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HMRC internal manual

Employment Income Manual

Pt 7A ITEPA 2003: CCG: relevant transaction – excluded transactions

ITEPA 2003: section 554AC

The intention behind the requirement for a company to enter into a relevant transaction is to bring into charge arrangements in which the employer has in some way given the value which then becomes the subject of the relevant step. It is necessary to ensure that the CCG provisions do not catch transactions which do not involve disguised employment income. Section 554AC details types of transactions which are excluded from being relevant transactions.

Where a distribution is made by the employer, section 554AC(1)(a) prevents that distribution from being a relevant transaction.

It is not intended to bring into charge any transactions which are part of a normal commercial relationship between the company and a third party. Section 554AC(1)(b) excludes transactions which are entered into by the employer in the ordinary course of their business and on terms which would have been made between unconnected persons dealing with each other at arm’s length.

Also excluded are transactions entered into in order to facilitate the disposal of shares in the employer on arm’s length terms between unconnected parties.

The section also contains a targeted anti-avoidance rule. Any of the above will cease to be excluded if a main purpose of the distribution or transaction is tax avoidance.