Income Tax (Earnings and Pensions) Act 2003 section 554Z4

Residence issues

Section 554Z4 deals with how the taxable value of a relevant step under the disguised remuneration rules is adjusted to reflect the individual's UK residence status and whether duties were performed in the UK.

• Once the value of a relevant step has been determined, the specific tax year or years it relates to must be identified by applying the normal rules used for general earnings
• If the value falls into a tax year when the individual is non-UK resident or a split year, the value is reduced by the portion not relating to duties performed in the UK, determined on a just and reasonable basis
• For lump sums paid under employer-financed retirement benefits schemes to UK-resident recipients, no residence reduction applies to rights accrued on or after 6 April 2017; for rights accrued before that date, the reduction is proportionally restricted
• These residence adjustments do not change the tax year in which the value of the relevant step counts as employment income — they only reduce the amount that is subject to UK income tax