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

Exclusions: commercial transactions

Section 554F provides an exclusion from the disguised remuneration rules in Part 7A where the relevant step is a genuine commercial transaction, either a loan on ordinary commercial terms or another type of transaction carried out in the normal course of business.

• Loans made on ordinary commercial terms (as defined in section 176, ignoring conditions B and C) are excluded from the Part 7A charge, provided there is no connection with a tax avoidance arrangement
• Other relevant steps are excluded where they are taken solely for the purpose of a transaction entered into in the ordinary course of business, on substantially the same terms as similar transactions with members of the public at large
• A significant proportion of the person's business must involve similar transactions with arm's length members of the public, and the terms offered to the employee (or a person linked with the employee) must not be materially different from those offered to the public
• In all cases, no exclusion applies if there is any direct or indirect connection between the relevant step and a tax avoidance arrangement