that name specified in section 1 of the House of Commons Members' Fund Act 2016 . Taxable pension income 621 If section 619 applies, the taxable pension income for a tax year is the total amount of the payments made in that year. Person liable for tax 622 If section 619 applies, the person liable for any tax charged under this Part is the person receiving or entitled to the payments. Chapter 13 Return of surplus employee additional voluntary contributions Return of surplus employee additional voluntary contributions 623 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taxable pension income 624 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Person liable for tax 625 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax treated as paid 626 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “grossing up” 627 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interpretation 628 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 14 Pre-1973 pensions paid under the Overseas Pensions Act 1973 Pre-1973 pensions paid under the Overseas Pensions Act 1973 629 1 This section applies to a pension if— a it is paid under section 1 of OPA 1973 (whether or not paid out of a fund established under a scheme made under that section), b it is a pre-1973 pension, and c it is paid to— i the original pensioner, or ii the widow or widower of the original pensioner. 2 But this section does not apply to a part of a pension which is paid because the Pensions (Increase) Act 1971 (c. 56) applies to it (and accordingly section 569 applies to that part of the pension). 3 Chapter 18 of this Part provides an exemption where a pension to which this section applies is paid to a person who is not resident in the United Kingdom (see sections 647 and 651). Interpretation 630 1 For the purposes of this Chapter a person is the “ original pensioner ” in relation to a pension if— a the pension is payable by virtue of the person’s service, and b the person retired from that service before 6th April 1973. 2 For the purposes of this Chapter a pension is a “pre-1973 pension” if, immediately before 6th April 1973— a the pension was payable to— i the original pensioner, or ii the widow or widower of the original pensioner, and b that person was resident in the United Kingdom. Taxable pension income 631 1 If section 629 applies, the taxable pension income for a tax year is the full amount of the pension income arising in the tax year . 2 The full amount of the pension income arising in the tax year is to be calculated on the basis that the pension is 90% of its actual amount. 3 The pension income is treated as relevant foreign income for the purposes of section 838 of that Act (expenses attributable to collection or payment of relevant foreign income). Person liable for tax 632 If section 629 applies, the person liable for any tax charged under this Part is the person receiving or entitled to the pension. Chapter 15 Voluntary annual payments Voluntary annual payments 633 1 This section applies to an annual payment which— a is paid voluntarily, or b is capable of being discontinued, if conditions A and B are met. 2 Condition A is that the payment is paid to— a a former employee or a former office-holder, b the widow or widower or surviving civil partner of a former employee or former office-holder, or c any child, relative or dependant of a former employee or a former office-holder. 3 Condition B is that the payment is paid by or on behalf of— a the person— i who employed the former employee, or ii under whom the former office-holder held the office, or b the successors of that person. 4 But this section applies to a payment which is paid by or on a behalf of a person who is outside the United Kingdom only if it is paid to a person resident in the United Kingdom. 5 In this section “ office ” includes in particular any position which has an existence independent of the person who holds it and may be filled by successive holders. Taxable pension income: UK voluntary annual payments 634 1 The taxable pension income for payments to which section 633 applies is determined in accordance with this section if the payments are made by or on behalf of a person who is in the United Kingdom. 2 The taxable pension income for a tax year is the full amount of the payments accruing in that year irrespective of when any amount is actually paid. Taxable pension income: foreign voluntary annual payments 635 1 The taxable pension income for payments to which section 633 applies is determined in accordance with this section if the payments are made by or on behalf of a person who is outside the United Kingdom. 2 The taxable pension income for a tax year is the full amount of the pension income arising in the tax year, but subject to subsection (4) . 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 The full amount of the pension income arising in the tax year is treated as relevant foreign income for the purposes of Chapters 2 and 3 of Part 8 of ITTOIA 2005 (relevant foreign income: remittance basis and deductions and reliefs). 5 But if that pension income arises in the Republic of Ireland, section 839 of that Act (annual payments payable out of relevant foreign income) applies with the omission of conditions B1 and B2 (and the reference to them in subsection (1)) and subsection (5)(a). 6 See also Chapter 4 of that Part (unremittable income). Person liable for tax 636 If section 633 applies, the person liable for any tax charged under this Part is the person receiving or entitled to the payment. CHAPTER 15A Lump sums under registered pension schemes Exemptions and liabilities for certain lump sums under registered pension schemes 636A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taxable lump sum death benefits 636AA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trivial commutation and winding-up lump sums 636B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trivial commutation and winding-up lump sum death benefits 636C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction Introduction 637 1 This Chapter makes provision about the income tax treatment of authorised lump sums and authorised lump sum death benefits. 2 In this Chapter— a “ authorised lump sum ” means a lump sum permitted by the lump sum rule in section 166 of FA 2004 to be paid by a registered pension scheme to a member of the scheme; b “ authorised lump sum death benefit ” means a lump sum death benefit permitted by the lump sum death benefit rule in section 168 of that Act to be paid by a registered pension scheme in respect of a member of the scheme. 3 Expressions used in this Chapter and Part 4 of FA 2004 (pensions etc) have the same meaning in this Chapter as in that Part. Tax treatment of authorised lump sums Pension commencement lump sums 637A No liability to income tax arises on a pension commencement lump sum paid under a registered pension scheme. Pension commencement excess lump sums 637B A person to whom a pension commencement excess lump sum is paid under a registered pension scheme is treated as having taxable pension income for the tax year in which the payment is made equal to the amount of the lump sum. Serious ill-health lump sums 637C 1 Subject to subsections (2) and (4) , no liability to income tax arises on a serious ill-health lump sum paid under a registered pension scheme. 2 If— a a serious ill-health lump sum is paid under a registered pension scheme to a member who (at the time of the payment) is under 75, and b the lump sum exceeds the permitted maximum, section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme. 3 In subsection (2) “ the permitted maximum ”, in relation to a serious ill-health lump sum paid to a member, means so much of the member’s lump sum and death benefit allowance as is available on the member becoming entitled to the lump sum (see section 637S ). 4 If a serious ill-health lump sum is paid under a registered pension scheme to a member who (at the time of the payment) is 75 or over, section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme. Uncrystallised funds pension lump sums 637D 1 Subject to subsection (2) , where an uncrystallised funds pension lump sum is paid under a registered pension scheme— a no liability to income tax arises on 25% of the lump sum, and b section 579A (pensions) applies in relation to the remainder of the lump sum as it applies to any pension under a registered pension scheme. 2 If— a an uncrystallised funds pension lump sum is paid under a registered pension scheme, and b 25% of the lump sum is an amount that exceeds the permitted maximum, section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme. 3 In subsection (2) “ the permitted maximum ”, in relation to an uncrystallised funds pension lump sum paid to a member, means the lower of the following amounts— a so much of the member’s lump sum allowance as is available on the member becoming entitled to the lump sum (see section 637Q ); b so much of the member’s lump sum and death benefit allowance as is available on the member becoming entitled to the lump sum (see section 637S ). Short service refund lump sum 637E A short service refund lump paid under a registered pension scheme is subject to income tax in accordance with section 205 of FA 2004 (charge to tax on scheme administrator in respect of such a lump sum) but not otherwise. Refund of excess contributions lump sums 637F No liability to income tax arises on a refund of excess contributions lump sum paid under a registered pension scheme. Trivial commutation lump sums and winding-up lump sums 637G 1 Subject to subsection (2), a member of a registered pension scheme to whom— a a trivial commutation lump sum, or b a winding-up lump sum, is paid under the scheme is treated as having taxable pension income for the tax year in which the payment is made equal to the amount of the lump sum. 2 If, immediately before the lump sum is paid, the member has uncrystallised rights under any one or more arrangements under the pension scheme, the amount of the taxable pension income — a if all the member’s rights under the pension scheme are uncrystallised rights, is 75% of the lump sum, and b otherwise, is reduced by the tax-free element (if any). 3 In subsection (2) “ the tax-free element ” means 25% of the value of any uncrystallised rights extinguished by the lump sum. 4 In this section “ uncrystallised rights ” has the same meaning as in section 212 of FA 2004; and the value for the purposes of this section of any uncrystallised rights is to be calculated in accordance with that section. Tax treatment of authorised lump sum death benefits Defined benefits lump sum death benefits 637H 1 Subject to subsections (2) to (6) , no liability to income tax arises on a defined benefits lump sum death benefit paid under a registered pension scheme. 2 If— a a defined benefits lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, b the lump sum is paid before the end of the relevant two year period, and c the lump sum exceeds the permitted maximum, section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme. 3 If— a a defined benefits lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, b the lump sum is not paid before the end of the relevant two year period, and c the lump sum is paid to a qualifying person, section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme. 4 If— a a defined benefits lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, b the lump sum is not paid before the end of the relevant two year period, and c the lump sum is paid to a non-qualifying person, the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise. 5 If a defined benefits lump sum death benefit under a registered pension scheme is paid— a in respect of a member who, on death, is 75 or over, and b to a qualifying person, section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme. 6 If a defined benefits lump sum death benefit under a registered pension scheme is paid— a in respect of a member who, on death, is 75 or over, and b to a non-qualifying person, the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise. 7 In this section— “ non-qualifying person ” has the same meaning as in section 206 of FA 2004; “ the permitted maximum ”, in relation to a defined benefits lump sum death benefit paid in respect of a member, means so much of the member’s lump sum and death benefit allowance as is available on the lump sum being paid (see section 637S ); “ qualifying person ” means a person who is not a non-qualifying person; “ the relevant two year period ” means the period of two years beginning with the day on which the scheme administrator of the scheme first knew of the member’s death or (if earlier) the day on which the scheme administrator could first reasonably have been expected to have known of it. Pension protection lump sum death benefits 637I 1 Subject to subsections (2) , (3) and (4) no liability to income tax arises on a pension protection lump sum death benefit paid under a registered pension scheme. 2 If— a a pension protection lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, and b the lump sum exceeds the permitted maximum, section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme. 3 If a pension protection lump sum death benefit under a registered pension scheme is paid— a in respect of a member who, on death, is 75 or over, and b to a qualifying person, section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme. 4 If a pension protection lump sum death benefit under a registered pension scheme is paid— a in respect of a member who, on death, is 75 or over, and b to a non-qualifying person, the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise. 5 In this section— “ non-qualifying person ” has the same meaning as in section 206 of FA 2004; “ the permitted maximum ”, in relation to a pension protection lump sum death benefit paid in respect of a member, means so much of the member’s lump sum and death benefit allowance as is available on the lump sum being paid (see section 637S ); “ qualifying person ” means a person who is not a non-qualifying person. Uncrystallised funds lump sum death benefits 637J 1 Subject to subsections (2) to (6) , no liability to income tax arises on an uncrystallised funds lump sum death benefit paid under a registered pension scheme. 2 If— a an uncrystallised funds lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, b the lump sum is paid before the end of the relevant two year period, and c the lump sum exceeds the permitted maximum, section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme. 3 If— a an uncrystallised funds lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, b the lump sum is not paid before the end of the relevant two year period, and c the lump sum is paid to a qualifying person, section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme. 4 If— a an uncrystallised funds lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, b the lump sum is not paid before the end of the relevant two year period, and c the lump sum is paid to a non-qualifying person, the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise. 5 If an uncrystallised funds lump sum death benefit under a registered pension scheme is paid— a in respect of a member who, on death, is 75 or over, and b to a qualifying person, section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme. 6 If an uncrystallised funds lump sum death benefit under a registered pension scheme is paid— a in respect of a member who, on death, is 75 or over, and b to a non-qualifying person, the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise. 7 In this section— “ non-qualifying person ” has the same meaning as in section 206 of FA 2004; “ the permitted maximum ”, in relation to an uncrystallised funds lump sum death benefit paid in respect of a member, means so much of the member’s lump sum and death benefit allowance as is available on the lump sum being paid (see section 637S ); “ qualifying person ” means a person who is not a non-qualifying person; “ the relevant two year period ” means the period of two years beginning with the day on which the scheme administrator of the scheme first knew of the member’s death or (if earlier) the day on which the scheme administrator could first reasonably have been expected to have known of it. Annuity protection lump sum death benefits 637K 1 Subject to subsections (2) , (3) and (4) , no liability to income tax arises on an annuity protection lump sum death benefit paid under a registered pension scheme. 2 If— a an annuity protection lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, and b the lump sum exceeds the permitted maximum, section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme. 3 If an annuity protection lump sum death benefit under a registered pension scheme is paid— a in respect of a member who, on death, is 75 or over, and b to a qualifying person, section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme. 4 If an annuity protection lump sum death benefit under a registered pension scheme is paid— a in respect of a member who, on death, is 75 or over, and b to a non-qualifying person, the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise. 5 In this section— “ non-qualifying person ” has the same meaning as in section 206 of FA 2004; “ the permitted maximum ”, in relation to an annuity protection lump sum death benefit paid in respect of a member, means so much of the member’s lump sum and death benefit allowance as is available on the lump sum being paid (see section 637S ); “ qualifying person ” means a person who is not a non-qualifying person. Drawdown pension fund lump sum death benefits 637L 1 Subject to subsections (2) to (6) , no liability to income tax arises on a drawdown pension fund lump sum death benefit paid under a registered pension scheme. 2 If— a a drawdown pension fund lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, b the lump sum is paid before the end of the relevant two year period, and c the lump sum exceeds the permitted maximum, section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme. 3 If— a a drawdown pension fund lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, b the lump sum is not paid before the end of the relevant two year period, and c the lump sum is paid to a qualifying person, section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme. 4 If— a a drawdown pension fund lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, b the lump sum is not paid before the end of the relevant two year period, and c the lump sum is paid to a non-qualifying person, the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise. 5 If a drawdown pension fund lump sum death benefit under a registered pension scheme is paid— a in respect of a member who, on death, is 75 or over, and b to a qualifying person, section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme. 6 If a drawdown pension fund lump sum death benefit under a registered pension scheme is paid— a in respect of a member who, on death, is 75 or over, and b to a non-qualifying person, the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise. 7 A reference in this section to a “ member ”, in relation to a drawdown pension fund lump sum death benefit under paragraph 17(2) of Schedule 29 to FA 2004 (lump sum payable on death of dependant of deceased member), is a reference to the dependant on whose death the lump sum is payable. 8 In this section— “ non-qualifying person ” has the same meaning as in section 206 of FA 2004; “ the permitted maximum ”, in relation to a drawdown pension fund lump sum death benefit paid in respect of a member, means so much of the member’s lump sum and death benefit allowance as is available on the lump sum being paid (see section 637S ); “ qualifying person ” means a person who is not a non-qualifying person; “ the relevant two year period ” means the period of two years beginning with the day on which the scheme administrator of the scheme first knew of the member’s death or (if earlier) the day on which the scheme administrator could first reasonably have been expected to have known of it. Flexi-access drawdown lump sum death benefits 637M 1 Subject to subsections (2) to (6) , no liability to income tax arises on a flexi-access drawdown lump sum death benefit paid under a registered pension scheme. 2 If— a a flexi-access drawdown lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, b the lump sum is paid before the end of the relevant two year period, and c the lump sum exceeds the permitted maximum, section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme. 3 If— a a flexi-access drawdown lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, b the lump sum is not paid before the end of the relevant two year period, and c the lump sum is paid to a qualifying person, section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme. 4 If— a a flexi-access drawdown lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, b the lump sum is not paid before the end of the relevant two year period, and c the lump sum is paid to a non-qualifying person, the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise. 5 If a flexi-access drawdown lump sum death benefit under a registered pension scheme is paid— a in respect of a member who, on death, is 75 or over, and b to a qualifying person, section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme. 6 If a flexi-access drawdown lump sum death benefit under a registered pension scheme is paid— a in respect of a member who, on death, is 75 or over, and b to a non-qualifying person, the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise. 7 A reference in this section to a “member”— a in relation to a flexi-access drawdown lump sum death benefit under paragraph 17A(2) of Schedule 29 to FA 2004 (lump sum payable on death of dependant of deceased member), is a reference to the dependant on whose death the lump sum is payable; b in relation to a flexi-access drawdown lump sum death benefit under paragraph 17A(3) or (4) of Schedule 29 to FA 2004 (lump sum payable on death of nominee or successor of deceased member), is a reference to the nominee or successor on whose death the lump sum is payable. 8 In this section— “ non-qualifying person ” has the same meaning as in section 206 of FA 2004; “ the permitted maximum ”, in relation to a flexi-access drawdown lump sum death benefit paid in respect of a member, means so much of the member’s lump sum and death benefit allowance as is available on the lump sum being paid (see section 637S ); “ qualifying person ” means a person who is not a non-qualifying person; “ the relevant two year period ” means the period of two years beginning with the day on which the scheme administrator of the scheme first knew of the member’s death or (if earlier) the day on which the scheme administrator could first reasonably have been expected to have known of it. Trivial commutation lump sum death benefits 637N A person to whom a trivial commutation lump sum death benefit is paid under a registered pension scheme is treated as having taxable pension income for the tax year in which the payment is made equal to the amount of the lump sum. Allowances Individual’s lump sum allowance 637P An individual’s “lump sum allowance” is £268,275. Availability of individual’s lump sum allowance 637Q 1 This section is about the availability of an individual’s lump sum allowance on the occurrence of a relevant benefit crystallisation event (“the current event”). 2 In this section— a “ relevant benefit crystallisation event ”, in relation to an individual, means the individual becoming entitled to a relevant lump sum; b “ relevant lump sum ” means— i a pension commencement lump sum, or ii an uncrystallised funds pension lump sum. 3 If no relevant benefit crystallisation event has occurred in relation to the individual before the current event, the whole of the individual’s lump sum allowance is available. 4 Otherwise, the amount of the individual’s lump sum allowance that is available is— a so much of that allowance as is left after deducting the previously-used amount, or b if none is left after deducting that amount, nil. 5 For this purpose “the previously-used amount” is the aggregate of the non-taxable amounts in relation to each relevant benefit crystallisation event that has occurred in relation to the individual before the current event. 6 In subsection (5) “ non-taxable amount ”, in relation to a relevant benefit crystallisation event, means so much (if any) of the relevant lump sum to which the event relates as is not, by virtue of any provision of this Chapter, taxable pension income . 7 A reference in this section to a relevant benefit crystallisation event is to a relevant benefit crystallisation event occurring on or after 6 April 2024. 8 For transitional provision under which the amount of an individual’s lump sum allowance available on the occurrence of a relevant benefit crystallisation event may be reduced as a result of events occurring before 6 April 2024, see paragraph 125 of Schedule 9 to FA 2024. Individual’s lump sum and death benefit allowance 637R An individual’s “lump sum and death benefit allowance” is £1,073,100. Availability of individual’s lump sum and death benefit allowance 637S 1 This section is about the availability of an individual’s lump sum and death benefit allowance on the occurrence of a relevant benefit crystallisation event (“the current event”). 2 In this section— a “ relevant benefit crystallisation event ”, in relation to an individual, means— i the individual becoming entitled to a relevant lump sum, or ii a person being paid a relevant lump sum death benefit in respect of the individual; b “ relevant lump sum ” means— i a pension commencement lump sum, ii a serious ill-health lump sum, or iii an uncrystallised funds pension lump sum; c “ relevant lump sum death benefit ” means any authorised lump sum death benefit other than— i a charity lump sum death benefit, or ii a trivial commutation lump sum death benefit. 3 If no relevant benefit crystallisation event has occurred in relation to the individual before the current event, the whole of the individual’s lump sum and death benefit allowance is available. 4 Otherwise, the amount of the individual’s lump sum and death benefit allowance that is available is— a so much of that allowance as is left after deducting the previously-used amount, or b if none is left after deducting that amount, nil. 5 For this purpose “the previously-used amount” is the aggregate of the non-taxable amounts in relation to each relevant benefit crystallisation event that has occurred in relation to the individual before the current event. 6 In subsection (5) “ non-taxable amount ”, in relation to a relevant benefit crystallisation event, means so much (if any) of the relevant lump sum, or relevant lump sum death benefit, to which the event relates as is not, by virtue of any provision of this Chapter, taxable pension income . 