Income Tax (Earnings and Pensions) Act 2003 section 554Z8

Cases where consideration given for relevant step

Section 554Z8 allows the taxable value of a relevant step to be reduced where the employee (or a linked person) has given genuine consideration — either by transferring an asset or paying a sum of money — for the benefit received through a third-party arrangement.

• Where an employee transfers an asset as consideration for a relevant step, the taxable value of that step is reduced by the market value of the asset at the time of transfer, provided the transfer is not by way of loan and is not connected to a tax avoidance arrangement.
• Where an employee pays a sum of money as consideration for a relevant step that does not itself involve money, the taxable value is reduced by the amount paid, again provided there is no connection to a tax avoidance arrangement.
• If the value of the relevant step has already been reduced for residence reasons, the reduction for consideration given is scaled down proportionately rather than applied in full.
• The reduction for consideration can never bring the taxable value of the relevant step below nil, and references to the employee include any person linked with the employee.