Income Tax (Earnings and Pensions) Act 2003 section 554Z2

Value of relevant step to count as employment income

Section 554Z2 provides that where a "relevant step" is taken in connection with an employee's employment, the value of that step is treated as employment income for income tax purposes.

• The value of a relevant step counts as employment income of the employee, either for the tax year in which their employment starts (if the step was taken before employment began) or for the tax year in which the step is taken (in all other cases).
• Where the value of a relevant step would count as employment income of more than one person, it must be apportioned between those individuals on a just and reasonable basis, with each person only being taxed on their share.
• This section takes priority over the benefits code and over Chapter 3 of Part 4 of ITTOIA 2005 (which deals with certain dividend income), so that where both could apply, only this section applies — and in particular, an employment-related loan caught by this section will not also be treated as a taxable cheap loan.
• An exception applies in relation to close companies under section 554Z2A, which may disapply the charge in certain circumstances.