7 Where more than one relevant benefit crystallisation event within subsection (2) (a) (i) occurs in relation to an individual on the same day, it is for the individual to decide the order in which they are to be treated as occurring for the purposes of this section. 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 A reference in this section to a relevant benefit crystallisation event is to a relevant benefit crystallisation event occurring on or after 6 April 2024. 10 For transitional provision under which the amount of an individual’s lump sum and death benefit allowance available on the occurrence of a relevant benefit crystallisation event may be reduced as a result of events occurring before 6 April 2024, see paragraph 126 of Schedule 9 to FA 2024. 11 For further transitional provision that may affect the operation of this section, see paragraph 20 of Schedule 36 to FA 2004 (pensions in payment before commencement of Part 4 of FA 2004). Section 637S: multiple lump sum death benefits paid 637T 1 This section applies where two or more relevant benefit crystallisation events within section 637S(2)(a)(ii) occur in relation to an individual. 2 The relevant benefit crystallisation events are to be treated for the purposes of section 637S as occurring simultaneously— a immediately before the individual’s death, and b immediately after any pension commencement lump sum to which the individual becomes entitled immediately before death by virtue of section 166(2) of FA 2004 (lump sum rule). 3 In the application of section 637S for the purpose of determining how much of the individual’s lump sum and death benefit allowance is available on the occurrence of any of the relevant benefit crystallisation events mentioned in subsection (1) — a the reference in subsection (3) of that section to the whole of the individual’s lump sum and death benefit allowance is to the relevant proportion of that allowance, and b the reference in subsection (4) of that section to so much of the individual’s lump sum and death benefit allowance as is left after deducting the previously-used amount is to the relevant proportion of so much of that allowance as is left after deducting that amount. 4 In subsection (3) , “ the relevant proportion ” means— A B where— A is the amount of the lump sum death benefit the payment of which constitutes the relevant benefit crystallisation event in question; B is the aggregate of the amounts of each lump sum death benefit the payment of which constitutes a relevant benefit crystallisation event mentioned in subsection (1) . Chapter 16 Exemption for certain lump sums Chapter 17 Exemptions: any taxpayer Awards for bravery 638 1 No liability to income tax arises on a pension or annuity if it is paid to the holder of an award for bravery in respect of the award. 2 In this section “ award for bravery ” means— the Victoria Cross, the George Cross, the Albert Medal, the Edward Medal, the Military Cross, the Distinguished Flying Cross, the Distinguished Conduct Medal, the Conspicuous Gallantry Medal, the Distinguished Service Medal, the Military Medal, the Distinguished Flying Medal. Pensions in respect of death due to military or war service 639 1 No liability to income tax arises on these pensions and allowances— a a pension or allowance payable by or on behalf of the Ministry of Defence under so much of instrument specified in subsection (2), as relates to death due to— i service in the armed forces of the Crown, ii wartime service in the merchant navy, or iii war injuries; b a pension or allowance— i payable by the Ministry of Defence in respect of death due to peacetime service in the armed forces of the Crown before 3rd September 1939, and ii payable at rates, and subject to conditions, similar to those of a pension within paragraph (a); c a pension or allowance— i payable under the law of a country other than the United Kingdom, and ii of a character substantially similar to a pension within paragraph (a) or (b). 2 The instruments referred to in subsection (1)(a) are— Defence (Local Defence Volunteers) Regulations 1940 (S.R. & O. 1940/748), War Pensions (Coastguards) Scheme 1944 (S.R. & O. 1944/500), War Pensions (Naval Auxiliary Personnel) Scheme 1964 ( S.I. 1964/1985), Pensions (Polish Forces) Scheme 1964 ( S.I. 1964/2007), War Pensions (Mercantile Marine) Scheme 1964 ( S.I. 1964/2058), Order by Her Majesty concerning pensions and other grants in respect of disablement or death due to service in the Home Guard (1964 Cmnd. 2563), Order by Her Majesty concerning pensions and other grants in respect of disablement or death due to service in the Home Guard after 27th April 1952 (1964 Cmnd. 2564), Order by Her Majesty concerning pensions and other grants in respect of disablement or death due to service in the Ulster Defence Regiment (1971 Cmnd. 4567), Personal Injuries (Civilians) Scheme 1983 ( S.I. 1983/686), Naval, Military and Air Forces etc. (Disablement and Death) Service Pensions Order 1983 ( S.I. 1983/883). 3 The Treasury may by order amend subsection (2). Exemption under section 639 where income withheld 640 1 This section applies if— a an individual is entitled to both of the following— i a pension or allowance mentioned in section 639 (“pension A”), and ii any other pension or allowance (“pension B”), and b the whole or a part of pension A is withheld because of the individual’s entitlement to pension B. 2 In such a case, an amount of pension B equal to the withheld amount of pension A is treated for the purposes of section 639 as part of pension A. Lump sums provided under armed forces early departure scheme 640A No liability to income tax arises on a lump sum provided under a scheme established by the Armed Forces Early Departure Payments Scheme Order 2005 ( S.I. 2005/437) or the Armed Forces Early Departure Payments Scheme Regulations 2014 ( S.I. 2014/2328) . Wounds and disability pensions 641 1 No liability to income tax arises on— a a wounds pension granted to a member of the armed forces of the Crown; b retired pay of a disabled officer granted on account of medical unfitness attributable to or aggravated by service in the armed forces of the Crown; c a disablement or disability pension granted to a member of the armed forces of the Crown, other than a commissioned officer, on account of medical unfitness attributable to or aggravated by service in the armed forces of the Crown; d a disablement pension granted to a person who has been employed in the nursing services of any of the armed forces of the Crown on account of medical unfitness attributable to or aggravated by service in the armed forces of the Crown; e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f an injury or disablement pension payable under any War Risks Compensation Scheme for the Mercantile marine; g a pension— i granted to a person on account of disablement, and ii payable under any scheme made under section 3, 4 or 5 of the Pensions (Navy, Army, Air Force and Mercantile Marine) Act 1939 (c. 83). h a benefit under a scheme established by an order under section 1(2) of the Armed Forces (Pensions and Compensation) Act 2004 payable to a person by reason of his illness or injury— i by way of a lump sum, or ii following the termination of the person's service in the armed forces or reserve forces. 2 But if the Secretary of State certifies that a pension or retired pay of a kind listed in subsection (1) is only partly attributable to disablement or disability, that subsection applies only to the part attributable to disablement or disability. Compensation for National-Socialist persecution 642 No liability to income tax arises on a pension or annuity which is payable under any special provision for victims of National-Socialist persecution which is made by the law of— a the Federal Republic of Germany or any part of it, or b Austria. Netherlands Benefit Act for Victims of Persecution 1940-1945 642A No liability to income tax arises on a pension, annuity, allowance or other payment provided in accordance with the provisions of the scheme established under the law of the Netherlands and known as Wet uitkeringen vervolgingsslachtoffers 1940-1945 . Malawi, Trinidad and Tobago and Zambia government pensions 643 1 No liability to income tax arises on— a a Malawi government pension, b a Trinidad and Tobago government pension, or c a Zambia government pension, if conditions A, B and C are met. 2 Condition A is that the pension is paid to— a the original pensioner, or b the widow or widower or surviving civil partner of the original pensioner. 3 Condition B is that the pension is now paid under section 1 of OPA 1973 (whether or not it is paid out of a fund established under a scheme made under that section). 4 Condition C is that, at the time the pension is paid, provision is made by double taxation relief arrangements which would exempt the pension from income tax in the United Kingdom if the pension were still paid by the relevant government (rather than under section 1 of OPA 1973). 5 Subsection (1) does not apply to any part of a pension which is paid because the Pensions (Increase) Act 1971 (c. 56) applies to it. 6 In this section— “ double taxation relief arrangements ” means arrangements which have effect under section 2(1) of TIOPA 2010; “ Malawi government pension ” means a pension payable by the government of Malawi for services rendered— to the government of Malawi, or to the government of the Federation of Rhodesia and Nyasaland, in the discharge of government functions; “ Trinidad and Tobago government pension ” means a pension payable by the government of Trinidad and Tobago for services rendered to the government of Trinidad and Tobago in the discharge of governmental functions; “ Zambia government pension ” means a pension payable by the government of Zambia for services rendered— to the government of Zambia, to the government of Northern Rhodesia, or to the government of the Federation of Rhodesia and Nyasaland, in the discharge of governmental functions. 7 For the purposes of this section a person is the “ original pensioner ” in relation to a pension if— a the pension is payable by virtue of the person’s service, and b the person retired from that service before 6th April 1973. Pensions payable where employment ceased due to disablement 644 1 No liability to income tax arises on the exempt amount of a disablement pension. 2 For the purposes of this section a pension is a “disablement pension” if— a the pension is payable because a person has ceased to hold an employment or office because of disablement, and b that disablement is attributable to— i performance of the duties of the employment or office, or ii war injuries. But “ disablement pension ” does not include any pension to which section 579A applies. 3 The exempt amount of a disablement pension is determined in accordance with the following steps. Step 1 Determine what pension would have been payable if— a the person had ceased to hold the employment or office because of the disablement mentioned in subsection (2)(a), but b the disablement had not been attributable to— i performance of the duties of the employment or office, or ii war injuries. Step 2 If no pension would have been payable, the exempt amount is the amount of the disablement pension. If a pension of a smaller amount than the disablement pension would have been payable, the exempt amount is the amount by which the disablement pension exceeds the smaller amount. In any other case, the exempt amount is nil. 4 For the purposes of this section “ office ” includes in particular any position which has an existence independent of the person who holds it and may be filled by successive holders. Health and employment insurance payments 644A 1 No liability to income tax arises in respect of a pension or annuity payment if or to the extent that— a were the payment an annual payment falling within Chapter 7 of Part 5 of ITTOIA 2005, it would be exempt from income tax under section 735 of that Act (health and employment insurance payments), and b it meets conditions A and B. 2 Condition A is that the payments are made— a to a person (“ the pensioner ”) who made payments or contributions in respect of premiums under an insurance policy which another person took out wholly or partly for the pensioner's benefit, or b to the pensioner's spouse or civil partner . 3 Condition B is that the payments are attributable on a just and reasonable basis to the payments or contributions in respect of premiums. Social security pensions: increases in respect of children 645 1 No liability to income tax arises on a part of a social security pension which is attributable to an increase in respect of a child. 2 In this section “ social security pension ” means— a any pension, benefit or allowance to which section 577 applies, and b any pension, benefit or allowance which— i is payable under the law of a country or territory outside the United Kingdom, and ii is substantially similar in character to a pension, benefit or allowance to which section 577 applies. Former miners etc: coal and allowances in lieu of coal 646 1 No liability to income tax arises on— a the provision of coal or smokeless fuel— i to a former colliery worker, or ii to the widow or widower or surviving civil partner of a former colliery worker, or b any allowance paid to such a person in lieu of such provision, if the condition in subsection (2) is met. 2 That condition is that the amount of coal or fuel provided or in respect of which the allowance is paid does not substantially exceed the amount reasonably required for personal use. 3 That condition is assumed to be met unless the contrary is shown. 4 In this section “ former colliery worker ” means— a any person who has ceased to be employed as a coal miner, or b any other person who has ceased to be employed at or about a colliery otherwise than in clerical, administrative or technical work. Foreign pensions of consular employees 646A 1 No liability to income tax arises in respect of foreign pension income of a consular officer or employee in the United Kingdom for a foreign state if— a Her Majesty by Order in Council directs that this section applies to the foreign state for the purpose of giving effect to a reciprocal arrangement with that state, and b the officer or employee meets conditions A to C. 2 Condition A is that the officer or employee is not— a a British citizen, b a British overseas territories citizen, c a British National (Overseas), or d a British Overseas citizen. 3 Condition B is that the officer or employee is not engaged in any trade, profession, vocation or employment in the United Kingdom, otherwise than as a consular officer or employee of the state in question. 4 Condition C is that the officer or employee— a is a permanent employee of that state, or b was not ordinarily resident in the United Kingdom immediately before becoming a consular officer or employee in the United Kingdom of that state. 5 In this section— “ consular officer or employee ” includes any person employed for the purposes of the official business of a consular officer at— any consulate, any consular establishment, or any other premises used for those purposes, “ foreign pension income ” means— income to which section 573 or 629 applies, and income arising from a source outside the United Kingdom to which section 609, 610, 611 or 633 applies; and “ reciprocal agreement ” has the same meaning as in section 302. 6 Section 302(5) to (7) apply to an Order under subsection (1) and the operation of this section as they apply to an Order under section 302(1) and the operation of section 302. Registered schemes: beneficiaries' annuities from unused funds 646B 1 The charge to tax under this Part does not apply to a dependants' annuity, or nominees' annuity, payable to a person if— a it is paid in respect of a deceased member of a registered pension scheme who had not reached the age of 75 at the date of the member's death, b the member died on or after 3 December 2014, c either— i the annuity was purchased using unused drawdown funds or unused uncrystallised funds, or ii the annuity was purchased using sums or assets transferred to an insurance company by another insurance company in consequence of an annuity that was payable to the person by that other company, and was a dependants' annuity or nominees' annuity (as the case may be) purchased as mentioned in sub-paragraph (i) or this sub-paragraph, ceasing to be payable, d in a case where the annuity is purchased as mentioned in paragraph (c)(i) and using (whether or not exclusively) unused uncrystallised funds, the person became entitled to it before the end of the period of two years beginning with the earlier of— i the day on which the scheme administrator first knew of the member's death, and ii the day on which the scheme administrator could first reasonably have been expected to know of the death, e in a case where the annuity is purchased as mentioned in paragraph (c)(ii) and the prior annuity purchased as mentioned in paragraph (c)(i) was purchased using (whether or not exclusively) unused uncrystallised funds, the person became entitled to that prior annuity before the end of the period of two years specified in paragraph (d), f no payment of the annuity is made before 6 April 2015, and g in a case where the annuity is purchased as mentioned in paragraph (c)(ii), no payment is made before 6 April 2015 of— i the prior annuity purchased as mentioned in paragraph (c)(i), and ii any other annuity purchased as mentioned in paragraph (c)(ii) that is in the chain of annuities beginning with that prior annuity and ending with the annuity. 2 The charge to tax under this Part does not apply to a successor's annuity payable to a person if— a it is paid in respect of a deceased member of a registered pension scheme, b it is paid on the subsequent death of a dependant, nominee or successor of the member (“ the beneficiary ”), c the beneficiary had not reached the age of 75 at the date of the beneficiary's death, d the beneficiary died on or after 3 December 2014, e either— i the annuity was purchased using undrawn funds, or ii the annuity was purchased using sums or assets transferred to an insurance company by another insurance company in consequence of an annuity that was payable to the person by that other company, and was a successors' annuity purchased as mentioned in sub-paragraph (i) or this sub-paragraph, ceasing to be payable, f no payment of the annuity is made before 6 April 2015, and g in a case where the annuity is purchased as mentioned in paragraph (e)(ii), no payment is made before 6 April 2015 of— i the prior annuity purchased as mentioned in paragraph (e)(i), and ii any other annuity purchased as mentioned in paragraph (e)(ii) that is in the chain of annuities beginning with that prior annuity and ending with the annuity. 3 The charge to tax under this Part does not apply to a dependants' annuity or nominees' annuity payable to a person if— a it is paid in respect of a deceased member of a registered pension scheme who had not reached the age of 75 at the date of the member's death, b the member died on or after 3 December 2014, c the annuity— i was purchased together with a lifetime annuity payable to the member, or ii was purchased using sums or assets transferred to an insurance company by another insurance company in consequence of an annuity that was payable to the person by that other company, and was a dependants' annuity or nominees' annuity (as the case may be) purchased as mentioned in sub-paragraph (i) or this sub-paragraph, ceasing to be payable, d no payment of the annuity is made before 6 April 2015, and e in a case where the annuity is purchased as mentioned in paragraph (c)(ii), no payment is made before 6 April 2015 of— i the prior annuity purchased as mentioned in paragraph (c)(i), and ii any other annuity purchased as mentioned in paragraph (c)(ii) that is in the chain of annuities beginning with that prior annuity and ending with the annuity. 4 The charge to tax under this Part does not apply to payments to a person of a lifetime annuity if— a the payments are payable to the person under pension rule 2 (see section 165 of FA 2004), b either— i a member of a registered pension scheme was entitled to be paid the annuity immediately before the member's death, or ii the annuity was purchased using sums or assets transferred to an insurance company by another insurance company in consequence of an annuity to which there was entitlement as mentioned in sub-paragraph (i), or which was purchased as mentioned in this sub-paragraph, ceasing to be payable, c the member had not reached the age of 75 at the date of the member's death, d the member died on or after 3 December 2014, e any payment of the annuity made before 6 April 2015 is made to the member, and f in a case where the annuity is one purchased as mentioned in paragraph (b)(ii), any payment made before 6 April 2015— i of the prior annuity to which there is entitlement as mentioned in paragraph (b)(i), or ii of any other annuity purchased as mentioned in paragraph (b)(ii) that is in the chain of annuities beginning with that prior annuity and ending with the annuity, is made to the member. 5 Paragraph 27E(3) to (5) of Schedule 28 to FA 2004 (meaning of “ unused drawdown funds ” and “ unused uncrystallised funds ”) apply for the purposes of subsection (1). 6 Paragraph 27FA(2) of Schedule 28 to FA 2004 (meaning of “undrawn funds”) applies for the purposes of subsection (2)(e). 7 For the purposes of subsection (3)(c), a dependants' annuity or nominees' annuity is purchased together with a lifetime annuity if the dependants' annuity or nominees' annuity (as the case may be) is related to the lifetime annuity, and paragraph 3(4A) and (4B) of Schedule 29 to FA 2004 (meaning of “related”) apply for the purposes of this subsection. 8 For the purposes of this section, a person becomes entitled to an annuity when the person first acquires an actual (rather than a prospective right) to receive the annuity. Registered schemes: beneficiaries' annuities from drawdown funds 646C 1 The charge to tax under this Part does not apply to a dependants' short-term annuity, nominees' short-term annuity, dependants' annuity or nominees' annuity paid to a person if— a it is paid in respect of a deceased member of a registered pension scheme who had not reached the age of 75 at the date of the member's death, b the member died on or after 3 December 2014, and c the annuity was purchased using sums or assets out of the person's— i dependant's drawdown pension fund, ii dependant's flexi-access drawdown fund, or iii nominee's flexi-access drawdown fund, in respect of a money purchase arrangement under a registered pension scheme. 2 The charge to tax under this Part does not apply to a successors' short-term annuity, or successors' annuity, paid to a person if— a it is paid in respect of a deceased beneficiary of a deceased member of a registered pension scheme where the beneficiary had not reached the age of 75 at the date of the beneficiary's death, b the beneficiary died on or after 3 December 2014, and c the annuity was purchased using sums or assets out of the person's successor's flexi-access drawdown fund in respect of a money purchase arrangement under a registered pension scheme, and here “ beneficiary ” means dependant, nominee or successor. 3 Subsection (1) is subject to subsections (4) to (6). 4 Subsection (1) does not exempt payments on or after 6 April 2015 to a person of a dependants' short-term annuity, or dependants' annuity, payable in respect of a deceased member of a registered pension scheme and purchased using sums or assets out of the person's dependant's drawdown pension fund in respect of a money purchase arrangement under a registered pension scheme (“ the drawdown fund ”) if before 6 April 2015— a any payment of the annuity was made, b any payment was made of any other dependants' short-term annuity, or dependants' annuity, purchased using sums or assets out of— i the drawdown fund, or ii any fund represented (to any extent) by the drawdown fund, or c any payment of dependants' income withdrawal was made from— i the drawdown fund, or ii any fund represented (to any extent) by the drawdown fund. 5 Subsection (1) does not exempt payments to a person of a dependants' short-term annuity, or dependants' annuity, payable in respect of a deceased member of a registered pension scheme and purchased using sums or assets out of the person's dependant's flexi-access drawdown fund in respect of a money purchase arrangement under a registered pension scheme (“ the new fund ”) if— a any of the sums or assets that make up the new fund— i became newly-designated dependant funds under paragraph 22A(2)(b) of Schedule 28 to FA 2004 or as a result of the operation of any of paragraphs 22B to 22D of that Schedule, or ii arise, or (directly or indirectly) derive, from any such newly-designated funds or from sums or assets that to any extent so arise or derive, b before 6 April 2015— i any payment of dependants' income withdrawal in respect of the deceased member was made to the person from, or ii any payment in respect of the deceased member was made to the person of a dependants' short-term annuity, or dependants' annuity, purchased using sums or assets out of, the person's dependant's drawdown pension fund in respect of a money purchase arrangement under a registered pension scheme, and c any of the sums or assets that made up that fund at the time of the payment make up, or are represented by sums or assets that to any extent make up, the new fund. 6 Where relevant unused uncrystallised funds— a are designated on or after 6 April 2015 as available for the payment of dependants' drawdown pension or nominees' drawdown pension, and b as a result of the designation make up (to any extent) a person's dependant's flexi-access drawdown fund or nominee's flexi-access drawdown fund in respect of a money purchase arrangement under a registered pension scheme, but c are not so designated before the end of the relevant two-year period, subsection (1) does not exempt payments to the person of a dependants' short-term annuity, nominees' short-term annuity, dependants' annuity or nominees' annuity if any of the sums or assets used to purchase the annuity represent, at the time of the purchase, the whole or any part of those relevant unused uncrystallised funds. 7 In this section “ the relevant two-year period ”, in relation to relevant unused uncrystallised funds held for the purposes of a money purchase arrangement relating to a deceased individual under a registered pension scheme, means the period of two years beginning with the earlier of— a the day on which the scheme administrator first knew of the individual's death, and b the day on which the scheme administrator could first reasonably have been expected to know of it. 8 For the purposes of this section, sums or assets held after the death of a member of a registered pension scheme for the purposes of a money purchase arrangement relating to the member under the scheme are “relevant unused uncrystallised funds” if— a they are unused uncrystallised funds, and b the member had not reached the age of 75 at the date of the member's death. 