Part 7A

Employment income provided through third parties
CHAPTER 1

Application etc

Exclusions

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).
Pt. 7A inserted (with effect in accordance with Sch. 2 paras. 52-59 of the amending Act) by Finance Act 2011 (c. 11), Sch. 2 para. 1
Pt. 7A modified (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 11 para. 35(6)
Pt. 7A modified (22.7.2020) by 2017 c. 32, Sch. 11 para. 1A(2)(6) (as inserted by Finance Act 2020 (c. 14), s. 16(3))
Pt. 7A modified (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 11 para. 1(8)