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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Employment income provided through third parties: remittance basis: effect on reductions under Sections 554Z5 to 554Z8

Sections 554Z11(1) to (3) and 554Z17(3) ITEPA 2003


  • A is claiming the remittance basis, and
  • Section 554Z9 or 554Z10 applies (see EIM45805 onwards),

then Section 554Z11 reduces Part 7A income, excluding the amount not attributable to the UK employment.

If a part (‘the relevant part’) of the value of the relevant step:

  • is ‘for’ a tax year (Section 554Z9(1)(a)), or
  • is ‘for’ a tax year and is not in respect of duties performed in the United Kingdom (Section 554Z10(1)(a)),

then you take four steps to adjust any reductions to be made under Sections 554Z5 to 554Z8.

Section 554Z11 does not apply to steps within Section 554Z18 or 554Z19.

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.

Step 1. Calculate the reduction (R) under:

* Section 554Z5 (overlap with earlier relevant step, see [EIM45725](,
* Section 554Z6 (overlap with certain earnings, see [EIM45735](,
* Section 554Z7 (exercise price of share options, see [EIM45740]( onwards), or, as the case may be,
* Section 554Z8 (cases where consideration given for relevant step, see [EIM45755]( onwards).

Step 2. Calculate X, where:

* ‘X’ = 100 x A/B
* ‘A’ = the value of the relevant part before any reductions under any of Sections 554Z5 to 554Z8
* ‘B’ = the value of the whole of the relevant step before any reductions under any of those sections.

Step 3. Calculate A - (X x R).

Step 4. Calculate ((B - A)) - ((100 - X) x R).