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HMRC internal manual

Employment Income Manual

Pt 7A ITEPA 2003: CCG: interaction with amounts also chargeable as redirected earnings

ITEPA 2003: sections 554A(5A), (5B), (5C), 554AA(5)(6) and (7)

Where a sum of money is passed to a third party or to the employee if they are acting as trustee, that amount may be charged as earnings of the employee under section 62 ITEPA 2003 as well as being chargeable under the provisions of Pt 7A if any relevant steps are taken using that sum.

HMRC’s view has always been that the transactions involved in avoidance schemes can give rise to multiple separate charges on the same amount of income. The double taxation provisions in Chapter 2 Pt 7A ITEPA 2003 are used to ensure that tax is only paid once on the same amount of income where more than one charge to tax exists. The provisions noted above confirm this position and put the matter beyond doubt.

Where such an amount of earnings is paid to a third party, or to the employee if they are acting as trustee - whether the tax due is paid or not - this is an amount of redirected earnings. Any sum or other property which represents or is derived from that payment is also redirected earnings.

The legislation clarifies that an arrangement which involves the payment of redirected earnings can also be a relevant arrangement within section 554A(1)(b).

The legislation also clarifies that where a redirected earnings arrangement is used for provision of rewards, recognition or loans, that arrangement does prevent any such rewards, recognition or loans also being in connection with the employee’s (“A”) employment with their employer (“B”) for the purposes of section 554A(1)(c) – see EIM45025.