Income Tax (Earnings and Pensions) Act 2003 section 554P

Exclusions: employment income exemptions under Part 4

Section 554P ensures that the disguised remuneration rules in Chapter 2 of Part 7A do not tax benefits that are already exempt from employment income tax under Part 4 of the Act.

• Where a benefit provided through a relevant step is fully covered by an employment income exemption under Part 4, the disguised remuneration charge under Chapter 2 does not apply
• Where only part of the benefit is covered by an exemption (for example, because a financial cap applies), the relevant step is split into two notional steps — one exempt and one taxable
• The money or asset involved is apportioned between the two notional steps on a just and reasonable basis
• The definition of employment income exemption is extended to include the exemption for qualifying removal benefits and expenses under section 271, even though that exemption does not provide a complete exemption from tax