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HMRC internal manual

Employment Income Manual

Optional remuneration arrangements: excluded exemptions

Section 228A ITEPA 2003

Benefits that are provided through optional remuneration arrangements from 6 April 2017 (subject to the transitional provisions) are not covered by existing exemptions within Part 4 of ITEPA 2003 unless the exemption is an ‘excluded exemption’.

An excluded exemption means an exemption conferred by any of the following provisions:

  • section 239 ITEPA 2003 - exemption for payments and benefits connected with taxable cars, vans and heavy goods vehicles
  • section 244 ITEPA 2003 - exemption for cycles and cyclist’s safety equipment
  • section 266(2)( c) - exemption for non-cash vouchers used in conjunction with the exemption for cycles and cyclist’s safety equipment
  • section 270A - limited exemption for qualifying childcare vouchers 
  • section 307 – only in as far as the exemption applies to the provision of retirement benefits
  • section 308 - exemption for contributions to registered pension schemes
  • section 308A - exemption for contributions to overseas pension schemes
  • section 308C - exemption for the provision of pensions advice
  • section 309 - limited exemption for statutory redundancy payments
  • section 310 - exemption for counselling and other outplacement services
  • section 311 - exemption for retraining courses
  • section 318 - exemption for employer provided childcare
  • section 318A - limited exemption for other childcare provisions

These exemptions are not affected by the changes and, even when provided under optional remuneration arrangements, the benefit remains exempt provided it satisfies the qualifying conditions of the particular exemption.

The exemption under section 307 is only treated as an excluded exemption to the extent that the benefits provided are in respect of retirement benefits. Where the employee is provided with death benefits (for example, the employer takes out a life assurance policy to provide death in service benefits) then the exemption does not apply when provided under optional remuneration arrangements.

It’s important to note that contributions under a registered pension scheme in respect of death benefits, even when provided under optional remuneration arrangements, remain exempt under section 308.