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Income Tax (Earnings and Pensions) Act 2003

Section 553: Meaning of “appropriate percentage” for purposes of section 552

2229.This section sets out how the “appropriate percentage” is to be calculated. It derives from paragraph 7(10) of Schedule 8 to ICTA.

2230.There are a number of factors to be taken into account in working out the “appropriate percentage” of the company’s ordinary share capital for the purposes of section 552. The main calculation consists of a straightforward fraction using “P” and “D” to signify the numbers to be fed into that fraction. The expressions “P” and “D”, however, take rather more explaining.

2231.“P” is either the total of any payments received by the individual or associates from the trust during the 12 months up to and including the day the relevant payment is made (subsection (2)) or, if smaller, the distributions made by the company to the trustees of the employee benefit trust during the period of three years up to and including the day the relevant payment is made (subsection (3)).

2232.“D” is the aggregate distributions made during the three years preceding the relevant payment, divided by the number of years in which such distributions were actually made (subsection (4)).

2233.It is difficult to express the ideas in this calculation in simpler terms than those used in paragraph 7(10) of Schedule 8 to ICTA; but the section includes a mini method statement for the calculation of “D”.

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