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

Exclusions: pre-6 April 2006 contributions to employer-financed retirement benefit schemes

Section 554U provides an exclusion from the disguised remuneration rules (Chapter 2) where the sum or asset involved in a relevant step arose from employer contributions to an employer-financed retirement benefits scheme that were already taxed on the employee before 6 April 2006.

• Where an employer contributed to an employer-financed retirement benefits scheme and the employee was already taxed on that contribution before 6 April 2006, the disguised remuneration charge under Chapter 2 does not apply to sums or assets arising from those contributions
• Whether the employee has been "taxed" is determined by reference to paragraph 53(3) of Schedule 36 to the Finance Act 2004, which sets out the test for pre-6 April 2006 taxed contributions
• Where the sum or asset only partly derives from a previously taxed contribution, the relevant step is split into two notional steps on a just and reasonable basis, with only the part traceable to the taxed contribution being excluded from Chapter 2
• If the employer is a company within a group, contributions made by any other company in the same group at the relevant time are treated as if they were made by the employer itself