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Finance (No. 3) BillPage 110

(a) for a tax year there is an amount (“amount TPI”) of taxable
pension income for a pension, annuity or other item of
pension income,

(b) the pension, annuity or other item of pension income accrues
5or arises out of rights (“the relevant rights”) which represent,
or have arisen or derived (directly or indirectly) from, a sum
of money or asset which was the subject of a relevant step
within the meaning of Part 7A, and

(c) Chapter 2 of that Part applied by reason of the relevant step.

(2) 10A deduction is allowed from amount TPI.

(3) The amount of the deduction allowed is the amount (“amount EI”)
which counted as employment income of A under Chapter 2 of Part
7A in relation to the relevant step (see section 554Z2(1)).

(4) If amount EI exceeds amount TPI, the excess is to be carried forward
15to future tax years to be deducted under this section (when
applicable) until all of amount EI has been deducted.

(5) Subsection (6) applies if it is determined on a just and reasonable
basis that the relevant rights represent, or have arisen or derived
from, only part of the sum of money or asset which was the subject
20of the relevant step.

(6) In subsection (3) the reference to the amount which counted as
employment income is to be read as a reference to the corresponding
proportion of that amount.

28 After section 687(4) (PAYE: payments by intermediary) insert—

(5) 25This section does not apply in relation to a payment so far as the sum
paid is employment income under Chapter 2 of Part 7A.

29 After section 687 insert—

687A Payment of employment income under Part 7A

(1) This section applies if—

(a) 30the value of a relevant step counts as employment income
under Chapter 2 of Part 7A, and

(b) the relevant step is the payment of a sum of money,

and references to A and B are to be read accordingly.

(2) For the purposes of PAYE regulations B is treated as making a
35payment of PAYE income of A of an amount which, on the basis of
the best estimate which can reasonably be made, is the amount of the
employment income.

(3) The payment is treated as made on the latest of the following days—

(a) the day on which the relevant step is taken,

(b) 40the day on which A’s  employment with B starts, and

(c) the day which is 30 days after the day on which FA 2011 is
passed.

(4) Subsection (2) does not apply if the person who takes the relevant
step (whether or not a person to whom PAYE regulations apply)

Finance (No. 3) BillPage 111

deducts income tax from the payment, and accounts for it, in
accordance with PAYE regulations.

30 (1) Amend section 689 (PAYE: employee of non-UK employer) as follows.

(2) After subsection (1) insert—

(1A) 5Subject to subsection (4), subsection (1)(b) does not apply in relation
to a payment so far as the sum paid is employment income under
Chapter 2 of Part 7A.

(3) In subsection (4) after “sections” insert “687A and”.

31 Before section 696 insert—

695A 10 Employment income under Part 7A

(1) This section applies if—

(a) the value of a relevant step counts as employment income
under Chapter 2 of Part 7A, and

(b) the relevant step is not the payment of a sum of money,

15and references to A and B are to be read accordingly.

(2) For the purposes of PAYE regulations B is treated as making a
payment of PAYE income of A of an amount which, on the basis of
the best estimate which can reasonably be made, is—

(a) the amount of the employment income, less

(b) 20so much of that amount (if any) to which section 554Z9(2) or
554Z10(2) applies.

(3) The payment is treated as made on the latest of the following days—

(a) the day on which the relevant step is taken,

(b) the day on which A’s  employment with B starts, and

(c) 25the day which is 30 days after the day on which FA 2011 is
passed.

(4) Subsection (2) does not apply if the person who takes the relevant
step (whether or not a person to whom PAYE regulations apply)
accounts for income tax on the relevant step in accordance with
30PAYE regulations.

32 After section 696(2) (PAYE: readily convertible assets) insert—

(3) This section does not apply to any PAYE income so far as it is
employment income under Chapter 2 of Part 7A.

33 In section 710(2)(a) (PAYE: accounting for tax on notional payments) after
35“687,” insert “687A,”.

34 (1) Amend section 716A (priority rule in relation to certain dividend income) as
follows.

(2) Make the existing text subsection (1).

(3) After subsection (1) insert—

(2) 40Subsection (1) is subject to section 554Z2(2).

Finance (No. 3) BillPage 112

Amendments to ITTOIA 2005

35 ITTOIA 2005 is amended as follows.

36 (1) Amend section 39 (employee benefit contributions: meaning of “employee
benefit scheme” etc) as follows.

