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HMRC internal manual

Employment Income Manual

Employment income provided through third parties: Part 7A income: general

Section 554Z2 ITEPA 2003

If Part 7A Chapter 2 ITEPA 2003 applies by reason of a relevant step, employment income arises as a result.

What income

The value of the relevant step counts as employment income. If the value of the relevant step would count as employment income of more than one person, its value is to be apportioned between those persons on a just and reasonable basis. The amount apportioned in respect of each person is then taken to be the value of the relevant step in relation to that person’s employment income.

Whose income

The general rule is that it counts as employment income of A. Special rules apply if A has died. Please read EIM45865.

What kind of income

It counts as employment income of A in respect of A’s employment with B.

This rule takes priority over the benefits code. So, for example, if the relevant step is the making of an employment-related loan, the loan gives rise to Part 7A income and is not treated as a taxable cheap loan. On the benefits code and loans, please read EIM26101 onwards.

Similarly, this rule takes priority over Part 4 Chapter 3 ITTOIA 2005 (savings and investment income: dividends etc. from UK resident companies etc.)

When

In general, it counts as A’s employment income for the tax year in which the relevant step is taken.

But, if the relevant step is taken before A’s employment with B starts, it counts as A’s employment income for the tax year in which the employment starts. Please also read EIM45720 (residence issues).

How much

For the measure of the income, please read EIM45710.