Disguised remuneration—the tax charge and responsibility for paying tax
Produced in partnership with Pete Miller Miller Partnership for Tolley's Tax Digest and Karen Cooper of Cooper Cavendish LLP
Disguised remuneration—the tax charge and responsibility for paying tax

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 tax charge and responsibility for paying tax
  • Quantum of the tax charge
  • Value of the relevant step
  • Valuation of shares and securities
  • Loan charge
  • National Insurance contributions
  • Reducing the value of the relevant step: non-UK employment—ITEPA 2003, s 554Z4
  • Example 1—residence
  • Reducing the value of the relevant step: overlap with earlier relevant step—ITEPA 2003, s 554Z5
  • Reducing the value of the relevant step: step treated as relevant earnings—ITEPA 2003, s 554Z6
  • More...

Under the disguised remuneration rules, the value of the 'relevant step' counts as employment income. For the meaning of a relevant step, see Practice Note: Disguised remuneration—the relevant steps.

Anything that counts as employment income is part of specific employment income and is therefore subject to the general charge to tax on employment income under section 6 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) (see Practice Note: How employment income is taxed—concept of general earnings—Specific employment income).

If a relevant step would otherwise give rise to a charge under the benefits code (for example under the employment related-loan provisions), Part 7A takes priority.

Similarly, Part 7A takes priority over any amounts which would be taxed as dividend income.

If the relevant step is taken before the employment starts, the charge arises in the year in which the employment starts. Otherwise the charge arises in the tax year in which the relevant step is taken, including in a year after the employment has ceased, if that is when the relevant step is taken. Where more than one employee benefits from the relevant step, the charge can be apportioned between them on a just and reasonable basis.

This Practice Note looks at how the relevant step is valued, and some circumstances in which the value may be reduced. It also describes who is responsible for paying the

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