Income Tax (Earnings and Pensions) Act 2003 section 554Z11G

Earlier income tax liability: supplementary provision

Section 554Z11G provides supplementary rules that adjust both the PAYE notional payment (for employer tax account purposes) and the inheritance tax income relief, where an earlier income tax liability has already been recognised under the overlap provisions.

• Where a "relevant step" gives rise to a notional PAYE payment by the employer, that notional payment is reduced by the amount already treated as a payment on account of an earlier or overlap charge under section 554Z11C
• This ensures a section 222 charge (employer bearing tax where PAYE deduction is not possible) only arises on the portion of Part 7A income not already relieved
• The value of the relevant step is similarly reduced for inheritance tax purposes under sections 65(5)(b) and 70(3)(b) of the Inheritance Tax Act 1984, so that the IHT income relief does not apply to amounts already relieved under section 554Z11C
• Both reductions apply only to the extent that the sum or asset falls within the overlap and an amount has been treated under section 554Z11C as a payment on account of the earlier charge or the Chapter 2 overlap charge