Disguised remuneration and its relevance to employee share incentives—a guide for corporate lawyers
Produced in partnership with Dilpa Raval of CMS and Graham Muir of CMS
Disguised remuneration and its relevance to employee share incentives—a guide for corporate lawyers

The following Corporate practice note Produced in partnership with Dilpa Raval of CMS and Graham Muir of CMS provides comprehensive and up to date legal information covering:

  • Disguised remuneration and its relevance to employee share incentives—a guide for corporate lawyers
  • The ITEPA 2003, Pt 7A charge
  • The key concepts
  • Relevant arrangement
  • Relevant third person
  • Relevant step
  • Exclusions and reliefs
  • Tax-advantaged share plan exclusions
  • Non-tax favoured share plan exclusions
  • Cashless exercise facilities
  • More...

This Practice Note describes:

  1. what is meant by 'disguised remuneration'

  2. the basis of the disguised remuneration charge, and

  3. the tax implications of a disguised remuneration charge

This Practice Note refers only to those aspects of the disguised remuneration legislation which apply to employee share incentives and is not intended to be a comprehensive guide to the legislation.

The Finance Act 2011 introduced Part 7A of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), aimed at tackling what has become widely known as 'disguised remuneration' involving the use of employee benefit trusts.

Broadly, the term 'disguised remuneration' describes arrangements involving third parties (often employee benefit trusts) which benefit employees in a way that avoids or defers liabilities for income tax and national insurance contributions (NICs). The arrangements must involve a third party in order for ITEPA 2003, Pt 7A to apply—if an employer is providing a benefit directly to the employee (other than where the employer is acting as a trustee), then ITEPA 2003, Pt 7A will not apply.

In summary, if an arrangement is caught by ITEPA 2003, Pt 7A, charges to income tax (under PAYE) and NICs will arise on the occurrence of any one of a number of steps envisaged by the legislation.

ITEPA 2003, Pt 7A took effect on 6 April 2011 and the corresponding NICs legislation took effect on 6 December 2011 (although

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