Income Tax (Earnings and Pensions) Act 2003 section 554Z5

Overlap with money or asset subject to earlier tax liability

Section 554Z5 prevents double taxation where a sum of money or asset that is the subject of a taxable relevant step under the disguised remuneration rules has already given rise to an earlier income tax liability.

• Where a sum or asset involved in a relevant step overlaps with a sum or asset that has already been taxed, the value of the later step is reduced by the overlapping amount, provided certain payment or liability conditions are met
• The reduction applies if the earlier tax has been paid in full (or a settlement agreed with HMRC), or if the earlier tax is not yet due and payable at the time of the later step
• An overlap exists where the two sums or assets are the same, or where the later sum or asset directly or indirectly represents the earlier one, judged on a just and reasonable basis
• Certain provisional payments — such as payments on account of income tax, accelerated payments, or payments pending appeal — do not count as having discharged the earlier tax liability for these purposes