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HMRC internal manual

Employment Income Manual

Employment income provided through third parties: undertakings given by employers etc in relation to retirement benefits etc: overview

Part 7A Chapter 3 ITEPA 2003

EFRBS and trusts that meet the conditions in Section 615(3) ICTA 1988 are within the scope of Part 7A ITEPA 2003.

Part 7A does not prevent the operation of EFRBS etc. But the inclusion of such arrangements within Part 7A is intended to prevent them being used:

  • to circumvent the annual and lifetime allowance limits on tax reliefs available through registered pension schemes, or
  • for other tax avoidance purposes.

Part 7A includes some extra rules for pension arrangements where the employee’s rights are secured in some way in advance of contributions being paid to the arrangement.

Part 7A Chapter 3 ITEPA 2003 treats certain steps taken by B (in anticipation of contributions to third party arrangements such as EFRBS) as if they were already relevant steps taken by a relevant third person within Section 554B. If the other statutory conditions are met, such steps will give rise to Part 7A income.

Chapter 3 does not apply unless an employer has given a ‘relevant undertaking’ (for a contribution) see EIM45145.

The steps which are deemed to be relevant steps within Section 554B are (to summarise):

  • earmarking sums or assets with a view to a contribution being made later (the later performance of the relevant undertaking Section 554Z18 see EIM45150), and
  • provision of security for the performance of the relevant undertaking (Section 554Z19 see EIM45155).