9 Paragraph 27E(4) and (5) of Schedule 28 to FA 2004 (meaning of “unused uncrystallised funds”) apply for the purposes of subsection (8)(a). Non-registered schemes: beneficiaries' annuities from unused funds 646D 1 The charge to tax under this Part does not apply to an annuity payable to a person if— a it is paid in respect of a deceased member of an overseas pension scheme, or relevant non-UK scheme, who had not reached the age of 75 at the date of the member's death, b it would, if the scheme were a registered pension scheme and if “insurance company” in Part 4 of FA 2004 had the meaning given by subsection (8), be a dependants' annuity or nominees' annuity, c the member died on or after 3 December 2014, d either— i the annuity was purchased using sums or assets that would, if the scheme were a registered pension scheme, be unused drawdown funds or unused uncrystallised funds, or ii the annuity was purchased using sums or assets transferred to an insurance company by another insurance company in consequence of an annuity— a that was payable to the person by that other insurance company, b that was purchased as mentioned in sub-paragraph (i) or this sub-paragraph, and c that would have been a dependants' annuity or nominees' annuity (as the case may be) if the scheme had been a registered pension scheme, ceasing to be payable, e no payment of the annuity is made before 6 April 2015, and f in a case where the annuity is purchased as mentioned in paragraph (d)(ii), no payment is made before 6 April 2015 of— i the prior annuity purchased as mentioned in paragraph (d)(i), and ii any other annuity purchased as mentioned in paragraph (d)(ii) that is in the chain of annuities beginning with that prior annuity and ending with the annuity. 2 The charge to tax under this Part does not apply to an annuity payable to a person if— a it is paid in respect of a deceased member of an overseas pension scheme or relevant non-UK scheme, b it is paid on the subsequent death of an individual who would, if the scheme were a registered pension scheme, be a dependant, nominee or successor of the member (“ the beneficiary ”), c it would, if the scheme were a registered pension scheme and if “insurance company” in Part 4 of FA 2004 had the meaning given by subsection (8), be a successors' annuity, d the beneficiary had not reached the age of 75 at the date of the beneficiary's death, e the beneficiary died on or after 3 December 2014, f either— i the annuity was purchased using sums or assets that would, if the scheme were a registered pension scheme, be undrawn funds, or ii the annuity was purchased using sums or assets transferred to an insurance company by another insurance company in consequence of an annuity— a that was payable to the person by that other insurance company, b that was purchased as mentioned in sub-paragraph (i) or this sub-paragraph, and c that would have been a successors' annuity if the scheme had been a registered pension scheme and if “insurance company” in Part 4 of FA 2004 had the meaning given by subsection (8), ceasing to be payable, g no payment of the annuity is made before 6 April 2015, and h in a case where the annuity is purchased as mentioned in paragraph (f)(ii), no payment is made before 6 April 2015 of— i the prior annuity purchased as mentioned in paragraph (f)(i), and ii any other annuity purchased as mentioned in paragraph (f)(ii) that is in the chain of annuities beginning with that prior annuity and ending with the annuity. 3 The charge to tax under this Part does not apply to an annuity payable to a person if— a it is paid in respect of a deceased member of an overseas pension scheme, or relevant non-UK scheme, who had not reached the age of 75 at the date of the member's death, b it would, if the scheme were a registered pension scheme and if “insurance company” in Part 4 of FA 2004 had the meaning given by subsection (8), be a dependants' annuity payable to a dependant of the member or a nominees' annuity payable to a nominee of the member, c the member died on or after 3 December 2014, d the annuity— i was purchased together with an annuity payable to the member that would, if the scheme were a registered pension scheme and if “insurance company” in Part 4 of FA 2004 had the meaning given by subsection (8), have been a lifetime annuity, or ii was purchased using sums or assets transferred to an insurance company by another insurance company in consequence of an annuity— a that was payable to the person by that other insurance company, and b that would, if the scheme were a registered pension scheme and if “insurance company” in Part 4 of FA 2004 had the meaning given by subsection (8), have been a dependants' annuity or nominees' annuity (as the case may be) purchased as mentioned in sub-paragraph (i) or this sub-paragraph, ceasing to be payable, e no payment of the annuity is made before 6 April 2015, and f in a case where the annuity is purchased as mentioned in paragraph (d)(ii), no payment is made before 6 April 2015 of— i the prior annuity purchased as mentioned in paragraph (d)(i), and ii any other annuity purchased as mentioned in paragraph (d)(ii) that is in the chain of annuities beginning with that prior annuity and ending with the annuity. 4 The charge to tax under this Part does not apply to payments to a person of an annuity if— a either— i a member of an overseas pension scheme, or relevant non-UK scheme, was entitled to be paid the annuity immediately before the member's death, or ii the annuity was purchased using sums or assets transferred to an insurance company by another insurance company in consequence of an annuity to which there was entitlement as mentioned in sub-paragraph (i), or which was purchased as mentioned in this sub-paragraph, ceasing to be payable, b the payments would, if the scheme were a registered pension scheme and if “insurance company” in Part 4 of FA 2004 had the meaning given by subsection (8), be— i payments of a lifetime annuity, and ii payable to the person under pension rule 2 (see section 165 of FA 2004), c the member had not reached the age of 75 at the date of the member's death, d the member died on or after 3 December 2014, e any payment of the annuity made before 6 April 2015 is made to the member, and f in a case where the annuity is one purchased as mentioned in paragraph (a)(ii), any payment made before 6 April 2015— i of the prior annuity to which there is entitlement as mentioned in paragraph (a)(i), or ii of any other annuity purchased as mentioned in paragraph (a)(ii) that is in the chain of annuities beginning with that prior annuity and ending with the annuity, is made to the member. 5 Paragraph 27E(3) to (5) of Schedule 28 to FA 2004 (meaning of “ unused drawdown funds ” and “ unused uncrystallised funds ”) apply for the purposes of subsection (1). 6 Paragraph 27FA(2) of Schedule 28 to FA 2004 (meaning of “undrawn funds”) applies for the purposes of subsection (2)(f). 7 For the purposes of subsection (3)(d), an annuity is purchased together with another if they are purchased— a in the form of a joint life annuity, or b separately in circumstances in which the day on which the one is purchased is no earlier than seven days before, and no later than seven days after, the day on which the other is purchased. 8 In this section “ insurance company ” means— a an insurance company as defined by section 275 of FA 2004, or b a person— i whose normal business includes the activity of providing annuities, ii who carries on that activity in a country or territory outside the United Kingdom, and iii whose carrying on of that activity in any particular country or territory outside the United Kingdom— a is regulated in that country or territory, or b is lawful under the law of that country or territory because it is regulated in another country or territory, and for this purpose an activity is regulated in a country or territory if it is regulated by the government of that country or territory or by a body established under the law of that country or territory for the purpose of regulating the carrying-on of the activity. Non-registered schemes: beneficiaries' annuities from drawdown funds 646E 1 The charge to tax under this Part does not apply to an annuity paid to a person if— a it is paid in respect of a deceased member of an overseas pension scheme, or a relevant non-UK scheme, who had not reached the age of 75 at the date of the member's death, b the person would, if that scheme were a registered pension scheme, be a dependant or nominee of the member, c the annuity was purchased using sums or assets held for the purposes of a money purchase arrangement under an overseas pension scheme or relevant non-UK scheme, and those sums or assets would if that scheme were a registered pension scheme form the whole or part of the person's— i dependant's drawdown pension fund, ii dependant's flexi-access drawdown fund, or iii nominee's flexi-access drawdown fund, in respect of the arrangement, d the annuity would, if the scheme were a registered pension scheme and if “insurance company” in Part 4 of FA 2004 had the meaning given by section 646D(8), be a dependants' short-term annuity or dependants' annuity or (as the case may be) a nominees' short-term annuity or nominees' annuity, and e the member died on or after 3 December 2014. 2 The charge to tax under this Part does not apply to an annuity payable to a person if— a it is paid in respect of a deceased individual (“ the beneficiary ”) who had not reached the age of 75 at the date of the beneficiary's death, b the beneficiary would have been a dependant, nominee or successor of a deceased member of an overseas pension scheme, or relevant non-UK scheme, if that scheme had been a registered pension scheme, c the person would, if that scheme were a registered pension scheme, be a successor of the member, d the annuity was purchased using sums or assets out of a fund held for the purposes of a money purchase arrangement under an overseas pension scheme or relevant non-UK scheme and would, if that scheme were a registered pension scheme and if “insurance company” in Part 4 of FA 2004 had the meaning given by section 646D(8), be a successors' short-term annuity, or successors' annuity, purchased using sums or assets out of the person's successor's flexi-access drawdown fund in respect of the arrangement, and e the beneficiary died on or after 3 December 2014. 3 Subsection (1) is subject to subsections (4) and (5). 4 Subsection (1) does not exempt payments on or after 6 April 2015 to a person of an annuity payable in respect of a deceased member of an overseas pension scheme, or relevant non-UK scheme, if— a the annuity is purchased using sums or assets held for the purposes of a money purchase arrangement under an overseas pension scheme or relevant non-UK scheme, b the annuity would, if that scheme were a registered pension scheme and if “insurance company” in Part 4 of FA 2004 had the meaning given by section 646D(8), be a dependants' short-term annuity or dependants' annuity, c the annuity was purchased using sums or assets out of a fund that would, if that scheme were a registered pension scheme, be the person's dependant's drawdown pension fund in respect of the arrangement (“ the drawdown fund ”), and d before 6 April 2015— i any payment of the annuity was made, ii any payment was made to the person of any other annuity purchased using sums or assets out of the drawdown fund or out of any fund represented (to any extent) by the drawdown fund, or iii any payment was made to the person out of the drawdown fund, or out of any fund represented (to any extent) by the drawdown fund, of any pension that would be dependants' income withdrawal if the fund concerned were held for the purposes of a registered pension scheme. 5 Subsection (1) does not exempt payments to a person of an annuity payable in respect of a deceased member of an overseas pension scheme, or relevant non-UK scheme, if— a the annuity was purchased using sums or assets held for the purposes of a money purchase arrangement under an overseas pension scheme or relevant non-UK scheme and would, if that scheme were a registered pension scheme and “insurance company” in Part 4 of FA 2004 had the meaning given by section 646D(8), be a dependants' short-term annuity or dependants' annuity, b the annuity was purchased using sums or assets out of a fund (“ the new fund ”) that would, if that scheme were a registered pension scheme, be the person's dependant's flexi-access drawdown fund in respect of the arrangement, c before 6 April 2015— i any payment of pension in respect of the deceased member was made to the person from a fund held for the purposes of a money purchase arrangement under an overseas pension scheme, or relevant non-UK scheme, that would be a payment of dependants' income withdrawal from the person's dependant's drawdown pension fund in respect of the arrangement if the scheme were a registered pension scheme, or ii any payment in respect of the deceased member was made to the person of an annuity purchased using sums or assets out of a fund held for the purposes of a money purchase arrangement under an overseas pension scheme, or relevant non-UK scheme, that would be a payment of a dependants' short-term annuity, or dependants' annuity, purchased using sums or assets out of the person's dependant's drawdown pension fund in respect of the arrangement if the scheme were a registered pension scheme, and d any of the sums or assets that made up the fund mentioned in paragraph (c)(i) or (ii) make up, or are represented by sums or assets that to any extent make up, the new fund. Interpretation of sections 646B to 646E 646F In sections 646B to 646E, an expression listed in the first column of the table has the meaning given by the provision of FA 2004 listed against that expression in the second column of the table. Expression Provision of FA 2004 dependant Schedule 28, paragraph 15 dependants' annuity Schedule 28, paragraph 17 dependant's drawdown pension fund Schedule 28, paragraph 22 dependant's flexi-access drawdown fund Schedule 28, paragraph 22A dependants' income withdrawal Schedule 28, paragraph 21 dependants' short-term annuity Schedule 28, paragraph 20 insurance company (in sections 646B and 646C) section 275 lifetime annuity Schedule 28, paragraph 3 money purchase arrangement section 152 nominee Schedule 28, paragraph 27A nominees' annuity Schedule 28, paragraph 27AA nominee's flexi-access drawdown fund Schedule 28, paragraph 27E nominees' short-term annuity Schedule 28, paragraph 27C overseas pension scheme section 150(1) and (7) relevant non-UK scheme Schedule 34, paragraph 1(5) successor Schedule 28, paragraph 27F successors' annuity Schedule 28, paragraph 27FA successor's flexi-access drawdown fund Schedule 28, paragraph 27K successors' short-term annuity Schedule 28, paragraph 27H Chapter 18 Exemptions: Non-UK resident taxpayers Introduction and meaning of “foreign residence condition” etc. 647 1 The provisions of this Part provide that no liability to income tax arises on certain kinds of pensions if the foreign residence condition is met. 2 The foreign residence condition is met in relation to a pension if the pension is payable to a person who is not resident in the United Kingdom. 3 For the purposes of the foreign residence condition, a person is taken to be not resident in the United Kingdom only if— a a person makes a claim to the Commissioners for Her Majesty’s Revenue and Customs that the person is not resident, and b the Commissioners are satisfied that the person is not resident. 4 In this Chapter “ pension ” includes— a a gratuity or any sum payable on or in respect of death, b a return of contributions, and c any interest or other addition included in a return of contributions. The Central African Pension Fund 648 1 No liability to income tax arises on a pension which is paid from the Central African Pension Fund if the foreign residence condition is met. 2 In this section “ the Central African Pension Fund ” means the fund established under that name by section 24 of the Federation of Rhodesia and Nyasaland (Dissolution) Order in Council 1963 (S.I. 1963/2085). Commonwealth government pensions 649 1 No liability to income tax arises on a pension paid out of a fund which is established— a in the United Kingdom, b by a Commonwealth government, c for the sole purpose of providing pensions payable in respect of service under that government, if the foreign residence condition is met. 2 In this section “ Commonwealth government ” means— a the government of a territory or country mentioned in subsection (3), b the government of any part of a territory or country mentioned in subsection (3), or c a government constituted for two or more of the territories or countries mentioned in subsection (3). 3 The territories and countries referred to in subsection (2) are— a a country mentioned in Schedule 3 to the British Nationality Act 1981 (c. 61) apart from Australia, Canada, New Zealand, India, Sri Lanka and Cyprus, b an associated state, c a British overseas territory, d a protectorate, e a protected state, and f a United Kingdom trust territory. 4 In subsection (2)(c) the reference to a government constituted for two or more of the territories or countries mentioned in subsection (3) includes a reference to any authority established for the purpose of providing or administering services which are common to, or relate to matters of common interest to, two or more of those territories or countries. 5 In subsection (3)(f) “ United Kingdom trust territory ” means a territory administered by the government of the United Kingdom under the trusteeship system of the United Nations. Oversea Superannuation Scheme 650 1 No liability to income tax arises on a pension which is paid under the Oversea Superannuation Scheme (formerly known as the Colonial Superannuation Scheme) if the foreign residence condition is met. 2 For the purposes of subsection (1) a pension is paid under the Oversea Superannuation Scheme if— a the pension is paid under the Scheme as it has effect (by reason of section 2(4A) of OPA 1973) as a scheme under section 2 of OPA 1973, or b the pension is paid under a scheme which— i the Secretary of State has made under section 2(1) of OPA 1973, and ii corresponds to the Oversea Superannuation Scheme. Overseas Pensions Act 1973 651 1 No liability to income tax arises on a pension which is paid under section 1 of OPA 1973 if the foreign residence condition is met. 2 Subsection (1) applies whether or not the pension is paid out of a fund established under a scheme made under section 1 of OPA 1973. 3 But subsection (1) does not apply to any part of a pension paid because the Pensions (Increase) Acts apply to it. 4 In this section “ the Pensions (Increase) Acts ” means— a the Pensions (Increase) Act 1971 (c. 56), and b any Act passed after that Act for purposes which correspond to the purposes of that Act. Overseas Service Act 1958 652 1 No liability to income tax arises on a pension— a which is paid under the authority of the Overseas Service Act 1958 (c. 14), and b which the Secretary of State certifies to be attributable to the employment of a person in the public services of an overseas territory, if the foreign residence condition is met. 2 If the Secretary of State certifies that only part of a pension paid under the authority of the 1958 Act is attributable to the employment of a person in the public services of an overseas territory, subsection (1) applies only to that part of the pension. 3 For the purposes of subsections (1) and (2) a pension is paid under the authority of the 1958 Act if condition A or B is met. 4 Condition A is that the pension is paid under either of the following— a an order made under section 2 of the 1958 Act, or b section 4(2) of the 1958 Act, as it has effect (by reason of section 2(3) of OPA 1973) as a scheme under section 2 of OPA 1973. 5 Condition B is that the pension is paid under a scheme which the Secretary of State— a has made under section 2(1) of OPA 1973, and b has certified to correspond to— i an order made under section 2 of the 1958 Act, or ii section 4(2) of the 1958 Act. 6 For the purposes of this section, a person is taken to be employed in the public service of an overseas territory at any time when— a the person is employed in any capacity under the government of that territory, or under any municipal or other local authority in it, b the person is employed in circumstances not falling within paragraph (a), by a body corporate established for any public purpose in that territory by an enactment of a legislature empowered to make laws for that territory, or c the person is the holder of a public office in that territory in circumstances not falling within paragraph (a) or (b). 7 In subsection (6) references to the government of an overseas territory include references to— a a government constituted for two or more overseas territories, and b any authority established for the purpose of providing or administering services which are common to, or relate to matters of common interest to, two or more such territories. 8 In this section— “ the 1958 Act ” means the Overseas Service Act 1958 (c. 14); “ certified ” means certified for the purposes of ICTA 1970, ICTA or this Act. Overseas Service Pensions Fund 653 1 No liability to income tax arises on a pension which is paid out of the Overseas Service Pensions Fund if the foreign residence condition is met. 2 In this section “ the Overseas Service Pensions Fund ” means the fund with that name established under section 7(1) of the Overseas Aid Act 1966 (c. 21). 3 In this section “ pension ” includes not only the things mentioned in section 647(4) but also any sum payable in respect of ill-health. The Pensions (India, Pakistan and Burma) Act 1955 654 1 No liability to income tax arises on a pension paid under the authority of the Pensions (India, Pakistan and Burma) Act 1955 (c. 22) if the foreign residence condition is met. 2 A pension is paid under the authority of the 1955 Act if— a the pension is paid under the 1955 Act as it has effect (by reason of section 2(3) of OPA 1973) as a scheme under section 2 of OPA 1973, or b the pension is paid under a scheme which the Secretary of State— i has made under section 2(1) of OPA 1973, and ii has certified to correspond to the provision made under the 1955 Act. 3 This section does not apply to any part of a pension paid because the Pensions (Increase) Acts apply to it. 4 In this section— “ the 1955 Act ” means the Pensions (India, Pakistan and Burma) Act 1955 (c. 22); “ certified ” means certified for the purposes of ICTA 1970, ICTA or this Act; “ the Pensions (Increase) Acts ” means— the Pensions (Increase) Act 1971 (c. 56), and any Act passed after that Act for purposes which correspond to the purposes of that Act. Part 10 Social security income Chapter 1 Introduction Structure of Part 10 655 1 The structure of this Part is as follows— Chapter 2— a imposes the charge to tax on social security income, and b provides for deductions to be made from the amount of income chargeable; Chapter 3 sets out the UK social security benefits which are charged to tax under this Part and identifies— a the amount of income chargeable to tax for a tax year, and b the person liable to pay any tax charged; Chapters 4 and 5 deal with exemptions from the charge to tax on UK social security benefits (whether under this Part or any other provision); Chapters 6 and 7 make provision about foreign benefits. Chapter 8 makes provision for the high income child benefit charge. 2 For other provisions about the taxation of social security benefits, see— section 151 of FA 1996 (power for the Treasury to make orders about the taxation of benefits payable under Government pilot schemes); section 781 of ITTOIA 2005 (exemption from income tax for payments under New Deal 50plus); section 782 of ITTOIA 2005 (exemption from income tax for payments under employment zone programmes); section 44 of FA 2016 (tax treatment of supplementary welfare payments: Northern Ireland); section 13 of FA 2020 (power to exempt social security benefits from income tax) ; section 27 of F(No. 2)A 2023 (power to clarify tax treatment of devolved social security benefits). 3 For the charge to tax on social security pensions, see Part 9 (pension income). Chapter 2 Tax on social security income Nature of charge to tax on social security income 656 1 The charge to tax on social security income is a charge to tax on that income excluding any exempt income. 2 “ Exempt income ” is social security income on which no liability to income tax arises as a result of any provision of Chapter 4, 5 or 7 of this Part. This definition applies for the purposes of this Part. Meaning of “social security income”, “taxable benefits” etc. 657 1 This section defines— “ social security income ” for the purposes of the Tax Acts, and “taxable benefits”, “Table A” and “ Table B ” for the purposes of this Part. 2 “ Social security income ” means— a the United Kingdom social security benefits listed in Table A, b the United Kingdom social security benefits listed in Table B, c the foreign benefits to which section 678 applies, and d the foreign benefits to which section 681(2) applies. 3 “ Taxable benefits ” means— a the United Kingdom social security benefits listed in Table A, and b the foreign benefits to which section 678 applies. 4 Subsections (2) and (3) are subject to section 660(2). 5 “ Table A ” means Table A in section 660. 6 “ Table B ” means Table B in section 677. Amount charged to tax 658 1 The amount of social security income which is charged to tax under this Part for a particular tax year is as follows. 2 In relation to a taxable benefit, the amount charged to tax is the net taxable social security income for the tax year. 3 The net taxable social security income for a taxable benefit for a tax year is given by the formula— TSSI - PGD where— TSSI means the amount of taxable social security income for that benefit for that year (see subsections (4) to (7)), and PGD means the amount of the deduction (if any) allowed from the benefit under Part 12 (payroll giving). 4 In relation to bereavement allowance, carer’s allowance, carer's allowance supplement, carer support payment, contributory employment and support allowance, incapacity benefit income support, welfare supplementary payments payable pursuant to the loss of contributory employment and support allowance and welfare supplementary payments payable pursuant to the loss of, or a reduction in the amount payable of, income support (which are listed in Table A), the amount of taxable social security income is determined in accordance with section 661. 