(2) 5In subsection (2) after “employer” insert “or persons linked with present or
former employees of the employer”.

(3) After subsection (2) insert—

(3) Section 554Z1 of ITEPA 2003 applies for the purposes of subsection
(2) but as if references to A were to a present or former employee of
10the employer.

(4) So far as it is not covered by subsection (2), “employee benefit
scheme” also means—

(a) an arrangement (“the relevant arrangement”) within
subsection (1)(b) of section 554A of ITEPA 2003 to which
15subsection (1)(c) of that section applies, or

(b) any other arrangement connected (directly or indirectly) with
the relevant arrangement.

37 (1) Amend section 40 (employee benefit contributions: provision of qualifying
benefits) as follows.

(2) 20In subsection (5) after “scheme” insert and the payment or transfer—

(a) gives rise to an employment income tax charge under
Chapter 2 of Part 6 of ITEPA 2003 or under Part 9 of that Act,
or

(b) is an excluded benefit as defined in section 393B(3) of that
25Act.

(3) After subsection (6) insert—

(6A) For the purposes of section 38 qualifying benefits are also provided
if—

(a) a relevant step within the meaning of Part 7A of ITEPA 2003
30is taken, and

(b) Chapter 2 of that Part applies by reason of the step.

38 (1) Amend section 41 (employee benefit contributions: timing of qualifying
benefits etc) as follows.

(2) For subsection (1) substitute—

(1) 35If the provision of a qualifying benefit takes the form of a payment of
money, the benefit, so far as Chapter 4 of Part 2 of ITEPA 2003 applies
to the money, is provided for the purposes of section 38 when the
money is treated as received for the purposes of that Chapter
(applying the rules in section 18 of that Act (receipt of money
40earnings)).

(3) After subsection (1) insert—

(1A) Except so far as subsection (1) applies to the provision of the
qualifying benefit, if the provision of a qualifying benefit is a
chargeable relevant step, for the purposes of section 38—

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(a) the benefit is provided when A’s employment with B starts if
the chargeable relevant step is taken before then, or

(b) otherwise, the benefit is provided when the chargeable
relevant step is taken.

(4) 5In subsection (2)—

(a) after “an asset” insert “which meets condition A, B, C or D in section
40”,

(b) omit the “and” after paragraph (a), and

(c) after paragraph (b) insert , and

(c) 10if the transfer is a chargeable relevant step, the cost of
the relevant step so far as not covered by paragraph
(a) or (b).

(5) After subsection (3) insert—

(4) If the provision of a qualifying benefit is a chargeable relevant step
15which does not involve a sum of money (see section 554Z(10) of
ITEPA 2003) and is not covered by subsection (2), the amount
provided for the purposes of section 38 is the cost of the relevant step
(subject to subsection (5)).

(5) If the provision of a qualifying benefit is a chargeable relevant step
20which is not covered by subsection (2) (whether or not it involves a
sum of money), the amount provided for the purposes of section 38
is not to exceed the amount that—

(a) is charged to tax under ITEPA 2003 in relation to the relevant
step (whether under Part 7A of that Act or otherwise), or

(b) 25would be charged had not A been non-UK resident in any tax
year.

(6) In this section—

(a) “chargeable relevant step” means a relevant step within the
meaning of Part 7A of ITEPA 2003 by reason of which
30Chapter 2 of that Part applies (and references to A and B are
to be read accordingly), and

(b) references to the cost of a chargeable relevant step are to be
read in accordance with section 554Z3(6) of that Act.

39 In section 44(1) (employee benefit contributions: interpretation)—

(a) 35in the definition of “employee benefit scheme” for “39(2)” substitute
“39(2) to (4)”, and

(b) in the definition of “employer-financed retirement benefits scheme”
after “Act)” insert “but ignoring section 393B(2)(a) and (c) of that
Act”.

40Amendments to ITA 2007

40 ITA 2007 is amended as follows.

41 After section 809F(5) (remittance basis: effect) insert—

(5A) For the effect on amounts which count as employment income under
Chapter 2 of Part 7A of ITEPA 2003, see sections 554Z9 to 554Z11 of
45that Act.

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42 After section 809K(1)(c) (remittance basis: application of sections 809L to
809Z6) insert—

(ca) sections 554Z9 to 554Z11 of that Act (employment income
provided through third parties charged on remittance
5basis),.

