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

Exclusions: income arising from earmarked sum or asset

Section 554Q prevents a double tax charge under the disguised remuneration rules where income grows on a sum or asset that has already been taxed when it was first earmarked for an employee.

• Where a sum of money or asset has already been subject to a disguised remuneration charge when it was earmarked under section 554B, any income subsequently arising from that sum or asset is not subject to a further charge when it too is earmarked.
• The exclusion only applies if the original sum or asset remains earmarked or held for the benefit of the employee immediately before the income arises, and Chapter 2 applied (or would have applied but for certain other exclusions) to the original earmarking step.
• The exclusion does not apply if the income represents an excessive return — that is, a return greater than what would be expected if all persons connected with the arrangement were dealing with each other at arm's length.
• A "relevant connected person" for this purpose means anyone with a direct or indirect connection to the arrangement under which the income arises.