5 In relation to any other benefit listed in Table A, the amount of taxable social security income is the amount of the benefit that falls to be charged to tax. 6 In relation to foreign benefits to which section 678 applies, the amount of taxable social security income is determined in accordance with section 679. 7 In determining for the purposes of this Act the amount of taxable social security income, any exempt income is to be excluded. Person liable for tax 659 The person liable for any tax charged under this Part is identified in— a section 662 (UK benefits), or b section 680 (foreign benefits). Chapter 3 Taxable UK social security benefits Taxable benefits: UK benefits – Table A 660 1 This is Table A— TABLE A TAXABLE UK BENEFITS Social security benefit Payable under . . . . . . . . . . . . Bereavement allowance . . . . . . . . . . . . Carer’s allowance SSCBA 1992 Section 70 SSCB(NI)A 1992 Section 70 Carer's allowance supplement SS(S)A 2018 Section 81 Carer support payment CA(CSP)(S)R 2023 Regulation 3 Employment and support allowance WRA 2007 Section 1(2)(a) Any provision made for Northern Ireland which corresponds to section 1(2)(a) of WRA 2007 Incapacity benefit SSCBA 1992 Section 30A(1) or (5), 40 or 41 SSCB(NI)A 1992 Section 30A(1) or (5), 40 or 41 Income support SSCBA 1992 Section 124 SSCB(NI)A 1992 Section 123 Jobseeker’s allowance JSA 1995 Section 1 JS(NI)O 1995 Article 3 Statutory paternity pay SSCBA 1992 Section 171ZA or 171ZB Any provision made for Northern Ireland which corresponds to section 171ZA or 171ZB of SSCBA 1992. Statutory adoption pay SSCBA 1992 Section 171ZL Any provision made for Northern Ireland which corresponds to section 171ZL of SSCBA 1992 Statutory maternity pay SSCBA 1992 Section 164 SSCB(NI)A 1992 Section 160 Statutory shared parental pay SSCBA 1992 Any provision made for Northern Ireland which corresponds to section 171ZU or 171ZV of SSCBA 1992 Section 171ZU or 171ZV Statutory parental bereavement pay SSCBA 1992 Any provision made for Northern Ireland which corresponds to section 171ZZ6 of SSCBA 1992 Section 171ZZ6 Statutory neonatal care pay SSCBA 1992 Section 171ZZ16 Any provision made for Northern Ireland which corresponds to section 171ZZ16 of SSCBA 1992 . . . . . . . . . Statutory sick pay SSCBA 1992 Section 151 SSCB(NI)A 1992 Section 147. Welfare supplementary payment payable pursuant to the loss of carer’s allowance WSP(LCP)R(NI) 2016 Regulation 4 Welfare supplementary payment payable pursuant to the loss of contributory employment and support allowance WSPR(NI) 2016 Regulation 7 Welfare supplementary payment payable pursuant to the loss of, or a reduction of the amount payable of, income support WSP(LCP)R(NI) 2016 Regulation 8 (when the recipient is entitled to the payment by meeting the condition in regulation 8(2)(c)) or regulation 12 WSP(LDRP)R(NI) 2016 Regulation 4, 5 or 6 Welfare supplementary payment payable pursuant to a reduction of the amount payable of jobseekers allowance WSP(LCP)R(NI) 2016 Regulation 8 (when the recipient is entitled to the payment by meeting the condition in regulation 8(2)(a)) WSP(LDRP)R(NI) 2016 Regulation 11, 12, 13, 14 or 15 2 A benefit listed below is not “social security income” or a “taxable benefit” if it is charged to tax under another Part of this Act— ... ... statutory paternity pay; statutory adoption pay; statutory maternity pay; statutory shared parental pay; statutory parental bereavement pay; statutory neonatal care pay; statutory sick pay. Taxable social security income 661 1 This section applies in relation to each of the following taxable benefits listed in Table A— bereavement allowance, carer’s allowance, carer's allowance supplement, carer support payment, contributory employment and support allowance, incapacity benefit, ... income support. welfare supplementary payments payable pursuant to the loss of contributory employment and support allowance, and welfare supplementary payments payable pursuant to the loss of, or a reduction of the amount payable of, income support. 2 The amount of taxable social security income for a taxable benefit for a tax year is the full amount of the benefit accruing in the tax year irrespective of when any amount is actually paid. Person liable for tax 662 The person liable for any tax charged under this Part on a taxable benefit listed in Table A is the person receiving or entitled to the benefit. Chapter 4 Taxable UK social security benefits: exemptions Incapacity benefit Long-term incapacity benefit: previous entitlement to invalidity benefit 663 1 No liability to income tax arises on long-term incapacity benefit if— a a person is entitled to the benefit for a day of incapacity for work which falls in a period of incapacity for work which is treated for the purposes of that benefit as having begun before 13th April 1995, and b the part of that period which is treated as having fallen before that date includes a day for which that person was entitled to invalidity benefit. 2 In this section— “ invalidity benefit ” means invalidity benefit under— Part 2 of SSCBA 1992, or Part 2 of SSCB(NI)A 1992; “ long-term incapacity benefit ” means incapacity benefit payable under— section 30A(5), 40 or 41 of SSCBA 1992, or section 30A(5), 40 or 41 of SSCB(NI)A 1992. Short-term incapacity benefit not payable at the higher rate 664 1 No liability to income tax arises on short-term incapacity benefit unless it is payable at the higher rate. 2 In this section— a “ short-term incapacity benefit ” means incapacity benefit payable under— i section 30A(1) of SSCBA 1992, or ii section 30A(1) of SSCB(NI)A 1992; b the reference to short-term incapacity benefit payable at the higher rate is to be construed in accordance with— i section 30B of SSCBA 1992, or ii section 30B of SSCB(NI)A 1992. Income support and relevant welfare supplementary payments Exempt unless payable to a person involved in a trade dispute 665 1 No liability to income tax arises on income support unless— a the income support is payable to one member of a ... couple (“ the claimant ”), and b section 126 of SSCBA 1992 or section 125 of SSCB(NI)A 1992 (trade disputes) applies to the claimant but not to the other member of the couple. 2 In this section “couple” has the same meaning as in section 137(1) of SSCBA 1992 or section 133(1) of SSCB(NI)A 1992. 3 No liability to income tax arises on a relevant welfare supplementary payment unless the whole or part of the payment relates to a period in which the claimant was prevented from being entitled to jobseeker’s allowance by– a section 14 of the Jobseekers Act 1995 (trade disputes), or b Article 16 of the Jobseekers (Northern Ireland) Order 1995 (trade disputes) or would have been so prevented if otherwise entitled to that benefit. 4 Where part of a relevant welfare supplementary payment relates to such a period no liability to income tax arises on the part that does not relate to such a period. Child maintenance bonus 666 No liability to income tax arises on a part of income support which is attributable to a child maintenance bonus (within the meaning of section 10 of CSA 1995 or Article 4 of CS(NI)O 1995). Amounts in excess of taxable maximum 667 1 If the amount of income support and relevant welfare supplementary payments paid to a person (“ the claimant ”) for a week or a part of a week exceeds the claimant’s taxable maximum for that period, no liability to income tax arises on the excess. 2 The claimant’s taxable maximum for a period is determined– a under section 668(1), (2) and (3) where the claimant is a member of a couple, and b under section 668(2A) and (3) where the claimant is not a member of a couple. Taxable maximum 668 1 A claimant’s taxable maximum for a week is determined under this subsection if the applicable amount for the purpose of calculating the income support consists only of an amount in respect of the relevant couple. The taxable maximum is equal to one half of the applicable amount. 2 A claimant’s taxable maximum for a week is determined under this subsection if the applicable amount includes amounts that are not in respect of the relevant couple. The taxable maximum is equal to one half of the amount which is included in the applicable amount in respect of the relevant couple. 2A A claimant’s taxable maximum for a week is determined under this subsection if the claimant is not a member of a couple. The taxable maximum is equal to the applicable amount. 3 A claimant’s taxable maximum for a part of a week is determined as follows— Step 1 Assume that the income support is paid to the claimant for the whole of, rather than part of, the week. Step 2 Determine under subsection (1) or (2) what the claimant’s taxable maximum for that week would be on that assumption. Step 3 Determine the claimant’s taxable maximum for the part of the week using this formula— N 7 × TMW where— N is the number of days in the part of the week for which the claimant is actually paid the income support, and TMW is the taxable maximum for the whole week determined under step 2. Interpretation 669 A1 In sections 665 and 667 “relevant welfare supplementary payment” means a payment to which a person is entitled under– a regulation 8 (when the recipient is entitled to the payment by meeting the condition in regulation 8(2)(c)) or regulation 12 of WSP(LCP)R(NI) 2016, or b regulation 4 , 5 or 6 of WSP(LDRP)R(NI) 2016. 1 In section 668, except in relation to Northern Ireland— “ applicable amount ” means the amount prescribed in relation to income support in regulations made under section 135 of SSCBA 1992; “couple” has the same meaning as in section 137(1) of SSCBA 1992 2 In section 668, in relation to Northern Ireland— “ applicable amount ” means the amount prescribed in relation to income support in regulations made under section 131 of SSCB(NI)A 1992; “couple” has the same meaning as in section 133(1) of SSCB( NI )A 1992 3 In section 668 “ relevant couple ”, in relation to a claimant, means the ... couple of which the claimant is a member. Jobseeker’s allowance and relevant welfare supplementary payments Child maintenance bonus 670 No liability to income tax arises on a part of a jobseeker’s allowance which is attributable to a child maintenance bonus (within the meaning of section 10 of CSA 1995 or Article 4 of CS(NI)O 1995). Amounts in excess of taxable maximum 671 1 If the amount of jobseeker’s allowance and relevant welfare supplementary payments paid to a person (“ the claimant ”) for a week or a part of a week exceeds the claimant’s taxable maximum for that period, no liability to income tax arises on the excess. 2 The claimant’s taxable maximum for a period is determined under sections 672 to 674. Taxable maximum: general 672 1 A claimant’s taxable maximum for a week is determined— a under section 673, if the claimant is paid an income-based jobseeker’s allowance for that week, or b under section 674, if the claimant is paid a contribution-based jobseeker’s allowance for that week. 2 A claimant’s taxable maximum for a part of a week is determined as follows— Step 1 Assume that the jobseeker’s allowance is paid to the claimant for the whole of, rather than part of, the week. Step 2 Determine under section 673 or 674 what the claimant’s taxable maximum for that week would be on that assumption. Step 3 Determine the claimant’s taxable maximum for the part of the week using this formula— M 7 × TMW where— N is the number of days in the part of the week for which the claimant is actually paid the jobseeker’s allowance, and TMW is the taxable maximum for the whole week determined under step 2. Taxable maximum: income-based jobseeker’s allowance 673 1 A claimant’s taxable maximum for a week is determined under this section if— a the claimant is paid an income-based jobseeker’s allowance for that week, or b the claimant is assumed under section 672(2) to be paid an income-based jobseeker’s allowance for that week. 2 If the claimant is not a member of a ... couple, the claimant’s taxable maximum for the week is equal to the age-related amount which would be applicable to the claimant if a contribution-based jobseeker’s allowance were payable to the claimant for that week. 3 If the claimant is a member of a ... couple, the claimant’s taxable maximum for the week is equal to the portion of the applicable amount which is included in the jobseeker’s allowance in respect of the couple for that week. 4 But if— a the claimant is a member of a ... couple, and b the other member of that couple is prevented by section 14 of JSA 1995 or Article 16 of JS(NI)O 1995 (trade disputes) from being entitled to a jobseeker’s allowance, the claimant’s taxable maximum for that week is equal to half the portion of the applicable amount which is included in the jobseeker’s allowance in respect of the couple for that week. Taxable maximum: contribution-based jobseeker’s allowance 674 1 A claimant’s taxable maximum for a week is determined under this section if— a the claimant is paid a contribution-based jobseeker’s allowance for that week, or b the claimant is assumed under section 672(2) to be paid a contribution-based jobseeker’s allowance for that week. 2 If the claimant is not a member of a ... couple, the claimant’s taxable maximum for the week is equal to the age-related amount which is applicable to the claimant for that week. 3 If the claimant is a member of a ... couple, the claimant’s taxable maximum for the week is equal to the portion of the applicable amount which would be included in the jobseeker’s allowance in respect of the couple if an income-based jobseeker’s allowance were payable to the claimant for that week. Interpretation 675 A1 In section 671 “relevant welfare supplementary payments” means payments to which a person is entitled under– a regulation 8 (when the recipient is entitled to the payment by meeting the condition in regulation 8(2)(a)) of WSP(LCP)R(NI) 2016, or b regulation 11, 12, 13, 14 or 15 of WSP(LDRP)R(NI) 2016. 1 In sections 671 to 674, except in relation to Northern Ireland— “ age-related amount ” and “ applicable amount ” mean the amounts determined as such in accordance with regulations made under section 4 of JSA 1995; ... “contribution-based jobseeker’s allowance” means a jobseeker’s allowance entitlement to which is based on the claimant satisfying conditions which include those set out in Article 4 of the JS(NI)O 1995; ... “income-based jobseeker’s allowance” means a jobseeker’s allowance entitlement to which is based on the claimant satisfying conditions which include those set out in Article 5 of the JS(NI)O 1995 or a joint-claim jobseeker’s allowance (which means a jobseeker’s allowance entitlement to which arises by virtue of Article 3(2B) of the JS(NI)O 1995); “couple” has the same meaning as in section 35(1) of JSA 1995 2 In sections 671 to 674, in relation to Northern Ireland— “ age-related amount ” and “ applicable amount ” mean the amounts determined as such in accordance with regulations made under Article 6 of JS(NI)O 1995; “ contribution-based jobseeker’s allowance ” and “ income-based jobseeker’s allowance ” have the same meaning as in Article 3(4) of JS(NI)O 1995; “couple” has the same meaning as in Article 2(2) of JS( NI )O 1995 Increases in respect of children Increases in respect of children 676 No liability to income tax arises on a part of a taxable benefit listed in Table A which is attributable to an increase in respect of a child. Chapter 5 UK social security benefits wholly exempt from income tax UK social security benefits wholly exempt from tax: Table B 677 1 No liability to income tax arises on the United Kingdom social security benefits listed in Table B. TABLE B—PART 1 BENEFITS PAYABLE UNDER PRIMARY LEGISLATION AND NORTHERN IRELAND WELFARE SUPPLEMENTARY PAYMENTS etc Social security benefit Payable under Adult Disability Payment SS(S)A 2018 Sections 24 and 31 Attendance allowance SSCBA 1992 SSCB(NI)A 1992 Section 64 Section 64 Back to work bonus JSA 1995 JS(NI)O 1995 Section 26 Article 28 Bereavement payment ... ... ... ... Bereavement support payment PA 2014 Any provision made for Northern Ireland which corresponds to section 30 of PA 2014 Section 30 Best start grant SS(S)A 2018 Sections 24 and 32 Child benefit SSCBA 1992 SSCB(NI)A 1992 Section 141 Section 137 Child’s special allowance SSCBA 1992 SSCB(NI)A 1992 Section 56 Section 56 Child tax credit TCA 2002 Part 1 Council tax benefit SSCBA 1992 Section 131 Disability assistance for children and young people SS(S)A 2018 Sections 24 and 31 Disability living allowance SSCBA 1992 SSCB(NI)A 1992 Section 71 Section 71 Discretionary housing payment SS(S)A 2018 Section 88 Discretionary support award DSR(NI) 2016 Regulation 2 Flexible support fund payment ETA 1973 Section 2 Funeral expense assistance SS(S)A 2018 Sections 24 and 35 Guardian’s allowance SSCBA 1992 SSCB(NI)A 1992 Section 77 Section 77 Health in pregnancy grant SSCBA 1992 SSCB( NI )A 1992 Section 140A Section 136A Housing benefit SSCBA 1992 SSCB(NI)A 1992 Section 130 Section 129 In-work credit ETA 1973 ETA( NI ) 1950 Section 2 Section 1 In-work emergency discretion fund payment ETA 1973 Section 2 In-work emergency fund payment ETA( NI ) 1950 Section 1 Income-related employment and support allowance WRA 2007 Section 1(2)(b) Any provision made for Northern Ireland which corresponds to section 1(2)(b) of WRA 2007 Industrial injuries benefit (apart from industrial death benefit) SSCBA 1992 SSCB(NI)A 1992 Section 94 Section 94 Job start ETA 1973 Section 2 Payments made under the Parental Transitions Support scheme LGSA 2003 Section 20 Payments out of the social fund SSCB(NI)A 1992 Section 138 SSCBA 1992 Section 134 Payments to secure the provision of food and drink, free of charge, to a person to whom a school lunch must be provided under section 53(2) of the Education (Scotland) Act 1980 , Article 58 of the Education and Libraries (Northern Ireland) Order 1986 , section 512(3) of the Education Act 1996 or Article 15(2) of the Further Education (Northern Ireland) Order 1997 SW(S)A 1968 Section 12 C(S)A 1995 Section 22 LGSA 2003 Section 20 GOWA 2006 Section 60 FPA(NI) 2009 Section 4 LGE(W)A 2021 Section 24 Payment under a council tax reduction scheme: England LGFA 1992 Section 13A(2) Pension Age Disability Payment SS(S)A 2018 Sections 24 and 31 Pensioner’s Christmas bonus SSCBA 1992 SSCB(NI)A 1992 Section 148 Section 144 Personal independence payment WRA 2012 Section 77 Any provision made for Northern Ireland which corresponds to section 77 of WRA 2012 Return to work credit ETA 1973 ETA( NI ) 1950 Section 2 Section 1 Scottish Adult Disability Living Allowance SS(S)A 2018 Sections 24 and 31 Severe disablement allowance SSCBA 1992 SSCB(NI)A 1992 Section 68 Section 68 Short-term assistance SS(S)A 2018 Section 36 State maternity allowance SSCBA 1992 Section 35 or 35B Any provision made for Northern Ireland which corresponds to section 35 or 35B of SSCBA 1992 State pension credit SPCA 2002 SPCA(NI) 2002 Section 1 Section 1 Universal credit WRA 2012 Part 1 Any provision made for Northern Ireland which corresponds to Part 1 of WRA 2012 Welfare supplementary payment payable pursuant a reduction of the amount payable of housing benefit HB(WSP)R(NI) 2017 Regulation 2 WSPR(NI) 2016 Regulation 4 Welfare supplementary payment payable pursuant to a reduction of the amount payable of employment and support allowance WSP(LCP)R(NI) 2016 Regulation 8 (when the recipient is entitled to the payment by meeting the condition in regulation 8(2)(b)) SP(LDRP)R(NI) 2016 Regulation 20, 21 or 22 Welfare supplementary payment payable pursuant to the loss of disability living allowance WSP(LDLA)R(NI) 2016 Regulation 4, 8, 13 or 14 Welfare supplementary payment payable pursuant to a reduction in the amount payable of state pension credit WSP(LCP)R(NI) 2016 Regulation 16 Welfare supplementary payment payable pursuant to a reduction in the amount payable of working tax credit WSP(LDRP)R(NI) 2016 Regulation 27 or 28 Welfare supplementary payment payable pursuant to a reduction in the amount payable of state pension tax credit WSP(LDRP)R(NI) 2016 Regulation 33 or 34 Winter heating assistance SS(S)A 2018 Section 30 Working tax credit TCA 2002 Part 1 Young carer grant SS(S)A 2018 Sections 24 and 28 TABLE B — PART 2 BENEFITS PAYABLE UNDER REGULATIONS Social security benefit Payable under regulations made under . . . ... ... . . . Discretionary housing payment CSPSSA 2000 Section 69 Payments made under the Best Start Foods scheme SSA 1988 Section 13 Payments made under the Healthy Start scheme SSA 1988 Section 13 Payments to reduce under-occupation by housing benefit claimants WRPA 1999 WRP(NI)O 1999 Section 79 Article 70 Payments to secure the provision of food and drink, free of charge, to a person to whom a school lunch must be provided under Article 58 of the Education and Libraries (Northern Ireland) Order 1986 or Article 15(2) of the Further Education (Northern Ireland) Order 1997 FAA(NI) 2009 Section 2 Payment under a council tax reduction scheme: Wales LGFA 1992 Section 13A(4) Scottish child payment SS(S)A 2018 Section 79 2 Industrial death benefit is charged to tax under Part 9 (see section 577). 3 In this section “ industrial death benefit ” means any benefit payable under— a section 94 of, and Part 6 of Schedule 7 to, SSCBA 1992, or b section 94 of, and Part 6 of Schedule 7 to, SSCB(NI)A 1992. Chapter 6 Taxable foreign benefits Taxable benefits: foreign benefits 678 1 This section applies to any benefit which is payable under the law of a country or territory outside the United Kingdom if— a it is substantially similar in character to a benefit listed in Table A, and b it is payable to a person resident in the United Kingdom. 2 But this section does not apply to a benefit which is charged to tax under Part 9 (pension income). Taxable social security income 679 1 If section 678 applies, the taxable social security income for a taxable benefit for a tax year is the full amount of the social security income arising in the tax year, but subject to subsection (2). 2 That income is treated as relevant foreign income for the purposes of Chapters 2 and 3 of Part 8 of ITTOIA 2005 (relevant foreign income: remittance basis and deductions and reliefs). 3 See also Chapter 4 of that Part (unremittable income). Person liable for tax 680 The person liable for any tax charged under this Part on a benefit to which section 678 applies is the person receiving or entitled to the benefit. Chapter 7 Taxable and other foreign benefits: exemptions Taxable and other foreign benefits: exemptions 681 1 No liability to income tax arises on a taxable foreign benefit if, or to the extent that, the corresponding UK benefit is exempt income. 2 No liability to income tax arises on a benefit which is payable under the law of a country or territory outside the United Kingdom if it is substantially similar in character to a United Kingdom social security benefit listed in Table B. 3 In this section— “ taxable foreign benefit ” means a benefit to which section 678 applies; “ corresponding UK benefit ”, in relation to a taxable foreign benefit, means the taxable benefit listed in Table A to which the foreign benefit is substantially similar in character (see section 678). Foreign benefits of consular employees 681A 1 No liability to income tax arises in respect of any benefit to which section 678 applies of a consular officer or employee in the United Kingdom for a foreign state if— a Her Majesty by Order in Council directs that this section applies to the foreign state for the purpose of giving effect to a reciprocal arrangement with that state, and b the officer or employee meets conditions A to C. 2 Condition A is that the officer or employee is not— a a British citizen, b a British overseas territories citizen, c a British National (Overseas), or d a British Overseas citizen. 3 Condition B is that the officer or employee is not engaged in any trade, profession, vocation or employment in the United Kingdom, otherwise than as a consular officer or employee of the state in question. 4 Condition C is that— a the officer or employee is a permanent employee of that state, or b the officer or employee was non-UK resident for each of the 2 tax years preceding the tax year in which the officer or employee became a consular officer or employee in the United Kingdom of that state. 5 In this section— “ consular officer or employee ” includes any person employed for the purposes of the official business of a consular officer at— any consulate, any consular establishment, or any other premises used for those purposes, and “ reciprocal agreement ” has the same meaning as in section 302. 6 Section 302(5) to (7) apply to an Order under subsection (1) and the operation of this section as they apply to an Order under section 302(1) and the operation of section 302. CHAPTER 8 High income child benefit charge High income child benefit charge 681B 1 A person (“P”) is liable to a charge to income tax for a tax year if— a P's adjusted net income for the year exceeds £60,000 , and b one or both of conditions A and B are met. 2 The charge is to be known as a “high income child benefit charge”. 3 Condition A is that— a P is entitled to an amount in respect of child benefit for a week in the tax year, and b there is no other person who is a partner of P throughout the week and has an adjusted net income for the year which exceeds that of P. 4 Condition B is that— a a person (“Q”) other than P is entitled to an amount in respect of child benefit for a week in the tax year, b Q is a partner of P throughout the week, and c P has an adjusted net income for the year which exceeds that of Q. The amount of the charge 681C 1 The amount of the high income child benefit charge to which a person (“P”) is liable for a tax year is the appropriate percentage of the total of— a any amounts in relation to which condition A is met, and b any amounts in relation to which condition B is met. For conditions A and B, see section 681B. 2 “The appropriate percentage” is— a 100%, or b if less, the percentage determined by the formula— ANI – L X % Where— ANI is P's adjusted net income for the tax year; L is £60,000 ; X is £200 . 3 If— a the total of the amounts mentioned in paragraphs (a) and (b) of subsection (1), or the amount of the charge determined under that subsection, is not a whole number of pounds, or b the percentage determined under subsection (2)(b) is not a whole number, it is to be rounded down to the nearest whole number. Extension of charge in cases where child not living with claimant 681D 1 This section applies where— a a person (“R”) is entitled to an amount in respect of child benefit for a child for a week in a tax year by virtue of section 143(1)(b) of SSCBA 1992 or section 139(1)(b) of SSCB(NI)A 1992 (persons contributing to the cost of providing for a child), b neither R, nor any person who is a partner of R throughout that week, is liable for a charge to income tax in respect of that amount under section 681B, and c there is another person (“S”) who, for the purposes of section 143(1)(a) of SSCBA 1992 or section 139(1)(a) of SSCB(NI)A 1992 (persons with whom child is living), is a person who has the child living with him or her in that week. 2 Section 681B applies as if S were entitled to the amount of child benefit mentioned in subsection (1)(a). 