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

Exclusions: other cases involving employment-related securities etc.

Section 554N sets out a series of exclusions from the disguised remuneration rules (Chapter 2 of Part 7A) where employment-related securities or securities options are involved and the transaction is already dealt with under the existing employment-related securities tax code in Part 7 of the Act.

• The disguised remuneration rules do not apply where someone acquires employment-related securities or securities options that are already within the scope of the existing securities income tax charges (sections 425(2) and 475(1)).
• The rules also stand aside where a chargeable event under the securities code (such as under sections 426, 438, 446U or 476, or a disposal under Chapter 3D of Part 7) already generates employment income — including cases where the charge is disapplied by certain elections or statutory exclusions.
• Where an asset is acquired at full market value (paid for in money or money's worth at or around the time of acquisition) or the acquisition already gives rise to taxable or exempt earnings of at least the asset's market value, subsequent relevant steps involving that asset are excluded from the disguised remuneration charge provided there is no connection to a tax avoidance arrangement.
• A loan made solely to enable the exercise of an employment-related securities option is excluded from the disguised remuneration charge, but only if the option exercise generates taxable or exempt employment income and the loan is repaid within 40 days — any outstanding balance after that period is treated as a new relevant step subject to the charge.