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HMRC internal manual

Employment Income Manual

Employment income provided through third parties: meaning of ‘arrangement’ and ‘tax avoidance arrangement’

Section 554Z ITEPA 2003

Meaning of ‘arrangement’

For the purposes of the rules in Part 7A ITEPA 2003, ‘arrangement’ includes any agreement, scheme, settlement, transaction, trust or understanding (whether or not it is legally enforceable).

Meaning of ‘tax avoidance arrangement’

For the purposes of the rules in Part 7A ITEPA 2003, a ‘tax avoidance arrangement’ is an arrangement which has a ‘tax avoidance purpose’.

To decide whether an arrangement has a tax avoidance purpose, you look at the purposes of the parties to the arrangement.

If the main purpose (or one of the main purposes) of any of these parties in entering into the arrangement was the avoidance of income tax, corporation tax or national insurance contributions, then the arrangement has a tax avoidance purpose.

Steps ‘connected with’ a tax avoidance arrangement

A step is ‘connected with’ a tax avoidance arrangement if (for example) the step is taken (wholly or partly) in pursuance of:

  • the tax avoidance arrangement, or
  • an arrangement at one end of a series of arrangements with the tax avoidance arrangement being at the other end.

It does not matter if the person taking the step is unaware of the tax avoidance arrangement.