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HMRC internal manual

Employment Income Manual

Section 554Z11C: overlapping charges introduction

ITEPA 2003 – sections 554Z11C(1)(a)

Section 554Z11C provides a flexible approach to giving relief where more than one charge exists on the same money or asset. It recognises that a payment can be made against one liability or the other. It gives relief by treating a payment of one liability as a payment on account of the other. The single payment will frank both charges to tax to the extent that they arise from the same income. As noted in section 554Z11B and C – Introduction, the first consideration is which liability is being paid by the taxpayer.

In order to give relief, section 554Z11C contains a number of basic concepts. The first is to define the charges which include amounts from what are effectively the same sum or asset. It is also necessary to consider how much of these charges relate to the value of that sum or asset. These are known as the earlier charge and the Chapter 2 overlap charge.

The term “earlier charge” refers to the amount of a charge which includes income common to sum or asset P and sum or asset Q and which arose prior to the taking of a relevant step.

The term “Chapter 2 overlap charge” refers to the amount of a charge which includes income common to sum or asset P and sum or asset Q and which arises on the taking of the relevant step referred to above.