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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Employment income provided through third parties: relevant steps: relevant step within Section 554B, later relevant step within Section554C or 554D, exclusions within Section 554E onwards

Sections 554B to 554X, 554Z18 and 554Z19 ITEPA 2003

A relevant step within Section 554B is taken with a view to a later relevant step being taken within Section 554C or 554D.

But the later relevant step does not necessarily have to be a relevant step which gives rise to Part 7A income.

Suppose:

P (a relevant third person) takes a relevant step within Section 554B with a view to a later relevant step within Section 554C or 554D,

the other conditions are met for the arrangement to come through the Section 554A gateway, and

if the later relevant step is taken, it will come within one of the exclusions in Sections554E onwards.

Then the later relevant step will not give rise to Part 7A income.

But it does not follow that the relevant step within Section 554B will not give rise to Part 7A income either.

The relevant step within Section 554B will give rise to Part 7A income unless it comes within one of the exclusions in Section 554E onwards whether or not the later relevant step also comes within one of those exclusions.

This rule also applies if the relevant step within Section 554B is a step within Section 554Z18 or 554Z19.

Some of the exclusions only apply to relevant steps within Section 554B. Clearly, therefore, these exclusions will still apply even though they will not cover the later relevant step.

On Section 554B, see EIM45095 onwards.

On Sections 554C and 554D, see EIM45060 onwards.

On the exclusions, see EIM45200 onwards.

On Sections 554Z18 and 554Z19 (undertakings given by employers etc in relation to retirement benefits etc: earmarking etc and provision of security), see EIM45150 and EIM45155 respectively.