Exclusions from the disguised remuneration rules
Produced in partnership with Karen Cooper of Cooper Cavendish
Last updated on 28/07/2020

The following Tax practice note produced in partnership with Karen Cooper of Cooper Cavendish provides comprehensive and up to date legal information covering:

  • Exclusions from the disguised remuneration rules
  • Exclusions for share schemes
  • Tax-advantaged share schemes
  • Unapproved share schemes and employment-related securities
  • Hedging
  • Earmarking for deferred remuneration
  • Fallback charges associated with unapproved scheme exclusions
  • Exclusions for other employment-related securities and other relieving provisions
  • Other employment-related exclusions

Exclusions from the disguised remuneration rules

The disguised remuneration legislation was introduced in 2011 but has been further developed and extended by subsequent Finance Acts. It is intended to prevent the use of employee benefit trusts and similar third party arrangements to reward employees or their family members in ways that avoid or defer liabilities for income tax and National Insurance contributions (NICs). The rules are widely drafted and therefore contain a series of exclusions and reliefs for legitimate arrangements that do not involve tax avoidance.

This Practice Note covers the main exclusions available.

Exclusions for share schemes

There are a number of specific exemptions in the legislation for arrangements that support common types of employees' share schemes. It is important to ensure that each step in the process is covered by a separate exclusion, as HMRC will treat the setting aside of assets (earmarking), and the grant of options or awards as distinct steps for the purposes of the rules. The statutory exemptions overlap, and in some cases are subject to certain terms and conditions.

Tax-advantaged share schemes

These types of schemes benefit from the widest set of exclusions covering relevant steps:

  1. taken under HMRC tax-advantaged share schemes (Share Incentive Plans (SIPs), How SAYE schemes work and key features, and How CSOPs work and key features), including the grant of options/awards, and the acquisition and delivery of shares to satisfy

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