3 Where there is more than one person to whom subsection (1)(c) applies in relation to an amount of child benefit for a week, subsection (2) applies only to the one with the highest adjusted net income for the tax year. 4 For the purposes of subsection (1)(a), an amount of child benefit to which R is entitled for a week is to be ignored if— a the period (which includes that week) for which R is entitled to child benefit by virtue of section 143(1)(b) of SSCBA 1992 or section 139(1)(b) of SSCB(NI)A 1992 in respect of the same child does not exceed 52 weeks, and b R is entitled to child benefit in respect of the child for the week immediately before and the week immediately after that period by virtue of section 143(1)(a) of SSCBA 1992 or section 139(1)(a) of SSCB(NI)A 1992. 5 In this section “ child ” means— a a child within the meaning of section 142 of SSCBA 1992 or section 138 of SSCB(NI)A 1992, or b a qualifying young person within the meaning of either of those sections. Special cases 681E 1 The following amounts are to be disregarded for the purposes of this Chapter— a amounts to which a person is entitled but in respect of which an election under section 13A of the Social Security Administration Act 1992 or section 11A of the Social Security Administration (Northern Ireland) Act 1992 (election for payment of child benefit not to be made if high income child benefit charge would be triggered) has effect; b amounts to which a person is entitled by virtue of section 145A of SSCBA 1992 or section 141A of SSCB(NI)A 1992 (entitlement to child benefit after death of child or qualifying young person). 2 Subsection (3) applies if— a a person (“T”) is entitled to an amount in respect of child benefit for a week in a tax year or is treated as so entitled by virtue of section 681D(2), b two or more other persons are partners of T throughout the week, and c two or more of those persons would, apart from subsection (3), each be liable to a charge under section 681B(1) in relation to that amount. 3 Only one of those persons is liable, namely the person with the highest adjusted net income for the tax year. Alteration of income limit etc by Treasury order 681F 1 The Treasury may by order— a substitute another amount for the amount for the time being specified in section 681B(1)(a) and defined as “L” in section 681C(2), or b substitute another amount for the amount defined as “X” in section 681C(2). 2 An order under this section has effect for tax years beginning after the order is made. 3 A statutory instrument containing an order under this section which increases any person's liability to income tax may not be made unless a draft of it has been laid before and approved by a resolution of the House of Commons. Meaning of “partner” 681G 1 For the purposes of this Chapter a person is a “partner” of another person at any time if either condition A or condition B is met at that time. 2 Condition A is that the persons are married to, or civil partners of, each other and are neither— a separated under a court order, nor b separated in circumstances in which the separation is likely to be permanent. 3 Condition B is that the persons are not married to, or civil partners of, each other but are living together as if they were a married couple or civil partners . 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other interpretation provisions 681H 1 This section applies for the purposes of this Chapter. 2 “Adjusted net income” of a person for a tax year means the person's adjusted net income for that tax year as determined under section 58 of ITA 2007. 3 “ Week ” means a period of 7 days beginning with a Monday; and a week is in a tax year if (and only if) the Monday with which it begins is in the tax year. Part 11 Pay As You Earn Chapter 1 Introduction Scope of this Part 682 1 This Part provides for the assessment, collection and recovery of income tax in respect of PAYE income and includes provision in respect of the deduction of certain other amounts from, and the repayment of certain other amounts with, PAYE income . 2 The provisions of this Part are contained in— this Chapter (which gives the meaning of “PAYE income”), Chapter 2 (PAYE: general), Chapter 3 (PAYE: special types of payer or payee), Chapter 4 (PAYE: special types of income), Chapter 5 (PAYE settlement agreements), and Chapter 6 (miscellaneous and supplemental). 3 Provision for PAYE regulations is made by Chapters 2 to 6. PAYE income 683 1 For the purposes of this Act and any other enactment (whenever passed) “PAYE income” for a tax year consists of— a any PAYE employment income for the year, b any PAYE pension income for the year, and c any PAYE social security income for the year. 2 “ PAYE employment income ” for a tax year means income which consists of— a any taxable earnings from an employment in the year (determined in accordance with section 10(2)), and b any taxable specific income from an employment for the year (determined in accordance with section 10(3)). 3 “ PAYE pension income ” for a tax year means, subject to subsections (3A) to (3D) , taxable pension income for the year determined in accordance with any of the following provisions— section 571 (United Kingdom pensions), section 578 (United Kingdom social security pensions), section 579B (pension under registered pension scheme), section 612, so far as relating to annuities to which section 610 applies (annuities under non-registered occupational pension schemes), section 616 (certain overseas government pensions paid in the United Kingdom), section 621 (the House of Commons Members' Fund), section 634 (voluntary annual payments). section 637B (tax treatment of pension commencement excess lump sums), section 637G (tax treatment of trivial commutation lump sums and winding-up lump sums), section 637N (trivial commutation lump sum death benefits). 3ZA PAYE employment income” for a tax year does not include any taxable specific income treated as paid or received in that tax year by section 394A or 554Z4A (temporary non-residents). 3A “ PAYE pension income ” for a tax year also includes any social security pension lump sum (within the meaning of section 7 of F(No.2)A 2005) in respect of which a charge to income tax arises under that section for that tax year. 3B PAYE pension income” for a tax year does not include any taxable pension income that is treated as accruing in that tax year by section 572A or 579CA (temporary non-residents). 3C PAYE pension income” for a tax year does not include any taxable pension income that is treated as accruing in that tax year by virtue of Chapter 15A of Part 9 (pension income: lump sums under registered pension schemes) so far as having effect as applied by paragraph 1(3)(e) of Schedule 34 to FA 2004. 3D “PAYE pension income” for a tax year does not include any amount to which section 579A applies by virtue of any of the following provisions— section 637H(2) (certain defined benefits lump sum death benefits), section 637I(2) (certain pension protection lump sum death benefits), section 637J(2) (certain uncrystallised funds lump sum death benefits), section 637K(2) (certain annuity protection lump sum death benefits), section 637L(2) (certain drawdown pension fund lump sum death benefits), section 637M(2) (certain flexi-access drawdown lump sum death benefits). 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 “ PAYE social security income ” for a tax year means taxable social security income for the year determined in accordance with section 658(4) or (5) (taxable United Kingdom social security benefits). Chapter 2 PAYE: general PAYE regulations 684 1 The Commissioners ... must make regulations (“ PAYE regulations ”) with respect to the assessment, charge, collection and recovery of income tax in respect of all PAYE income. 2 The provision that may be made in PAYE regulations includes any such provision as is set out in the following list. List of Provisions 1. Provision— a for requiring persons making payments of, or on account of, PAYE income to make, at the relevant time , deductions or repayments of income tax calculated by reference to tax tables prepared by the Commissioners ... , and b for making persons who are required to make any such deductions or repayments accountable to or, as the case may be, entitled to repayment from the Board. “The relevant time” is— a if the payment is a notional payment for the purposes of section 710 and the person is treated by virtue of any Act as making it at a time before the date on which the Act is passed, that date, and b in any other case, the time when the payment is made. 1ZA. Provision— a for authorising a person (“P”), in a case where the PAYE income of an employee (whether an employee of P or of another person) includes an amount charged to tax under any of Chapters 3 to 10 of Part 3 in respect of the provision of a benefit of a specified kind— i to make deductions of income tax in respect of the benefit from any payment or payments actually made of, or on account of, PAYE income of the employee, or ii to make repayments of such income tax, b for any such deductions or repayments to be made at a specified time, c for the amount of any such deductions or repayments to be calculated in accordance with the regulations, d for the provision of the benefit to be treated for specified purposes as a payment of PAYE income, and e for making persons who make any such deductions or repayments accountable to or, as the case may be, entitled to repayment from the Commissioners. 1A. Provision— a for deductions to be made, if and to the extent that the payee does not object, with a view to securing that income tax payable in respect of any income of a payee for a tax year which is not PAYE income is deducted from PAYE income of the payee paid during that year; and b as to the circumstances and manner in which a payee may object to the making of deductions. 2. Provision— a for repayments or deductions to be made, if and to the extent that the payee does not object, in respect of any amounts overpaid or (or treated as overpaid) on account of, or any amounts other than relevant debts remaining unpaid (or treated as remaining unpaid) on account of— i income tax in respect of income for a previous tax year, or ii capital gains tax in respect of chargeable gains for such a year; and b as to the circumstances in which repayments or deductions may be made, and the circumstances and manner in which a payee may object to the making of repayments or deductions. 2ZA. Provision— a for deductions to be made, if and to the extent that the payee does not object, with a view to securing that income tax payable for a tax year by the payee by virtue of section 681B (high income child benefit charge) is deducted from PAYE income of the payee paid during that year, b for repayments to be made in a tax year, if and to the extent that the payee does not object, in respect of any amounts overpaid on account of income tax under that section for that tax year, and c as to the circumstances and manner in which a payee may object to the making of deductions or repayments. 2A. Provision— a for deductions to be made in respect of relevant debts of a payee, b as to the circumstances in which such deductions may be made, and c where such deductions are made, as to the date on which the relevant debts are to be treated as paid. 3. Provision for the production to, and inspection by, persons authorised by the Board of wages sheets and other documents and records for the purposes of satisfying themselves that amounts have been and are being deducted, repaid and accounted for in accordance with the regulations. 4. Provision for requiring an employer or former employer to provide any information, within a prescribed time, about payments or other benefits provided or to be provided, including those provided or to be provided in connection with— a the termination of a person’s employment, or b a change in the duties of or general earnings from a person’s employment. 4ZA. Provision- a for authorising or requiring a person who provides with respect to payments of or on account of PAYE income a service that is specified or of a specified description (“a relevant payment service”) to supply to Her Majesty's Revenue and Customs information about payments with respect to which the service is provided, or any information the Commissioners may request about features of the service provided or to be provided with respect to particular payments; b for conferring power on the Commissioners to specify by directions circumstances in which provision made by virtue of paragraph (a) or subsection (4ZB) is not to apply in relation to a payment; c for securing that a supply of information that is authorised by regulations under paragraph (a) is not treated as breaching any obligation of confidence owed in respect of the information by the person supplying it; d for prohibiting or restricting the disclosure, otherwise than to Her Majesty's Revenue and Customs, of information by a person to whom it was supplied pursuant to a requirement imposed by virtue of subsection (4ZB); e for requiring a person who provides, or is to provide, a relevant payment service to take steps (including any steps that may be specified, or further specified, in accordance with item 8A(b)) for facilitating the meeting by persons making payments of obligations imposed by virtue of subsection (4ZB). 4A. Provision authorising the recovery from the payee rather than the payer of any amount that an officer of Revenue and Customs considers should have been deducted by the payer. 4B. Provision for and in connection with requiring the giving, in specified circumstances, of security (or further security) for the payment of amounts in respect of which a person is or may be accountable to the Commissioners under the regulations. 5. Provision for the way in which any matters provided for by the regulations are to be proved. 6. Provision— a for requiring the payment of interest on sums due to the Board which are not paid by the due date, b for determining the date (being not less than 14 days after the end of the tax year in respect of which the sums are due) from which such interest is to be calculated, and c for enabling the repayment or remission of such interest or interest under section 101 of FA 2009 . 7. Provision for requiring the payment of interest on sums due from the Board and for determining the date from which such interest is to be calculated. 7A. Provision for excluding payments of such description as may be specified from the operation of the regulations in such circumstances as may be specified. Provision for excluding payments of such description as may be specified from the operation of the regulations in such circumstances as may be specified. 8. Provision for the making of decisions by Her Majesty’s Revenue and Customs as to any matter required to be decided for the purposes of the regulations and for appeals against such decisions. 8A. Provision requiring compliance with any directions the Commissioners may give— a about the form and manner in which any information is to be provided under the regulations; b specifying, or further specifying, steps for the purposes of item 4ZA(e); c specifying information that a person making payments of or on account of PAYE income must provide about the method by which the payments are made. 9. Provision for appeals with respect to matters arising under the regulations which would otherwise not be the subject of an appeal. 10. Different provision for different cases or classes of case. 11. Any incidental, consequential, supplementary and transitional provision which appears to the Board to be expedient. 3 The deductions of income tax— a required to be made by PAYE regulations under item 1 in the above list, or b which a person is authorised to make by PAYE regulations under item 1ZA in that list, may be required to be made at the basic rate or other rates in such cases or classes of case as may be provided by the regulations. 3A PAYE regulations under item 2A in the above list may not make provision enabling deductions totalling more than £17,000 to be made from a payee's income for a tax year without the payee's consent. 3B The Treasury may by order amend the amount specified in subsection (3A). 3C References in items 4ZA and 8A of the above list to directions include directions making different provision for different cases. 4 Interest required to be paid by PAYE regulations under item 6 or 7 in the above list or by section 101 of FA 2009, in connection with sums due to the Commissioners under the PAYE Regulations , must be paid without any deduction of income tax and may not be taken into account in computing any income, profits or losses for any tax purposes. 4ZA Item 8A in the above list does not prejudice the power of the Commissioners under subsection (1) to make provision in PAYE regulations about the matters mentioned in that item. 4ZB The persons to whom PAYE information regulations may require information to be supplied include, in the case of information about a payment, a person who provides, or is to provide, with respect to the payment a service such as is mentioned in item 4ZA(a) in the above list. 4ZC In subsection (4ZB) “ PAYE information regulations ” means PAYE regulations that require information to be supplied for any purpose authorised by subsections (1) and (2). 4A A person who fails to comply with a requirement imposed under PAYE regulations to give security, or further security, for the payment of any amount commits an offence if the failure continues for such period as is specified; and a person guilty of an offence under this subsection is liable on summary conviction— a in England and Wales, to a fine; b in Scotland or Northern Ireland, to a fine not exceeding level 5 on the standard scale 5 PAYE regulations must not affect any right of appeal to the tribunal which a person would have apart from the regulations. 6 It does not matter for the purposes of PAYE regulations that income is wholly or partly income for a tax year other than that in which the payment is made. 7 PAYE regulations have effect despite anything in the Income Tax Acts. 7A Nothing in PAYE regulations may be read— a as preventing the making of arrangements for the collection of tax or other amounts in such manner as may be agreed by, or on behalf of, the payer and an officer of Revenue and Customs , or b as requiring the payer to comply with the regulations in circumstances in which an officer of Revenue and Customs is satisfied that it is unnecessary or not appropriate for the payer to do so. 7AA In this Part “ relevant debt ”, in relation to a payee, means— a a sum payable by the payee to the Commissioners under or by virtue of an enactment, other than an excluded debt, and b a sum payable by the payee to the Commissioners under a contract settlement. 7AB For the purposes of subsection (7AA)— a child tax credit or working tax credit that the payee is liable to repay is an excluded debt, and b if the payee is an employer, any amount that the payee is required to deduct from the PAYE income of employees for a tax year is an excluded debt until the tax year has ended. 7B References in this section and section 685 to income tax in respect of PAYE income are references to income tax in respect of that income if reasonable assumptions are (when necessary) made about other income. 7C In this section and section 685— “ the Commissioners ” means the Commissioners for Her Majesty's Revenue and Customs; “ contract settlement ” means an agreement made in connection with the liability of the payee or another person to make a payment to the Commissioners under or by virtue of an enactment; “ payer ” means any person paying PAYE income and “ payee ” means any person in receipt of such income; “ specified ” means specified in PAYE regulations. 8 In this Act and any other enactment (whenever passed) “ PAYE regulations ” means regulations under this section. Tax tables 685 1 The Commissioners ... must construct tax tables with a view to securing that so far as possible— a the total income tax payable in respect of PAYE income for any tax year and any relevant debts payable during that tax year are deducted from PAYE income paid during that year, and b the income tax and any relevant debts deductible or repayable on the occasion of any payment of, or on account of, PAYE income are such that the following proportions are the same— i the proportion which the total net income tax and any relevant debts deducted since the beginning of the tax year bears to the total income tax and the total amount of any relevant debts payable for the year, and ii the proportion which the part of the tax year which ends with the date of the payment bears to the whole year. 2 References in subsection (1) to the total income tax payable for the year are to be read as references to the total income tax estimated to be payable for the year in respect of the income in question— a subject to a provisional deduction for allowances and reliefs, and b subject to an adjustment in respect of amounts required to be deducted or repaid by PAYE regulations made under item 1A , 2 , 2ZA or 2A in the list in section 684(2). 3 For the purpose of estimating the total income tax payable as mentioned in subsection (1)(a), it may be assumed, in relation to any payment of, or on account of, PAYE income, that the following proportions will be the same— a the proportion which the income paid in the part of the tax year which ends with the making of the payment bears to the income for the whole year, and b the proportion which that part of the tax year bears to the whole year. 4 PAYE regulations may make provision, where it appears to an officer of Revenue and Customs that it is impracticable for a payer to deduct tax by reference to tax tables— a for deductions to be made by the payer in accordance with other arrangements agreed as mentioned in section 684(7A)(a), or b for the payee to be required to keep records and make payments and returns as if he were the payer. Meaning of “payment” 686 1 For the purposes of PAYE regulations, a payment of, or on account of, PAYE income of a person is treated as made at the earliest of the following times— Rule 1 The time when the payment is made. Rule 2 The time when the person becomes entitled to the payment. Rule 3 If the person is a director of a company and the income is income from employment with the company (whether or not as director), whichever is the earliest of— a the time when sums on account of the income are credited in the company’s accounts or records (whether or not there is any restriction on the right to draw the sums); b if the amount of the income for a period is determined before the period ends, the time when the period ends; c if the amount of the income for a period is not determined until after the period has ended, the time when the amount is determined. But this is subject to subsection (5) ( PAYE pension income: social security pension lump sums). 2 Rule 3 applies if the person is a director of the company at any time in the tax year in which the time mentioned falls. 3 In this section “ director ” means— a in relation to a company whose affairs are managed by a board of directors or similar body, a member of that board or body, b in relation to a company whose affairs are managed by a single director or other person, that director or person, and c in relation to a company whose affairs are managed by the members themselves, a member of the company, and includes any person in accordance with whose directions or instructions the company’s directors (as defined above) are accustomed to act. 4 For the purposes of subsection (3) a person is not regarded as a person in accordance with whose directions or instructions the company’s directors are accustomed to act merely because the directors act on advice given by that person in a professional capacity. 5 For the purposes of PAYE regulations, a payment of, or on account of, an amount which is PAYE pension income of a person by virtue of section 683(3A) (social security pension lump sums) is to be treated as made at the time when the payment is made. Chapter 3 PAYE: special types of payer or payee Payments by intermediary 687 1 If any payment of, or on account of, PAYE income of an employee is made by an intermediary of the employer, the employer is to be treated, for the purposes of PAYE regulations, as making a payment of the income of an amount equal to the amount given by subsection (3). 2 Subsection (1) does not apply if the intermediary (whether or not a person to whom PAYE regulations apply) deducts income tax and any relevant debts from the payment the intermediary makes, and accounts for it, in accordance with PAYE regulations. 3 The amount referred to is— a if the amount of the payment made by the intermediary is an amount to which the recipient is entitled after deduction of income tax and any relevant debts , the aggregate of the amount of the payment and the amount of any income tax due and any relevant debts deductible , and b in any other case, the amount of the payment. 4 For the purposes of this section a payment of, or on account of, PAYE income of an employee is made by an intermediary of the employer if it is made— a by a person acting on behalf of the employer and at the expense of the employer or a person connected with the employer, or b by trustees holding property for any persons who include or class of persons which includes the employee. 5 This section does not apply in relation to a payment so far as the sum paid is employment income under Chapter 2 of Part 7A. Payment of employment income under Part 7A 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. 3 The payment is treated as made on the latest of the following days— a the day on which the relevant step is taken, b the day on which A's employment with B starts, and c the day which is 30 days after the day on which FA 2011 is passed. 4 Subsection (2) does not apply if the person who takes the relevant step (whether or not a person to whom PAYE regulations apply) deducts income tax from the payment, and accounts for it, in accordance with PAYE regulations. Agency workers 688 1 This section applies if the remuneration receivable by an individual in consequence of providing services falls to be treated under section 44 (agency workers) as earnings from an employment. 1A The relevant provisions have effect as if the individual held the employment with or under the deemed employer, subject to subsection (2). 1B For the purposes of sections 687, 689 and 689A, if— a a person other than the deemed employer or an intermediary of the deemed employer makes a payment of, or on account of, PAYE income of the individual, and b the payment is not within subsection (2), the person is to be treated as making the payment as an intermediary of the deemed employer. 