Income Tax (Earnings and Pensions) Act 2003 section 554Z14

Relief where earmarking not followed by further relevant step

Section 554Z14 provides a mechanism for claiming back income tax where funds or assets were originally earmarked (triggering a tax charge) but no further step is ever taken to pass those funds or assets to the employee or anyone else.

• Where an earmarking step originally triggered an income tax charge, but a subsequent event means no further steps will ever be taken in relation to the earmarked sums or assets, the employee (or their personal representatives) may apply to HMRC for relief
• The application must be made within four years of the event that ended the possibility of further steps, and there must be no connection between that event and any tax avoidance arrangement
• HMRC will grant such relief as they consider just and reasonable in respect of income tax paid on the amount originally charged, taking into account any reductions in tax liability already given elsewhere
• Once relief is granted, the tax legislation applies going forward as if the original earmarking step had never triggered a charge under the disguised remuneration rules