Disguised remuneration—the gateway

Produced in partnership with Stephen Downie of Francis Wilks & Jones
Practice notes

Disguised remuneration—the gateway

Produced in partnership with Stephen Downie of Francis Wilks & Jones

Practice notes
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Sections 554A–554AA of Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) are referred to by HMRC as the ‘gateway’ to the disguised remuneration legislation (this is not a legislative term). Part 7A applies where the conditions required by these sections are met and the gateway has been passed through.

This Practice Note refers specifically to the gateway tests to understand where such rules apply in respect of any schemes or arrangements which may appear to provide for remuneration without any immediate and obvious liability to pay tax on such remuneration. This Practice Note, and indeed the main case and close companies gateways described below, do not apply to circumstances where normal taxation rules apply as regards earnings.

Main case gateway

Broadly, ITEPA 2003, s 554A requires the following as a precondition of the treatment of a ‘relevant step’ for income tax purposes:

  1. an existing employee or a former or prospective employee (A) of another person (B). Employee for these purposes includes office-holders such as company secretaries and directors)

  2. a relevant arrangement (to which

Stephen Downie
Stephen Downie

Stephen is a dual qualified solicitor and ACCA accountant, and is a partner at Francis Wilks & Jones acting for tax advisors, private clients and Insolvency Practitioners.

Stephen works with FWJ’s tax disputes team dealing with Code 8 and Code 9 enquiries, direct and indirect tax investigations and tribunal proceedings; Stephen’s particular specialism in this area comprises the evolving legal position surrounding tax avoidance schemes in respect of both live and insolvent companies.

Stephen’s person experience over the course of the last 20 years also extends to insolvency, restructuring and contentious insolvency claims, acting on both sides for both liquidators/administrators and defending SMEs, individuals and directors.

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Jurisdiction(s):
United Kingdom
Key definition:
Remuneration definition
What does Remuneration mean?

In a defined benefit scheme, the amount of pension earned is invariably related to the amount of salary; HMRC calls this remuneration. So far as scheme rules or an employer's policy is concerned, it can include or exclude bonuses, commission and other fluctuating emoluments.

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