2 If— a the client is not the deemed employer, and b a payment of, or on account of, PAYE income of the individual is made by a person acting on behalf of the client, and at the expense of the client or a person connected with the client, section 687 and, in relation to any payment treated as made by the client under section 687, section 710 have effect in relation to the payment as if the client and not the deemed employer were the employer for the purposes of the relevant provisions. 2A PAYE regulations may make provision for, or in connection with, the recovery from a director or officer of a company, in such circumstances as may be specified in the regulations, of— a any amount the company is, by virtue of section 44(4) to (6) or 46A, to deduct, or account for, in accordance with PAYE regulations, and b any interest or penalty, in respect of an amount within paragraph (a), for which the company is liable. 3 In this section— “ the client ” means the person who is the client for the purposes of section 44; “ company " includes a limited liability partnership; “ the deemed employer ” means the person with whom the individual is treated under section 44 as having an employment, the duties of which consist of the services; “ director ” has the meaning given by section 67; “ officer ” in relation to a company, means any manager, secretary or other similar officer of the company, or any person acting or purporting to act as such; “ the relevant provisions ” means this Chapter except section 691, Chapter 4 of this Part and section 710. Managed service companies: recovery from other persons 688A 1 PAYE regulations may make provision authorising the recovery from a person within subsection (2) of any amount that an officer of Revenue and Customs considers should have been deducted by a managed service company (“the MSC ”) from a payment of, or on account of, PAYE income of an individual. 2 The persons are— a a director or other office-holder, or an associate, of the MSC , b an MSC provider, c a person who (directly or indirectly) has encouraged or been actively involved in the provision by the MSC of the services of the individual, and d a director or other office-holder, or an associate, of a person (other than an individual) who is within paragraph (b) or (c). 3 A person does not fall within subsection (2)(c) merely by virtue of— a providing legal or accountancy advice in a professional capacity, or b placing the individual with persons who wish to obtain the services of the individual (including by contracting with the MSC for the provision of those services). 4 The supplementary provision that may be made by the regulations includes provision as to the liability of one person within subsection (2) to another such person. 5 In this section— “ associate ” has the meaning given by section 61I, “ director ” has the meaning given by section 67, “ managed service company ” has the meaning given by section 61B but for the purposes of section 339A has the meaning given by subsection (11) of that section , and “ MSC provider ” means an MSC provider who is involved with the MSC (within the meaning of section 61B). 6 Section 61C(4) (extended meaning of “associate”) applies for the purposes of subsection (2)(d). 7 The Treasury may by order amend this section (but not this subsection or subsection (8)). 8 The Treasury must not make an order under subsection (7) unless a draft of it has been laid before and approved by a resolution of the House of Commons. Workers' services provided through intermediaries: recovery of PAYE 688AA 1 PAYE Regulations may make provision for, or in connection with, the recovery of a deemed employer PAYE debt from a relevant person. 2 “ A deemed employer PAYE debt ” means an amount— a that a person (“the deemed employer”) is liable to pay under PAYE regulations in consequence of being treated under section 61N(3) as having made a deemed direct payment to a worker (other than by virtue of section 61WA) , and b that an officer of Revenue and Customs considers there is no realistic prospect of recovering from the deemed employer within a reasonable period. 3 “ Relevant person ”, in relation to a deemed employer PAYE debt, means a person who is not the deemed employer and who— a is the highest person in the chain identified under section 61N(1) in determining that the deemed employer is to be treated as having made the deemed direct payment, or b is the second highest person in that chain and is a qualifying person (within the meaning given by section 61N(8)) at the time the deemed employer is treated as having made that deemed direct payment. Workers’ providing services through intermediaries etc: cases where taxes already paid 688AB 1 PAYE regulations may make the following provision. 2 Provision for an amount to be treated as having been recovered from the payee, and for that amount not to be recoverable from the payer (“the deemed employer”), where— a the deemed employer would otherwise be liable to pay an amount under PAYE regulations in consequence of being treated under section 61N(3) as having made a deemed direct payment to a worker (other than by virtue of section 61WA), and b an amount of income tax or corporation tax has already been paid, or assessed, in respect of income referable to that payment. 3 Provision for the amount referred to in the opening words of subsection (2) to be the best estimate which can reasonably be made by an officer of Revenue and Customs (whether generally or specifically) of the amount referred to in subsection (2) (b) . 4 Provision preventing a person specified in PAYE regulations from— a making a claim for the repayment of, or relief in respect of, an amount referred to in subsection (2) (b) , or b deducting, or setting off, the amount referred to in that subsection from, or against, any tax liability of the person, in a case where an estimate of that amount is treated as having been recovered from the payee as a result of provision made by virtue of this section. 5 In this section, “ payee ” and “ payer ” have the same meaning as in section 684 (see subsection (7C) of that section). Travel expenses of workers providing services through intermediaries: recovery of unpaid tax 688B 1 PAYE regulations may make provision for, or in connection with, the recovery from a director or officer of a company, in such circumstances as may be specified in the regulations, of amounts within any of subsections (2) to (5). 2 An amount within this subsection is an amount that the company is to account for in accordance with PAYE regulations by virtue of section 339A(7) to (9) (persons providing fraudulent documents). 3 An amount within this subsection is an amount which the company is to deduct and pay in accordance with PAYE regulations by virtue of section 339A in circumstances where— a the company is an employment intermediary, b on the basis that section 339A does not apply by virtue of subsection (3) of that section, the company has not deducted and paid the amount, but c the company has not been provided by any other person with evidence from which it would be reasonable in all the circumstances to conclude that subsection (3) of that section applied (and the mere assertion by a person that the manner in which the worker provided the services was not subject to (or to the right of) supervision, direction or control by any person is not such evidence). 4 An amount within this subsection is an amount that the company is to deduct and pay in accordance with PAYE regulations by virtue of section 339A in a case where subsection (4) of that section applies (services provided under arrangements made by intermediaries). 5 An amount within this subsection is any interest or penalty in respect of an amount within any of subsections (2) to (4) for which the company is liable. 6 In this section— “ company ” includes a limited liability partnership; “ director ” has the meaning given by section 67; “ employment intermediary ” has the same meaning as in section 339A; “ officer ”, in relation to a company, means any manager, secretary or other similar officer of the company, or any person acting or purporting to act as such Employee of non-UK employer 689 1 This section applies if— a an employee during any period works for a person (“ the relevant person ”) who is not the employer of the employee, b any payment of, or on account of, PAYE income of the employee in respect of that period is made by a person who is the employer or an intermediary of the employer or of the relevant person, c PAYE regulations do not apply to the person making the payment or, if that person makes the payment as an intermediary of the employer or of the relevant person, the employer, and d income tax and any relevant debts are not deducted, or not accounted for, in accordance with the regulations by the person making the payment or, if that person makes the payment as an intermediary of the employer or of the relevant person, the employer. 1ZA But this section does not apply if section 689A applies or would apply but for a certificate issued under regulations made under subsection (7) of that section. 1A Subject to subsection (4), subsection (1)(b) does not apply in relation to a payment so far as the sum paid is employment income under Chapter 2 of Part 7A. 1B Subsection (1C) applies if— a the employee worked for the relevant person during the period under or in consequence of arrangements made between the relevant person and a third person, b the third person did not make the payment of, or on account of, PAYE income of the employee, and c PAYE regulations would apply to the third person if the third person were to make a payment of, or on account of, PAYE income of the employee. 1C The third person is to be treated, for the purposes of PAYE regulations, as making a payment of PAYE income of the employee of an amount equal to the amount given by subsection (3). 2 If subsection (1C) does not apply, the relevant person is to be treated, for the purposes of PAYE regulations, as making a payment of PAYE income of the employee of an amount equal to the amount given by subsection (3). 3 The amount referred to is— a if the amount of the payment actually made is an amount to which the recipient is entitled after deduction of income tax and any relevant debts due under the PAYE regulations , the aggregate of the amount of the payment and the amount of any income tax and any relevant debts deductible due, and b in any other case, the amount of the payment. 4 If, by virtue of any of sections 687A and 693 to 700, an employer would be treated for the purposes of PAYE regulations (if they applied to the employer) as making a payment of any amount to an employee, and if the case is not within subsection (4A), this section has effect as if— a the employer were also to be treated for the purposes of this section as making an actual payment of that amount, and b paragraph (a) of subsection (3) were omitted. 4A A case is within this subsection if— a the section concerned is section 687A or 695A (employment income under Part 7A), and b the relevant step concerned is within paragraph 1 of Schedule 11 to F( No. 2)A 2017 (loans etc outstanding on 5 April 2019). (And this section does not apply in a case within this subsection.) 5 For the purposes of this section a payment of, or on account of, PAYE income of an employee is made by an intermediary of the employer or of the relevant person if it is made— a by a person acting on behalf of the employer or the relevant person and at the expense of the employer or the relevant person or a person connected with the employer or the relevant person, or b by trustees holding property for any persons who include or class of persons which includes the employee. 6 In this section and sections 690 and 691 “ work ”, in relation to an employee, means the performance of any duties of the employment of the employee and any reference to the employee’s working is to be read accordingly. Oil and gas workers on the continental shelf 689A 1 This section applies if— a any payment of, or on account of, PAYE income of a continental shelf worker in respect of a period is made by a person who is the employer or an intermediary of the employer or of the relevant person, b PAYE regulations do not apply to the person making the payment or, if that person makes the payment as an intermediary of the employer or of the relevant person, to the employer, and c income tax and any relevant debts are not deducted, or not accounted for, in accordance with PAYE regulations by the person making the payment or, if that person makes the payment as an intermediary of the employer or of the relevant person, by the employer. 2 Subject to subsection (5), subsection (1)(a) does not apply in relation to a payment so far as the sum paid is employment income under Chapter 2 of Part 7A. 3 The relevant person is to be treated, for the purposes of PAYE regulations, as making a payment of PAYE income of the continental shelf worker of an amount equal to the amount given by subsection (4). 4 The amount referred to is— a if the amount of the payment actually made is an amount to which the recipient is entitled after deduction of income tax and any relevant debts under PAYE regulations, the aggregate of the amount of the payment and the amount of any income tax due and any relevant debts deductible, and b in any other case, the amount of the payment. 5 If, by virtue of any of sections 687A and 693 to 700, an employer would be treated for the purposes of PAYE regulations (if they applied to the employer) as making a payment of any amount to a continental shelf worker, this section has effect as if— a the employer were also to be treated for the purposes of this section as making an actual payment of that amount, and b paragraph (a) of subsection (4) were omitted. 6 For the purposes of this section a payment of, or on account of, PAYE income of a continental shelf worker is made by an intermediary of the employer or of the relevant person if it is made— a by a person acting on behalf of the employer or the relevant person and at the expense of the employer or the relevant person or a person connected with the employer or the relevant person, or b by trustees holding property for any persons who include, or a class of persons which includes, the continental shelf worker. 7 PAYE regulations may make provision for, or in connection with, the issue by Her Majesty's Revenue and Customs of a certificate to a relevant person in respect of one or more continental shelf workers— a confirming that, in respect of payments of, or on account of, PAYE income of the continental shelf workers specified or described in the certificate, income tax and any relevant debts are being deducted, or accounted for, as mentioned in subsection (1)(c), and b disapplying this section in relation to payments of, or on account of, PAYE income of those workers while the certificate is in force. 8 Regulations under subsection (7) may, in particular, make provision about— a applying for a certificate; b the circumstances in which a certificate may, or must, be issued or cancelled; c the form and content of a certificate; d the effect of a certificate (including provision modifying the effect mentioned in subsection (7)(b) or specifying further effects); e the effect of cancelling a certificate. 9 Subsection (10) applies if— a there is more than one relevant person in relation to a continental shelf worker, and b in consequence of the same payment within subsection (1)(a), each of them is treated under subsection (3) as making a payment of PAYE income of the worker. 10 If one of the relevant persons complies with section 710 (notional payments: accounting for tax) in respect of the payment that person is treated as making, the other relevant persons do not have to comply with that section in respect of the payments they are treated as making. 11 In this section— “ continental shelf worker ” means a person in an employment some or all of the duties of which are performed— in the UK sector of the continental shelf (as defined in section 41), and in connection with exploration or exploitation activities (as so defined); “ employer ” means the employer of the continental shelf worker; “ relevant person ”, in relation to a continental shelf worker, means— if the employer has an associated company (as defined in section 449 of CTA 2010) with a place of business or registered office in the United Kingdom, the associated company, or in any other case, the person who holds the licence under Part 1 of the Petroleum Act 1998 in respect of the area of the UK sector of the continental shelf where some or all of the duties of the continental shelf worker's employment are performed. 12 The Treasury may by regulations modify the definitions of “continental shelf worker” and “relevant person”, as the Treasury thinks appropriate. 13 Regulations under subsection (12) may— a make different provision for different cases or different purposes, b make incidental, consequential, supplementary or transitional provision or savings, and c amend this section. Internationally mobile employees 690 1 This section applies in relation to an employee if the employee is or has been internationally mobile at any time in tax year 2025-26 or a subsequent tax year. 2 An employee is “internationally mobile” at a time in a tax year if at that time the employee works or is likely to work both inside and outside the UK during the tax year (“the mobile tax year”) and at that time— a the employee is or is likely to be non-UK resident for the mobile tax year, or b the mobile tax year is or is likely to be a split year as respects the employee. 3 If the employer makes an uncertain payment to the employee in any tax year, the entire payment is to be treated for the purposes of PAYE regulations as a payment of PAYE income of the employee. 4 For the purposes of this section and sections 690A and 690B, an “ uncertain payment ” means a payment of, or on account of, the income of the employee to the extent that— a the employer is unable to ascertain the extent to which the income is PAYE income, and b the reason for the employer being unable to ascertain that extent is connected to the employee being or having been internationally mobile in the mobile tax year. 5 Subsection (3) is without prejudice to— a any assessment in respect of the income of the employee in question, and b any right to repayment of income tax and any relevant debts overpaid and any obligation to pay income tax underpaid and any relevant debts that remain wholly or partly unpaid. 6 For the purposes of this section and sections 690A to 690E— a any reference to a payment made by the employer includes a reference to a payment made by a person acting on behalf of the employer and at the expense of the employer or a person connected with the employer, and b in a case where section 689 or 689A applies, any reference to a payment made by the employer is to be read as a reference to a payment treated, for the purposes of PAYE regulations, as made by the relevant person. Employer notification for internationally mobile employees 690A 1 This section applies in relation to an employee if the employee is or has been internationally mobile within the meaning of section 690(2) at any time in tax year 2025-26 or a subsequent tax year (“the mobile tax year”). 2 The appropriate person may give a notice to an officer of Revenue and Customs at any time during the mobile tax year— a that the employer is proposing to treat a proportion of any uncertain payment made by the employer to the employee as not being PAYE income of the employee for the purposes of PAYE regulations, and b specifying that proportion. 3 If a notice given under this section has effect, the proportion of any uncertain payment made by the employer to the employee in any tax year which is to be treated for the purposes of PAYE regulations as not being a payment of PAYE income is the proportion specified in the notice. 4 But if section 690D(4) (employer notification for qualifying new resident) also applies to a payment made by the employer, subsection (3) does not apply to the payment to the extent that it is a qualifying payment within the meaning of section 690D. 5 A notice given under this section— a does not have effect if a direction has previously been given to the appropriate person under section 690B (direction by HMRC in relation to internationally mobile employees) in relation to the employee and the mobile tax year; b otherwise, has effect when it is acknowledged by an officer of Revenue and Customs. 6 A notice given under this section ceases to have effect if— a a direction under section 690B is given to the appropriate person in relation to the employee and the mobile tax year, b a subsequent notice is given by the appropriate person under this section and is acknowledged by an officer of Revenue and Customs, or c where the notice was given on the basis that the employee was likely to be a non-UK resident for the mobile tax year, a subsequent notice— i is given by the appropriate person under section 690D (employer notification for qualifying new resident) on the basis that the employee is or is likely to be a qualifying new resident for the mobile tax year, and ii is acknowledged by an officer of Revenue and Customs. 7 A notice given under this section must be in such manner and form, and contain such information, as may be specified in a general direction made by the Commissioners for His Majesty’s Revenue and Customs. 8 Subsection (3) is without prejudice to— a any assessment in respect of the income of the employee in question, and b any right to repayment of income tax and any relevant debts overpaid and any obligation to pay income tax underpaid and any relevant debts that remain wholly or partly unpaid. 9 For the purposes of this section and sections 690B, 690D and 690E — a where an amount of employment income is treated as PAYE income paid by the employer for the purposes of PAYE regulations by virtue of section 693 (cash vouchers), section 694 (non-cash vouchers) or section 695 (credit-tokens), the employer is to be treated as making a payment of that amount of employment income, and b “ the appropriate person ” means— i the person designated by the employer for the purpose of this section and sections 690B, 690D and 690E and, if no person is so designated, the employer, and ii in a case where section 689 or 689A applies, the references to the employer in sub-paragraph (i) are to be read as references to the relevant person (within the meaning of section 689 or 689A). Direction by HMRC in relation to internationally mobile employees 690B 1 This section applies where— a a notice given during the mobile tax year under section 690A has effect, and b it appears to an officer of Revenue and Customs that the proportion of any uncertain payment made by the employer to the employee that is treated as not being a payment of PAYE income for the purposes of PAYE regulations should not be the proportion specified in the notice. 2 An officer of Revenue and Customs may give a direction— a for determining a proportion of any uncertain payment made by the employer to the employee which is to be treated for the purposes of PAYE regulations as not being a payment of PAYE income, or b that any such payment is to be treated entirely as PAYE income for the purposes of PAYE regulations. 3 A direction under subsection (2) — a must specify the employee and the mobile tax year, b must be given by notice to the appropriate person, and c may be varied by notice to the appropriate person from a date specified in the notice (which may not be earlier than 30 days from the date on which the notice is given). 4 If— a a direction under subsection (2) has effect, and b any uncertain payment is made by the employer to the employee in any tax year, the direction applies in relation to the payment. 5 A direction under subsection (2) has effect when it is given. 6 A direction under subsection (2) ceases to have effect if— a the notice to which the direction relates was given on the basis that the employee was likely to be non-UK resident for the mobile tax year, and b a notice has subsequently been— i given by the appropriate person under section 690D (employer notification for qualifying new resident) on the basis that the employee is or is likely to be a qualifying new resident for the mobile tax year, and ii acknowledged by an officer of Revenue and Customs. 7 Subsection (4) is without prejudice to— a any assessment in respect of the income of the employee in question, and b any right to repayment of income tax and any relevant debts overpaid and any obligation to pay income tax underpaid and any relevant debts that remain wholly or partly unpaid. Employees who were internationally mobile etc. before 2025-26 690C 1 This section applies in relation to an employee if the employee falls within subsection (2) or (3) in relation to a tax year that was before tax year 2025-26. 2 An employee falls within this subsection in relation to a tax year if the employee worked both inside and outside the UK in that tax year and— a the employee was non-UK resident for that tax year or it appears likely to the employer that the employee was non-UK resident, or b the tax year was a spilt year as respects the employee or it appears likely to the employer that the tax year was such a year. 3 An employee falls within this subsection in relation to a tax year if— a the employee worked outside the UK in the tax year, b the employee met the requirement of section 26A for that tax year or it appears likely to the employer that the employee met that requirement, and c the employee has made a claim under section 809B of ITA 2007 (claim for remittance basis) for that tax year or it appears likely to the employer that the employee has or will make such a claim. 4 If the employer makes a payment to the employee of, or on account of, general earnings for that tax year, the amount of the payment that is to be treated as PAYE income for the purposes of the PAYE regulations is the amount that, on the basis of the best estimate that can be reasonably made, is likely to be PAYE income. 5 For the purposes of subsection (4)— a where this section applies to an employee because it appears likely to the employer that a certain state of affairs exists, the employer may assume that state of affairs exists; b whether general earnings are “for” that tax year is determined in accordance with sections 29 and 30. Employer notification for qualifying new residents 690D 1 This section applies in relation to an employee if— a the employee is or is likely to be a qualifying new resident for a tax year (“the qualifying year”), and b the employee works or is likely to work outside the UK during the qualifying year. 2 The appropriate person may give a notice to an officer of Revenue and Customs at any time during the qualifying year— a that the employer is proposing to treat the foreign proportion of any qualifying payment made by the employer to the employee as not being PAYE income of the employee for the purposes of PAYE regulations, and b specifying that proportion. 