Disguised remuneration—the relevant steps
Produced in partnership with Pete Miller Miller Partnership for Tolley's Tax Digest and Karen Cooper of Cooper Cavendish LLP
Disguised remuneration—the relevant steps

The following Tax practice note Produced in partnership with Pete Miller Miller Partnership for Tolley's Tax Digest and Karen Cooper of Cooper Cavendish LLP provides comprehensive and up to date legal information covering:

  • Disguised remuneration—the relevant steps
  • Earmarking etc—ITEPA 2003, s 554B
  • Earmarking
  • Example 1—earmarking for specified employee
  • Example 2—earmarking for unspecified employees
  • Example 3—earmarking for connected persons
  • Holding money or assets on behalf of an employee
  • Example 4—holding money or assets on behalf of employee
  • Conditionality of later steps
  • Death of employee or director
  • More...

This Practice Note focuses on the meaning of a 'relevant step'. One of the requirements set out in the 'gateway' to the disguised remuneration rules (in section 554A of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003)) is that 'a relevant step is taken by a relevant third person'.

There are four main types of relevant step:

  1. earmarking cash or assets, or holding them on behalf of someone, with a view to taking a later relevant step

  2. giving or transferring cash or assets to a person, or making or writing off a loan

  3. allowing a person to use assets, as if they were their own, and

  4. granting a lease of premises for a period of more than 21 years

However, the employer or member of the same group of companies who acts as a trustee or takes steps in relation to an employer-financed retirement benefits scheme is also treated as taking a 'relevant step' for the purposes of the legislation.

It is important to remember that a relevant step, by itself, does not create a tax charge. Fundamentally, it must operate with the other factors required by the gateway to the legislation. The relevant step must be in pursuance of, or otherwise in connection with, relevant arrangements and those arrangements require there to be an employee (past, present or future) and an employer, as

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