Income Tax (Earnings and Pensions) Act 2003 section 556A

Deductible payments made pursuant to tax avoidance arrangements

Section 556A prevents former employees from claiming a tax deduction under section 555 where the payment in question was made as part of a tax avoidance arrangement.

• Section 555 normally allows former employees to deduct certain payments when calculating their net income
• Section 556A blocks that deduction if the payment was made under arrangements designed to avoid tax
• The restriction applies where tax avoidance is either the main purpose or one of the main purposes of the arrangements
• This is an anti-avoidance measure intended to prevent misuse of the former employee deduction rules