3 For the purposes of this section and section 690E— a a “ qualifying payment ” means a payment of, or on account of, an amount of employment income of the employee that is likely to be qualifying employment income; b the “foreign proportion” of a qualifying payment is the proportion of the employment income that, on the basis of the best estimate that can reasonably be made, is likely to be qualifying foreign employment income. 4 If a notice given under this section has effect, the proportion of any qualifying payment made by the employer to the employee in any tax year which is to be treated for the purposes of PAYE regulations as not being a payment of PAYE income is the proportion specified in the notice. 5 A notice given under this section— a does not have effect if a direction has previously been given to the appropriate person under section 690E (direction by HMRC in relation to qualifying new residents) in relation to the employee and the qualifying year; b otherwise, has effect when it is acknowledged by an officer of Revenue and Customs. 6 A notice given under this section ceases to have effect if— a a direction under section 690E is given to the appropriate person in relation to the employee and the qualifying year, b a subsequent notice is given by the appropriate person under this section and is acknowledged by an officer of Revenue and Customs, or c a subsequent notice— i is given by the appropriate person under section 690A (employer notification for internationally mobile employee) on the basis that the employee is or is likely to be non-UK resident in the qualifying year, and ii is acknowledged by an officer of Revenue and Customs. 7 A notice given under this section must be in such manner and form, and contain such information, as may be specified in a general direction made by the Commissioners for His Majesty’s Revenue and Customs. 8 Subsection (4) is without prejudice to— a any assessment in respect of the income of the employee in question, and b any right to repayment of income tax and any relevant debts overpaid and any obligation to pay income tax underpaid and any relevant debts that remain wholly or partly unpaid. 9 For the purposes of this section and section 690E— a where an amount of employment income is treated as PAYE income paid by the employer for the purposes of PAYE regulations by virtue of section 687A or 695A (employment income under Part 7A) or section 696 (readily convertible assets), the employer is to be treated as making payment of that amount of employment income, and b “ qualifying new resident ”, “ qualifying employment income ” and “ qualifying foreign employment income ” have the same meaning as in Chapter 5C of Part 2 (relief for new residents on foreign employment income). Direction by HMRC in relation to qualifying new residents 690E 1 This section applies where— a a notice given during the qualifying year under section 690D has effect, and b it appears to an officer of Revenue and Customs that the proportion of any qualifying payment made by the employer to the employee that is treated as not being a payment of PAYE income for the purposes of PAYE regulations should not be the proportion specified in the notice. 2 An officer of Revenue and Customs may give a direction— a for determining a proportion of any qualifying payment made by the employer to the employee which is to be treated for the purposes of PAYE regulations as not being a payment of PAYE income, or b that any such payment is to be treated entirely as PAYE income for the purposes of PAYE regulations. 3 A direction under subsection (2)— a must specify the employee and the qualifying year, b must be given by notice to the appropriate person, and c may be varied by notice to the appropriate person from a day specified in the notice (which may not be earlier than 30 days from the date on which the notice is given). 4 If— a a direction under subsection (2) has effect, and b any qualifying payment is made by the employer to the employee in any tax year, the direction applies to the payment. 5 A direction under subsection (2) has effect when it is given. 6 A direction under subsection (2) ceases to have effect if a notice has subsequently been— a given by the appropriate person under section 690A (employer notification for internationally mobile employee) on the basis that the employee is or is likely to be non-UK resident for the qualifying year, and b acknowledged by an officer of Revenue and Customs. 7 Subsection (4) is without prejudice to— a any assessment in respect of the income of the employee in question, and b any right to repayment of income tax and any relevant debts overpaid and any obligation to pay income tax underpaid and any relevant debts that remain wholly or partly unpaid. Mobile UK workforce 691 1 This section applies if it appears to the Commissioners for Her Majesty’s Revenue and Customs that— a a person (“ the relevant person ”) has entered into or is likely to enter into an agreement that employees of another person (“the contractor”) are in any period to work for, but not as employees of, the relevant person, b payments of, or on account of, PAYE income of the employees in respect of work done in that period are likely to be made by or on behalf of the contractor, and c PAYE regulations would apply on the making of such payments but it is likely that income tax and any relevant debts will not be deducted, or will not be accounted for, in accordance with the regulations. 2 The Commissioners may give a direction that, if— a any of the employees of the contractor work in any period for, but not as employees of, the relevant person, and b any payment is made by the relevant person in respect of work done by the employees in that period, income tax and any relevant debts are to be deducted in accordance with the provisions of this section by the relevant person on making the payment. 3 A direction under subsection (2)— a must specify the relevant person and the contractor to whom it relates; b must be given by notice to the relevant person; and c may at any time be withdrawn by notice to the relevant person. 4 The Commissioners must take such steps as are reasonably practicable to ensure that a contractor is supplied with a copy of any notice under subsection (3) which relates to him. 5 If— a a direction under subsection (2) has effect, and b any employees of the contractor specified in the direction work for, but not as employees of, the relevant person so specified, income tax and any relevant debts are , subject to and in accordance with PAYE regulations, to be deducted by the relevant person on making any payment in respect of that work as if so much of the payment as is attributable to work done by each employee were a payment of PAYE income of that employee. Organised arrangements for sharing tips 692 1 PAYE regulations may make provision with respect to organised arrangements for tips to be shared among employees by a person (“P”) who is not the principal employer. 2 PAYE regulations may include provisions which, for the purposes of PAYE regulations— a treat every payment made by P to an employee by way of the employee’s share of any tips (including the retention by P of P’s own share if P is an employee) as a payment of PAYE income by P, and b treat P as the employer in relation to every such payment. 3 PAYE regulations may also include provisions which— a apply if P has failed to comply with any of the requirements of PAYE regulations, and b treat the principal employer, for the purposes of PAYE regulations, as making payments to the employees of any tips paid over to P by the principal employer. 4 In this section— “ the principal employer ” means the person under whose general control and management the employees work; “ tips ” means gratuities and service charges. Chapter 4 PAYE: special types of income Income provided by means of vouchers and tokens Cash vouchers 693 1 If a cash voucher to which Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens) applies is received by an employee at any time, the employer is to be treated, for the purposes of PAYE regulations, as making at that time a payment of PAYE income of the employee of an amount equal to the amount ascertained under subsection (2) of, or (as the case may be) referred to in subsection (1A)(b) of, section 81 (benefit of cash voucher treated as earnings). 2 This section does not apply to the provision of a cash voucher if— a the voucher is used to meet expenses, and b if the amount for which the voucher is capable of being exchanged had been paid directly to the employee by his or her employer, the amount would not have been PAYE income except by virtue of section 70 (sums in respect of expenses). 3 This section does not apply to the provision of a cash voucher if it is exchanged for an amount which— a is used to meet expenses, and b if it had been paid directly to the employee by the employer, would not have been PAYE income except by virtue of section 70. 4 PAYE regulations may exclude from the scope of this section the provision of cash vouchers in circumstances specified in the regulations. 5 A cash voucher provided for an employee and appropriated to the employee— a by attaching it to a card held for the employee, or b in any other way, is to be treated for the purposes of this section as having been received by the employee at the time when it is appropriated. Non-cash vouchers 694 1 If a non-cash voucher to which this section applies is received by an employee, the employer is to be treated, for the purposes of PAYE regulations, as making a payment of PAYE income of the employee of an amount equal to the amount ascertained under section 87(2) or 87A(4) (benefit of non-cash voucher treated as earnings). 2 This section applies to a non-cash voucher to which Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens) applies if— a either of the conditions set out below is met with respect to the voucher, and b the voucher is not of a description for the time being excluded from the scope of this section by PAYE regulations. 3 The first condition is met with respect to a non-cash voucher if it is capable of being exchanged for anything which, if provided to the employee at the time when the voucher is received, would fall to be regarded as a readily convertible asset. 4 The second condition is met with respect to a non-cash voucher if (but for section 701(2)(b)) it would fall itself to be regarded as a readily convertible asset. 5 A payment under subsection (1) is made— a in the case of a non-cash voucher other than a cheque voucher, at the time when the cost of provision is incurred or, if later, the time when the voucher is received by the employee; b in the case of a cheque voucher, at the time when the voucher is handed over in exchange for money, goods or services. 6 For the purposes of subsection (5)— “ cheque voucher ” has the same meaning as in Chapter 4 of Part 3; “ cost of provision ”, in relation to a voucher provided by an employer, has the meaning given by section 87; and a cheque voucher that is posted is to be treated as handed over at the time of posting. 7 A non-cash voucher provided for an employee and appropriated to the employee— a by attaching it to a card held for the employee, or b in any other way, is to be treated for the purposes of this section as having been received by the employee at the time when it is appropriated. Credit-tokens 695 1 On each occasion on which an employee uses a credit-token provided to the employee because of the employee’s employment to obtain— a money, or b anything which, if provided to the employee at the time when the credit-token is used, would fall to be regarded as a readily convertible asset, the employer is to be treated, for the purposes of PAYE regulations, as making a payment of PAYE income of the employee of an amount equal to the amount ascertained under section 94(2) (benefit of credit-token treated as earnings). 1A If the credit-token is provided pursuant to optional remuneration arrangements, the reference in subsection (1) to the amount ascertained under section 94(2) is to be read as a reference to what that amount would be were the credit-token provided otherwise than pursuant to optional remuneration arrangements. In this subsection “optional remuneration arrangements” is to be interpreted in accordance with section 69A. 2 The use of a credit-token by an employee to obtain money is excluded from the scope of this section if the money— a is used to meet expenses, and b if it had been paid directly to the employee by the employer, would not have been PAYE income except by virtue of section 70 (sums in respect of expenses). 3 PAYE regulations may make provision for excluding from the scope of this section any other description of use of a credit-token. Income provided in other ways Employment income under Part 7A 695A 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 not 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— a the amount of the employment income, less b so much of that amount (if any) to which section 554Z9(2) or 554Z10(2) applies. 3 The payment is treated as made on the latest of the following days— a the day on which the relevant step is taken, b the day on which A's employment with B starts, and c the day which is 30 days after the day on which FA 2011 is passed. 4 Subsection (2) does not apply if the person who takes the relevant step (whether or not a person to whom PAYE regulations apply) accounts for income tax on the relevant step in accordance with PAYE regulations. Readily convertible assets 696 1 If any PAYE income of an employee is provided in the form of a readily convertible asset, the employer is to be treated, for the purposes of PAYE regulations, as making a payment of that income of an amount equal to the amount given by subsection (2). 2 The amount referred to is the amount which, on the basis of the best estimate that can reasonably be made, is the amount of income likely to be PAYE income in respect of the provision of the asset. 3 This section does not apply to any PAYE income so far as it is employment income under Chapter 2 of Part 7A. Enhancing the value of an asset 697 1 This section applies if— a any PAYE income of an employee is provided in the form of anything enhancing the value of an asset in which the employee or a member of the employee’s family or household already has an interest, and b that asset, with its value enhanced, would be treated as a readily convertible asset if PAYE income were provided to the employee in the form of the asset at the time of the enhancement. 2 Section 696 has effect as if— a the employee had been provided, at the time of the enhancement, with PAYE income in the form of the asset (with its value enhanced), instead of with what enhanced its value, and b the reference in subsection (2) to the provision of the asset were a reference to the enhancement of its value. 3 Any reference in this section to enhancing the value of an asset is a reference to— a the provision of any services by which the asset or any right or interest in it is improved or otherwise made more valuable, b the provision of any property the addition of which to the asset improves it or otherwise increases its value, or c the provision of any other enhancement by the application of money or property to the improvement of the asset or to securing an increase in its value or the value of any right or interest in it. 4 There is excluded from the scope of what constitutes enhancing the value of an asset for the purposes of this section any enhancement of value arising on the acquisition by the employee (whether or not as a result of the exercise of a right to acquire shares) of— a any shares acquired by the employee under a scheme approved under ... Schedule 9 to ICTA (approved profit sharing schemes), aa any shares acquired by the employee under a scheme which is a Schedule 3 SAYE option scheme (see Schedule 3), ab any shares acquired by the employee under a scheme which is a Schedule 4 CSOP scheme (see Schedule 4), b any right over or interest in shares obtained or acquired by the employee under a scheme mentioned in any of the preceding paragraphs , or c any shares acquired by the employee as a result of the exercise of a right over shares obtained before 27th November 1996, if the shares in question form part of the share capital of a company falling within section 701(3). 5 PAYE regulations may make provision excluding such other matters as may be described in the regulations from the scope of what constitutes enhancing the value of an asset for the purposes of this section. PAYE: special charges on employment-related securities 698 1 This section applies where by reason of the operation of— a section 426 (chargeable events in relation to restricted securities and restricted interests in securities), b section 438 (chargeable events in relation to convertible securities and interests in convertible securities), c section 446B (charge on acquisition where market value of securities or interest artificially depressed), d section 446L (charge where market value of securities artificially enhanced), e section 446U (securities or interest acquired for less than market value: charge on discharge of notional loan), ea section 446UA (securities or interest acquired for less than market value: charge in avoidance cases), f section 446Y (charge where securities or interest disposed of for more than market value), or g section 447 (chargeable benefit from securities or interest), in relation to employment-related securities, an amount counts as employment income of an employee. 2 Sections 684 to 691 and 696 have effect as if— a the employee were provided with PAYE income in the form of the employment-related securities by the employer on the relevant date, and b the reference in subsection (2) of section 696 to the amount of income likely to be PAYE income in respect of the provision of the asset were to the amount likely to count as employment income. 2A For the purposes of this section the amount likely to count as employment income under section 426 or 438 means the amount after deducting the amount of any relief likely to be available under section 428A or 442A (relief for secondary Class 1 contributions met by employee). 3 In a case in which the employment-related securities are not readily convertible assets, if— a the amount counts as income by virtue of section 427(3)(c), 439(3)(b), (c) or (d), 446Y or 447, and b the whole or any part of the consideration or benefit concerned takes the form of a payment or consists in the provision of an asset, subsection (4) applies. 4 Sections 684 to 691 and 696 have effect — a to the extent that the consideration or benefit takes the form of a payment, as if it were a payment of PAYE income of the employee by the employer, and b to the extent that the consideration or benefit consists in the provision of an asset, as if the provision of the asset were the provision of PAYE income in the form of the asset by the employer on the relevant date. 5 Section 696 as applied by subsection (4)(b) has effect as if the reference in subsection (2) of that section to the amount of income likely to be PAYE income were to the same proportion of the amount likely to count as employment income as so much of the consideration or benefit as consists in the provision of the asset bears to the whole of the consideration or benefit. 6 In this section “ the relevant date ” means— a in relation to an amount counting as employment income under section 426 or 438, the date on which the chargeable event in question occurs, b in relation to an amount counting as employment income under section 446B, the date of the acquisition of the securities or interest in securities in question, c in relation to an amount counting as employment income under section 446L, the valuation date in question, d in relation to an amount counting as employment income under section 446U, the date on which the notional loan in question is treated as discharged, da in relation to an amount counting as employment income under section 446UA, the date of the acquisition of the securities or interest in securities in question, e in relation to an amount counting as employment income under section 446Y, the date of the disposal of the securities or interest in securities in question, and f in relation to an amount counting as employment income under section 447, the date on which the benefit in question is received. 7 In this section “ employment-related securities ” has the same meaning as in Chapters 1 to 4 of Part 7. 8 This section is subject to section 700A (employment-related securities etc: internationally mobile employees ). PAYE: conversion of shares 699 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PAYE: gains from securities options 700 1 This section applies where by reason of the operation of section 476 (acquisition of securities pursuant to securities option etc) in relation to an employment-related securities option an amount counts as employment income of an employee. 2 In a case where the amount counts as employment income by virtue of section 477(3)(a) (acquisition of securities), sections 684 to 691 and 696 have effect as if— a the employee were provided with PAYE income in the form of the securities by the employer on the relevant date, and b the reference in subsection (2) of section 696 to the amount of income likely to be PAYE income in respect of the provision of the asset were to the amount likely to count as employment income. 3 In a case where the amount counts as income by virtue of section 477(3)(b) or (c) (assignment or release for consideration or receipt of benefit), sections 684 to 691 and 696 have effect — a to the extent that the consideration or benefit takes the form of a payment, as if it were a payment of PAYE income of the employee by the employer, and b to the extent that the consideration or benefit consists in the provision of an asset, as if the provision of the asset were the provision of PAYE income in the form of the asset by the employer on the relevant date. 4 Section 696 as applied by subsection (3)(b) has effect as if the reference in subsection (2) of that section to the amount of income likely to be PAYE income were to the same proportion of the amount likely to count as employment income as so much of the consideration or benefit as consists in the provision of the asset bears to the whole of the consideration or benefit. 4A For the purposes of this section the amount likely to count as employment income under section 476 means the amount after deducting the amount of any relief likely to be available under section 481 or 482 (relief for secondary Class 1 contributions or special contribution met by employee). 5 In this section “ the relevant date ” means the date on which the chargeable event in question occurs. 6 In this section— “ employment-related securities option ”, and “ securities ”, have the same meaning as in Chapter 5 of Part 7. 7 This section is subject to section 700A (employment-related securities etc: internationally mobile employees ). Employment-related securities etc : internationally mobile employees 700A 1 This section applies if— a section 698 or 700 applies, and b part or all of the amount that counts as employment income is foreign securities income or is likely to be foreign securities income. 2 The amount of the payment treated under section 696 as made is limited to— a the amount that, on the basis of the best estimate that can reasonably be made, is likely to count as employment income, minus b the amount that, on the basis of such an estimate, is likely to be foreign securities income. 3 References in this section to “foreign securities income” are to income that is foreign securities income for the purposes of section 41F . Supplemental Meaning of “asset” 701 1 In this Chapter “ asset ” includes any property and in particular any investment of a kind specified in Part 3 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544). This is subject to subsection (2). 2 In this Chapter “ asset ” does not include— a any payment actually made of, or on account of, PAYE income; b ... any cash voucher, non-cash voucher or credit-token; c the following— i any shares acquired by the employee (whether or not as a result of the exercise of a right to acquire shares) under a scheme approved under ... ... Schedule 9 to ICTA (approved profit sharing schemes), iza any shares acquired by the employee under a scheme which is a Schedule 3 SAYE option scheme (see Schedule 3), ia any shares acquired by the employee under a scheme which is a Schedule 4 CSOP scheme (see Schedule 4) in circumstances in which Condition A or B as set out in section 524(2) or (2A) is met; ii . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii any shares acquired by the employee as the result of the exercise of a right over shares obtained before 27th November 1996 where the avoidance of tax or national insurance contributions is not the main purpose (or one of the main purposes) of any arrangements under which the right was obtained or is exercised , if the shares in question form part of the ordinary share capital of a company falling within subsection (3); or d any description of property for the time being excluded from the scope of this section by PAYE regulations. 3 A company falls within this subsection if it— a is the employer (“ the employer company ”); b has control of the employer company; or c either is, or has control of, a company which is a member of a consortium owning either the employer company or a company having control of the employer company. 3A Paragraph (c) of subsection (2) does not apply to shares after their acquisition as mentioned in that paragraph. 4 In this section “ share ” includes stock. 5 For the purposes of this section a company is a member of a consortium owning another company if it is one of a number of companies which between them beneficially own not less than 75% of the other company’s ordinary share capital and each of which beneficially owns not less than 5% of that capital. Meaning of “readily convertible asset” 702 1 In this Chapter “ readily convertible asset ” means— a an asset capable of being sold or otherwise realised on— i a recognised investment exchange (within the meaning of the Financial Services and Markets Act 2000 (c. 8)), ii the London Bullion Market, iii the New York Stock Exchange, or iv a market for the time being specified in PAYE regulations; b an asset consisting in— i the rights of an assignee, or any other rights, in respect of a money debt that is or may become due to the employer or any other person, ii property that is subject to a warehousing regime, or any right in respect of property so subject, or iii anything that is likely (without anything being done by the employee) to give rise to, or to become, a right enabling a person to obtain an amount or total amount of money which is likely to be similar to the expense incurred in the provision of the asset; or c an asset for which trading arrangements are in existence, or are likely to come into existence in accordance with— i any arrangements of another description existing when the asset is provided, or ii any understanding existing at that time. 2 For the purposes of this section trading arrangements for any asset provided to any person exist whenever there exist any arrangements the effect of which in relation to that asset is to enable— a that person, or b a member of that person’s family or household, to obtain an amount or total amount of money that is, or is likely to be, similar to the expense incurred in the provision of that asset. 