Income Tax (Trading and Other Income) Act 2005 section 863J

Vesting of remuneration represented by the allocated profit

Section 863J sets out how an individual partner is taxed when variable remuneration, previously allocated to the AIFM partnership firm as restricted profit, finally vests in that partner.

• If the partner is still carrying on the AIFM trade when the remuneration vests, the amount is taxed as a trading profit; if the partner has ceased the trade, it is taxed as a standalone income tax charge on the individual.
• The taxable amount is the allocated profit (or relevant part) net of the income tax for which the AIFM firm is liable, plus a gross-up for any of that firm-level tax actually paid by the time of vesting.
• The partner receives a credit for the income tax already paid by the AIFM firm, which is set against the partner's own income tax liability or refunded as appropriate.
• The relevant tax year is the year of vesting for deferred remuneration, or the year in which the allocated profit would originally have been taxable for upfront remuneration paid in instruments.