43 For section 809Z7(4) (remittance basis: meaning of “foreign specific
employment income”) substitute—

(4) An individual’s “foreign specific employment income” for a tax year
(“the relevant tax year”) consists of the income (if any) within
10subsections (4A) and (4B).

(4A) The income within this subsection is the individual’s specific
employment income for the relevant tax year so far as it consists of
foreign securities income for the purposes of section 41A of ITEPA
2003.

(4B) 15The income within this subsection is any income, or any part of any
income, of the individual—

(a) to which section 554Z9(2) or 554Z10(2) of ITEPA 2003 applies,
and

(b) which consists of the value of a relevant step, or a part of the
20value of a relevant step, which is “for” the relevant tax year as
determined under section 554Z4 of ITEPA 2003.

Amendments to CTA 2009

44 CTA 2009 is amended as follows.

45 (1) Amend section 1291 (employee benefit contributions: meaning of “employee
25benefit scheme” etc) as follows.

(2) In subsection (2) after “employer” insert “or persons linked with present or
former employees of the employer”.

(3) After subsection (2) insert—

(3) Section 554Z1 of ITEPA 2003 applies for the purposes of subsection
30(2) but as if references to A were to a present or former employee of
the employer.

(4) So far as it is not covered by subsection (2), “employee benefit
scheme” also means—

(a) an arrangement (“the relevant arrangement”) within
35subsection (1)(b) of section 554A of ITEPA 2003 to which
subsection (1)(c) of that section applies, or

(b) any other arrangement connected (directly or indirectly) with
the relevant arrangement.

46 (1) Amend section 1292 (employee benefit contributions: provision of
40qualifying benefits) as follows.

(2) In subsection (5) after “scheme” insert and the payment or transfer—

(a) gives rise to an employment income tax charge under
Chapter 2 of Part 6 of ITEPA 2003 or under Part 9 of that Act,
or

Finance (No. 3) BillPage 115

(b) is an excluded benefit as defined in section 393B(3) of that
Act.

(3) After subsection (6) insert—

(6A) For the purposes of section 1290 qualifying benefits are also
5provided if—

(a) a relevant step within the meaning of Part 7A of ITEPA 2003
is taken, and

(b) Chapter 2 of that Part applies by reason of the step.

47 (1) Amend section 1293 (employee benefit contributions: timing of qualifying
10benefits etc) as follows.

(2) For subsection (1) substitute—

(1) If the provision of a qualifying benefit takes the form of a payment of
money, the benefit, so far as Chapter 4 of Part 2 of ITEPA 2003 applies
to the money, is provided for the purposes of section 1290 when the
15money is treated as received for the purposes of that Chapter
(applying the rules in section 18 of that Act (receipt of money
earnings)).

(3) After subsection (1) insert—

(1A) Except so far as subsection (1) applies to the provision of the
20qualifying benefit, if the provision of a qualifying benefit is a
chargeable relevant step, for the purposes of section 1290—

(a) the benefit is provided when A’s employment with B starts if
the chargeable relevant step is taken before then, or

(b) otherwise, the benefit is provided when the chargeable
25relevant step is taken.

(4) In subsection (2)—

(a) after “an asset” insert “which meets condition A, B, C or D in section
1292”,

(b) omit the “and” after paragraph (a), and

(c) 30after paragraph (b) insert , and

(c) if the transfer is a chargeable relevant step, the cost of
the relevant step so far as not covered by paragraph
(a) or (b).

(5) After subsection (3) insert—

(4) 35If the provision of a qualifying benefit is a chargeable relevant step
which does not involve a sum of money (see section 554Z(10) of
ITEPA 2003) and is not covered by subsection (2), the amount
provided for the purposes of section 1290 is the cost of the relevant
step (subject to subsection (5)).

(5) 40If the provision of a qualifying benefit is a chargeable relevant step
which is not covered by subsection (2) (whether or not it involves a
sum of money), the amount provided for the purposes of section
1290 is not to exceed the amount that—

(a) is charged to tax under ITEPA 2003 in relation to the relevant
45step (whether under Part 7A of that Act or otherwise), or

Finance (No. 3) BillPage 116

(b) would be charged had not A been non-UK resident in any tax
year.