3 PAYE regulations may exclude any description of arrangements from being trading arrangements for the purposes of this section. 4 References in this section to enabling a person to obtain an amount of money are to be read— a as references to enabling an amount to be obtained by that person by any means at all, including in particular— i by using any asset or other property as security for a loan or advance, or ii by using any rights comprised in or attached to any asset or other property to obtain any asset for which trading arrangements exist; and b as including references to cases where a person is enabled to obtain an amount as a member of a class or description of persons, as well as where the person is so enabled in the person’s own right. 5 For the purposes of this section an amount is similar to the expense incurred in the provision of any asset if it is, or is an amount of money equivalent to— a the amount of the expense so incurred, or b a greater amount, or c an amount that is less than that amount but not substantially so. 5A An asset consisting in securities which is not a readily convertible asset apart from this subsection is to be treated as a readily convertible asset unless the securities are shares that are corporation tax deductible. 5B For the purposes of subsection (5A) shares are corporation tax deductible if they are acquired by a person— a by reason of that, or another person's, employment with a company, or b pursuant to an option granted by reason of that, or another person's, employment with a company, and the company is entitled to corporation tax relief in respect of the shares under Part 12 of CTA 2009 (corporation tax relief for employee share acquisition). 5C If a person acquires additional shares by virtue of holding shares that are corporation tax deductible, the additional shares are to be treated for the purposes of subsection (5A) as if they were corporation tax deductible. 5D If— a on a person ceasing to be beneficially entitled to shares that are corporation tax deductible, that person acquires other shares, and b the circumstances are such that the shares to which the person ceases to be beneficially entitled constitute “ original shares ” and the other shares constitute a “ new holding ” for the purposes of sections 127 to 130 of TCGA 1992, the shares that constitute the new holding are to be treated for the purposes of subsection (5A) as if they were corporation tax deductible. 6 In this section— “ money ” includes money expressed in a currency other than sterling; “ money debt ” means any obligation which falls to be, or may be, settled— by the payment of money, or by the transfer of a right to settlement under an obligation which is itself a money debt; "securities" has the same meaning as in Chapters 1 to 5 of Part 7 (employment income from securities) (see section 420), “ shares ” includes— an interest in shares, and stock or an interest in stock, “ warehousing regime ” means— a warehousing or fiscal warehousing regime (within the meaning of sections 18 to 18F of the Value Added Tax Act 1994 (c. 23)); or any corresponding arrangements in a State other than the United Kingdom which is a Contracting Party to the Agreement on the European Economic Area signed at Oporto on 2nd May 1992 as adjusted by the Protocol signed at Brussels on 17th March 1993. Chapter 5 PAYE settlement agreements Introduction 703 This Chapter provides— a for employers to make agreements with Her Majesty's Revenue and Customs (“PAYE settlement agreements”) under which they agree to be accountable to the Commissioners for sums in respect of income tax on general earnings of their employees; and b for such earnings to be treated for certain purposes of the Income Tax Acts as excluded from the employees' income. Sums payable by employers under agreements 704 1 PAYE regulations may provide— a for a person to make a PAYE settlement agreement with Her Majesty's Revenue and Customs ; and b to such extent as may be prescribed, for that person’s accountability, and the sums to be accounted for, in respect of income tax on general earnings of that person’s employees to be determined— i in accordance with the agreement, and ii not in accordance with PAYE regulations which would apply apart from this Chapter. 2 Without prejudice to the generality of section 684(2), any power of the Commissioners to make PAYE regulations with respect to sums falling to be accounted for under such regulations includes power to make the corresponding provision with respect to sums falling to be accounted for in accordance with a PAYE settlement agreement. Approximations allowed in calculations 705 PAYE regulations may provide for a PAYE settlement agreement to allow sums which an employer is to account for— a to be computed, if two or more persons hold employments to which the agreement relates, by reference to a number of those persons all taken together; b to include sums representing income tax on an estimated amount taken to be the aggregate of the amounts of PAYE income consisting of— i taxable benefits provided or made available by reason of the employments to which the agreement relates, and ii expenses paid to the persons holding those employments; and c to be computed in a manner under which they do not necessarily represent an amount of income tax which would be payable (apart from the agreement) by persons holding employments to which the agreement relates. Exclusion of general earnings from income etc. 706 PAYE regulations may provide— a that sums accountable for by an employer under a PAYE settlement agreement, or any other sums, are not to be treated for any prescribed purpose as tax deducted from general earnings; b that an employee is to have no right to be treated as having paid tax in respect of sums accountable for by the employer under such an agreement; c that an employee is to be treated, except— i for the purposes of the obligations imposed on the employer by such an agreement, and ii to such further extent as may be prescribed, as relieved from any prescribed obligations of the employee under the Income Tax Acts in respect of general earnings from an employment to which the agreement relates; and d that such earnings are to be treated as excluded from the employee’s income for such further purposes of the Income Tax Acts, and to such extent, as may be prescribed. Interpretation of this Chapter 707 In this Chapter— “ employment ” means any employment the general earnings from which are (or, apart from any regulations made by virtue of this Chapter , would be) PAYE income and related expressions are to be construed accordingly; “ prescribed ” means prescribed by PAYE regulations; “ taxable benefit ”, in relation to an employee, means any benefit provided or made available, otherwise than in the form of a payment of money, to the employee, or to a person who is a member of the employee’s family or household. Chapter 6 Miscellaneous and supplemental Provision of additional information to His Majesty’s Revenue and Customs 707A 1 PAYE regulations may include provision requiring an employer to provide any information that is specified or described in regulations made by the Commissioners (whether or not that information is also relevant to the assessment, charge, collection and recovery of income tax in respect of PAYE income). 2 The Commissioners for His Majesty’s Revenue and Customs may only specify or describe information in regulations under subsection (1) if the Commissioners consider that the information is relevant for the purpose of the collection and management of any of the taxes listed in section 1 of TMA 1970. PAYE repayments 708 1 PAYE regulations may provide that no repayment of income tax may be made under such regulations to a person— a during a period for which the person has claimed jobseeker’s allowance, or b at a time when the person is prevented by the trade disputes provisions from being entitled to a jobseeker’s allowance, or would be so prevented if the person otherwise met the conditions for entitlement. 2 Different provision may be made with respect to— a persons within subsection (1)(a), and b persons within subsection (1)(b). 3 “ The trade disputes provisions ” means— a section 14 of JSA 1995, or b Article 16 of JS(NI)O 1995. Additional provision for certain assessments 709 1 This section applies if— a an assessment to income tax is made as respects relevant income (with or without other income), and b the assessment is made after the end of the period of 12 months following the tax year for which it is made. 2 In so far as it relates to relevant income, the assessment is to be made in accordance with the practice generally prevailing at the end of that period. 3 “ Relevant income ” means income which— a has been taken into account in the making of deductions or repayments of tax under PAYE regulations, and b was received not less than 12 months before the beginning of the tax year in which the assessment is made. Notional payments: accounting for tax 710 1 If an employer makes a notional payment of PAYE income of an employee, the employer must , subject to and in accordance with PAYE regulations, deduct income tax at the relevant time from any payment or payments the employer actually makes of, or on account of, PAYE income of the employee. 2 For the purposes of this section— a a notional payment is a payment treated as made by virtue of any of sections 687, 687A, 689 , 689A and 693 to 700, other than a payment whose amount is given by section 687(3)(a) , 689(3)(a) or 689A(4)(a) , and b any reference to an employer includes a reference to a person who is treated as making a payment by virtue of section 689(2) or 689A(3) . 3 Subsection (4) applies if, because the payments actually made are insufficient for the purpose, the employer is unable to deduct the full amount of the income tax as required by subsection (1). 4 The employer must , subject to and in accordance with PAYE regulations, account to the Commissioners for Her Majesty’s Revenue and Customs at the relevant time for an amount of income tax equal to the amount of income tax the employer is required, but is unable, to deduct. 5 PAYE regulations may make provision— a with respect to the time when any notional payment (or description of notional payment) is made; b applying (with or without modifications) any specified provisions of the regulations for the time being in force in relation to deductions from actual payments to amounts deducted or accounted for (or required to be deducted or accounted for) in respect of any notional payments; c with respect to the collection and recovery of amounts deducted or accounted for (or required to be deducted or accounted for) in respect of notional payments. 6 Any amount— a which an employer deducts as mentioned in subsection (1), or b for which an employer accounts as mentioned in subsection (4), is to be treated as an amount of tax which , at the time when the notional payment is made, is deducted in respect of the employee’s liability to income tax. 7 “ The relevant time ” means (subject to subsection (7A)) — a in subsection (1), any occasion— i on or after the time when the notional payment is made, and ii falling within the same income tax period, on which the employer actually makes a payment of, or on account of, PAYE income of the employee; b in subsection (4), any time within 14 days of the end of the income tax period in which the notional payment was made. 7A In a case where the notional payment is treated by virtue of any Act as made before the date on which the Act is passed— a the reference in sub-paragraph (i) of paragraph (a) of subsection (7) to the time when the notional payment is made is to the date on which the Act is passed, b the reference in sub-paragraph (ii) of that paragraph to any occasion falling within the same income tax period is to any occasion falling before the end of the income tax period next after that in which that date falls, and c the reference in paragraph (b) of that subsection to the income tax period in which the notional payment was made is to the income tax period next after that in which that date falls. 8 In subsection (7) “ income tax period ” has the same meaning as in the Income Tax (Employments) Regulations 1993 (S.I. 1993/744), or any subsequent regulations making corresponding provision. Right to make a return 711 1 A person who has PAYE income for a tax year in respect of which deductions or repayments are made under PAYE regulations may by notice require an officer of Revenue and Customs to give that person a notice under section 8 of TMA 1970 (personal return) for the tax year. 2 A notice to an officer of Revenue and Customs under subsection (1) must be given no later than 3 years after the 31st October next following the tax year. Interpretation of this Part 712 1 In this Part— “ employee ” means a person who holds or has held employment with another person; “ employer ” means— in relation to an employee, a person with whom the employee holds or has held an employment, and in relation to any PAYE income of an employee, the person who is the employer of the employee in relation to the employment in respect of which the income is or was provided or, as the case may be, by reference to which it falls to be regarded as PAYE income. The above definitions are subject to sections 688 and 710(2)(b). “ relevant debt ” has the meaning given by section 684(7AA). 2 Sections 4 and 5 apply for the purposes of this Part as they apply for the purposes of the employment income Parts. Part 12 Payroll giving Donations to charity: payroll deduction scheme 713 1 This section applies if— a an individual is entitled to receive payments of, or on account of, PAYE income in respect of which PAYE regulations require deductions or repayments of income tax in accordance with those regulations, and b at the request of the individual, the person making the payments (the “payer”) withholds sums from them as donations. 2 In determining whether there is such a requirement under PAYE regulations for the purposes of subsection (1)(a), any requirement under the regulations which requires the deduction of an amount in calculating the payments of, or on account of, PAYE income is to be disregarded. 3 The amount of the donations is allowed as a deduction in calculating the amount of the individual’s income which is charged to tax in accordance with subsection (4). 4 In the case of a payment of, or on account of— a taxable earnings from an employment, the deduction is allowed from the taxable earnings from the employment in calculating the net taxable earnings from the employment for the relevant tax year for the purposes of Part 2 (see section 11(1)); b taxable specific income from an employment, the deduction is allowed from that taxable specific income in calculating the net taxable specific income from the employment for the relevant tax year for the purposes of Part 2 (see section 12(1)); c taxable pension income for a pension, annuity or other item of pension income, the deduction is allowed from that taxable pension income in calculating the net taxable pension income for that income for the relevant tax year for the purposes of Part 9 (see section 567(3)); d taxable social security income for a taxable benefit, the deduction is allowed from that taxable social security income in calculating the net taxable social security income for that benefit for the relevant tax year for the purposes of Part 10 (see section 658(3)). 5 For the purposes of subsection (4) “ relevant tax year ” means— a in the case of paragraphs (a) and (b), the tax year in which the donation is withheld, and b in the case of paragraphs (c) and (d), the tax year for which the income referred to in subsection (1)(a) is taxable pension income or taxable social security income, as the case may be. 6 This section is subject to section 809ZM of ITA 2007 (removal of income tax relief in respect of tainted charity donations etc ). Meaning of “donations” 714 1 For the purposes of this Part “ donations ” means sums which— a are withheld by the payer under a scheme which is an approved scheme at the time of the withholding, b constitute gifts by the individual to one or more specified charities under the scheme, and c satisfy the conditions (if any) set out in the scheme. 2 In this section— “ approved scheme ” means a scheme which is approved (or is of a kind approved) by an officer of Revenue and Customs and under which— the payer is required to pay sums withheld to a body which is an approved agent at the time of the withholding, and the approved agent is required— to pay sums withheld to the specified charity or charities, or in a case where the agent is itself a specified charity, to retain any sum due to itself; “ charity ” ... includes each of the bodies mentioned in section 468 of CTA 2010 ; “ specified charity ” means a charity specified by the individual. 3 For the purposes of this section a body is an “approved agent” if it is approved by an officer of Revenue and Customs for the purpose of paying donations to one or more charities. Approval of schemes: regulation by Treasury 715 1 The Treasury may by regulations prescribe the circumstances in which an officer of Revenue and Customs may grant or withdraw approval of any— a scheme, b kind of scheme, or c agent. 2 The circumstances, whether relating to the terms of schemes or the qualifications of agents or otherwise, are to be such as the Treasury think fit. 3 The Treasury may by regulations make provision— a requiring a payer or agent who participates (or has at any time participated) in an approved scheme under this Part— i . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii in prescribed circumstances, to furnish to an officer of Revenue and Customs prescribed information; b for, and in relation to, appeals ... against a refusal by an officer of Revenue and Customs to approve , or the officer's withdrawal of approval from, any— i scheme, ii kind of scheme, or iii agent; c generally for giving effect to sections 713 and 714. In this subsection “ prescribed ” means prescribed by the regulations. Part 13 Supplementary provisions Alteration of amounts Alteration of amounts by Treasury order 716 1 The Treasury may by order increase or further increase the sums of money specified in any of the following provisions. 2 They are— a section 179(2)(a) (limit on exception for advances for necessary expenses), b section 241(3)(a) and (b) (incidental overnight expenses: overall exemption limit), c section 264(2) and (3) (annual parties and functions), d section 287(1) (limit on exemption under Chapter 7 of Part 4: removal benefits and expenses), e section 322(1) and (4) (suggestion awards: “the permitted maximum”), f section 323(2) (long service awards), fa section 323A(4) (trivial benefits provided by employers: cost of providing benefit), fb section 323B(2) (trivial benefits provided by employers: annual exempt amount), g section 324(6) (small gifts from third parties), and h section 358(3)(b) (business entertainment and gifts: other exceptions). 3 An order relating to section 241(3)(a) or (b) may make provision for determining what earnings are treated as received on or after the date when the order comes into force. 4 An order relating to section 287(1) applies to a change of an employee’s residence where the employment change occurs on or after the day specified in the order for the purpose. “ The employment change ” here has the same meaning as in Chapter 7 of Part 4 (see section 275). Priority rule for certain dividends etc Priority rule for dividends etc. of UK resident companies etc. 716A 1 Any income, so far as it falls within— a Part 2, 9 or 10 of this Act, and b Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc. ), is dealt with under Chapter 3 of Part 4 of ITTOIA 2005. 2 Subsection (1) is subject to section 554Z2(2). Employment intermediaries: information powers Employment intermediaries to keep, preserve and provide information etc 716B 1 For purposes connected with Chapter 7 of Part 2 (treatment of workers supplied by agencies) or Part 11 ( PAYE ), the Commissioners for Her Majesty's Revenue and Customs may by regulations make provision for, or in connection with, requiring a specified employment intermediary— a to keep and preserve specified information, records or documents for a specified period; b to provide Her Majesty's Revenue and Customs with specified information, records or documents within a specified period or at specified times. 2 An “employment intermediary” is a person who makes arrangements under or in consequence of which— a an individual works, or is to work, for a third person, or b an individual is, or is to be, remunerated for work done for a third person. 3 For the purposes of subsection (2), an individual works for a person if— a the individual performs any duties of an employment for that person (whether or not the individual is employed by that person), or b the individual provides, or is involved in the provision of, a service to that person. 4 In subsection (1) “ specified ” means specified or described in regulations made under this section. 5 Regulations under this section may— a make different provision for different cases or different purposes, and b make incidental, consequential, supplementary or transitional provision or savings. Orders and regulations Orders and regulations made by Treasury or Commissioners 717 1 Any power of the Treasury or the Commissioners for Her Majesty’s Revenue and Customs to make any order or regulations under this Act is exercisable by statutory instrument. This is subject to subsection (2). 2 Subsection (1) does not apply to the power conferred by section 28(5) (overseas Crown employment: order excepting certain earnings) or section 421L(7) (persons to whom section 421J applies: order in relation to excluded securities). 3 Any statutory instrument containing any order or regulations made by the Treasury or the Commissioners for Her Majesty’s Revenue and Customs under this Act is subject to annulment in pursuance of a resolution of the House of Commons. This is subject to subsection (4). 4 Subsection (3) does not apply to any statutory instrument made under section 24A(11) (assumptions about related employments), section 270AA(3) (exemption from income tax for qualifying childcare vouchers: meaning of “eligible employee”), section 318AZA(3) (exemption from income tax for other care: meaning of “eligible employee”), section 323C(1) (trivial benefits provided by employers), section 343(3) (deduction for professional membership fees: order adding certain fees) or section 688A(7) ( PAYE regulations: managed service companies) or to which section 312A(10) (reduction of tax-exempt amount in respect of certain bonus payments) , section 402D(10) (meaning of basic pay for purpose of calculating charge on termination award), section 404B(4) (reduction of tax-free threshold for employment-termination etc payments) or section 681F(3) (variation of income limit etc for high income child benefit charge: orders increasing liability to tax) applies . Interpretation Connected persons 718 Section 993 of ITA 2007 (how to tell whether persons are connected) applies for the purposes of this Act. Meaning of “control” 719 Section 995 of ITA 2007 (meaning of “control”) applies for the purposes of this Act, unless otherwise indicated. Meaning of “ an officer of Revenue and Customs ” etc. 720 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other definitions 721 1 In this Act— “ cash voucher ” has the same meaning as in Chapter 4 of Part 3 (see section 75), “ the Contributions and Benefits Act ” means SSCBA 1992 or SSCB( NI )A 1992; “ credit-token ” has the same meaning as in Chapter 4 of Part 3 (see section 92), “ foreign employer ” means an individual, partnership or body of persons resident outside, and not resident in, the United Kingdom, “ non-cash voucher ” has the same meaning as in Chapter 4 of Part 3 (see section 84), ... 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Any reference in this Act to being domiciled in the United Kingdom is to be read as a reference to being domiciled in any part of the United Kingdom. 4 For the purposes of this Act the following are members of a person’s family— a the person’s spouse or civil partner , b the person’s children and their spouses or civil partners , c the person’s parents, and d the person’s dependants. 5 For the purposes of this Act the following are members of a person’s family or household— a members of the person’s family, b the person’s domestic staff, and c the person’s guests. 6 The following provisions (which relate to the legal equality of illegitimate children) are to be disregarded in interpreting references in this Act to a child or children— a section 1 of the Family Law Reform Act 1987 (c. 42); b the paragraph inserted in Schedule 1 to the Interpretation Act 1978 (c. 30) by paragraph 73 of Schedule 2 to the 1987 Act; c section 1(2) of the Law Reform (Parent and Child) (Scotland) Act 1986 (c. 9); d Article 155 of the Children (Northern Ireland) Order 1995 (S.I. 1995/755 (N.I. 2)). 7 In the employment income Parts any reference to earnings which is not limited by the context— a to earnings within Chapter 1 of Part 3, or b to any other particular description of earnings, includes a reference to any amount treated as earnings by any of the provisions mentioned in section 7(5) (meaning of “employment income” etc.). Amendments, repeals, citation etc. Consequential amendments 722 Schedule 6 contains consequential amendments. Commencement and transitional provisions and savings 723 1 This Act comes into force on 6th April 2003 and has effect— a for the purposes of income tax, for the tax year 2003-04 and subsequent tax years, and b for the purposes of corporation tax, for accounting periods ending after 5th April 2003. 2 Subsection (1) is subject to Schedule 7, which contains transitional provisions and savings. Repeals and revocations 724 1 The enactments specified in Part 1 of Schedule 8 (which include certain spent provisions) are repealed to the extent specified. 2 The instruments specified in Part 2 of that Schedule are revoked to the extent specified. Citation 725 This Act may be cited as the Income Tax (Earnings and Pensions) Act 2003.