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HMRC internal manual

Employment Income Manual

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Employment income provided through third parties: relevant steps: Section 554D: making asset available for relevant person to benefit from

Section 554D ITEPA 2003

Meaning of ‘makes available’
Substantially similar to transfer
Asset made available at or after end of relevant period
Asset made available before end of relevant period
Factors not taken into account
Asset made available before 6 April 2011

A relevant third person (‘P’) takes a relevant step within Section 554D if (to summarise) P makes available an asset to a ‘relevant person’ in specified circumstances.

Broadly speaking, P takes a relevant step within Section 554D if one of two conditions is met.

  • Making the asset available is a quasi-transfer of ownership.
  • The asset continues to be available after a defined period following the end of the employment (and so for practical purposes its availability is permanent).

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Meaning of ‘makes available’

In Section 554D, ‘makes available’ means ‘begins to make available’ not ‘continues to make available’. Section 554D defines a step, not a state.

The examples in EIM45085 illustrate this.

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Substantially similar to transfer

P takes a relevant step within Section 554D if:

  • at any time, P does not transfer a particular asset, but
  • P makes that asset available for a relevant person to benefit from,
  • with the result that the relevant person can benefit from the asset in a substantially similar way to the way in which that person could have benefited from it if it had been transferred to that person at that time.

When applying the ‘substantially similar’ condition, you can take into account these factors.

  • Any limitations on the way in which the relevant person may benefit from the asset.
  • The period over which the asset is being made available.
  • If relevant, the extent to which that period covers the expected remaining useful life of the asset.
  • The extent to which the relevant person has (or is to have) a say over the disposal of the asset.
  • The extent to which the relevant person may:

    • benefit from any proceeds arising from the disposal of the asset, or
    • otherwise have a say in the way the proceeds are used.

You should also take into account any other relevant factors.

For practical purposes, the key question to ask is: ‘Suppose the relevant person was the outright owner of the asset. What difference would that make to the way in which that person benefited from it?’

The normal provision of company cars on short term leases to employees for their private use would not be a relevant step under Section 554D.

Nor would the occasional non-exclusive use of a holiday home while in employment.

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Asset made available at or after end of relevant period

P takes a relevant step within Section 554D if:

  • P does not transfer a particular asset, but
  • P makes that asset available for a relevant person to benefit from, and
  • P does this at or after the end of the ‘relevant period’.

The ‘relevant period’ is the period of two years starting with the day on which A’s employment with B ceases.

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Asset made available before end of relevant period

P takes a relevant step within Section 554D if:

  • P makes an asset available for a relevant person to benefit from, and
  • P does this before the end of the relevant period, and
  • at the end of the relevant period, P continues to make this asset available for the asset available for the relevant person to benefit from.

P takes this relevant step at the end of the relevant period.

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Factors not taken into account

For the purposes of these relevant steps, it does not matter if:

  • the asset is made available informally,
  • the relevant person has no legal right to benefit from the asset, or
  • the relevant person does not actually use the asset.

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Asset made available before 6 April 2011

The Part 7A rules apply to relevant steps that take place on or after 6 April 2011.

Antiforestalling rules cover certain relevant steps carried out between 9 December 2010 and 5 April 2011 inclusive (see EIM45905 onwards). But these rules do not cover steps within Section 554D.

Therefore, Section 554D only applies to relevant steps taken on or after 6 April 2011.

The examples in EIM45085 illustrate this.