(6) In this section—

(a) “chargeable relevant step” means a relevant step within the
5meaning of Part 7A of ITEPA 2003 by reason of which
Chapter 2 of that Part applies (and references to A and B are
to be read accordingly), and

(b) references to the cost of a chargeable relevant step are to be
read in accordance with section 554Z3(6) of that Act.

48 10In section 1296(1) (employee benefit contributions: interpretation)—

(a) in the definition of “employee benefit scheme” for “1291(2)”
substitute “1291(2) to (4)”, and

(b) in the definition of “employer-financed retirement benefits scheme”
after “Act)” insert “but ignoring section 393B(2)(a) and (c) of that
15Act”.

Other amendments

49 (1) TCGA 1992 is amended as follows.

(2) In section 119A (increase in expenditure by reference to tax charged in
relation to employment-related securities)—

(a) 20in subsection (5)(a) for “or (b)” substitute “, (b) or (d)”, and

(b) at the end of subsection (5A) insert “and section 119C (unremitted
Part 7A income)”.

(3) After section 119B insert—

119C Section 119A: unremitted Part 7A income

(1) 25This section applies for the purposes of section 119A if an amount
deducted under section 480(5)(d) of ITEPA 2003, which (apart from
this section) would by virtue of section 119A(5)(a) be added back to
an amount counting as employment income, is or includes
unremitted Part 7A income.

(2) 30So much of the amount deducted as is unremitted Part 7A income is
not to be added back.

(3) In this section “unremitted Part 7A income” means an amount
counting as employment income under Chapter 2 of Part 7A of
ITEPA 2003—

(a) 35to which section 554Z9(2) or 554Z10(2) of that Act applies,
and

(b) which has not been remitted to the United Kingdom by the
end of the tax year in which the disposal mentioned in section
119A(1) occurs.

(4) 40Section 119B(4) to (6) applies if any of the unremitted Part 7A income
is remitted to the United Kingdom after the end of the tax year
referred to in subsection (3)(b).

50 In the following provisions, in the definition of “the employment income
Parts of ITEPA 2003”, for “7” substitute “7A”—

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(a) section 122(1) of the Social Security Contributions and Benefits Act
1992, and

(b) section 121(1) of the Social Security Contributions and Benefits
(Northern Ireland) Act 1992.

51 5In Schedule 34 to FA 2004 (non-UK pension schemes) after paragraph 3(6)
insert—

(7) The provision which may be made under sub-paragraph (6)
includes (in particular) provision in consequence of Part 7A of
ITEPA 2003.

10Commencement and transitional provision relating to Part 7A of ITEPA 2003

52 (1) Part 7A of ITEPA 2003 (as inserted by paragraph 1 of this Schedule) has
effect in relation to relevant steps taken on or after 6 April 2011; and the other
amendments made by this Schedule have effect accordingly.

(2) Sub-paragraph (1) is subject to the following paragraphs.

53 (1) 15This paragraph applies if—

(a) on or after 9 December 2010 but before 6 April 2011 a relevant step
(“the early step”) within section 554C(1)(a) of ITEPA 2003 is taken,

(b) Chapter 2 of Part 7A of ITEPA 2003 would have applied by reason of
the early step had the reference in paragraph 52(1) of this Schedule
20to 6 April 2011 been a reference to 9 December 2010, and

(c) the early step is not chargeable to income tax by virtue of Schedule
34 to FA 2004 in whole or in part.

(2) Subject to what follows, Chapter 2 of Part 7A of ITEPA 2003 is to apply by
reason of the early step; and the amendments made by this Schedule have
25effect accordingly.

(3) In determining the tax year for which the employment income of A counts
for the purposes of section 554Z2(1) of ITEPA 2003, the early step is treated
as having been taken on 6 April 2012; but otherwise Chapter 2 of Part 7A of
that Act applies by reference to when the early step was actually taken.

(4) 30The amount which (apart from this sub-paragraph) would count as
employment income of A is to be reduced by an amount to reflect so much
of the sum paid as has been repaid to P before 6 April 2012 by the person to
whom the payment was made; and the Tax Acts are to apply in relation to
the sum paid so far as repaid to P before that date by that person as if
35Chapter 2 of Part 7A of ITEPA 2003 had never applied by reason of the early
step, with any adjustments that need to be made to any assessment to tax
being made accordingly.

(5) The amount of the reduction (if any) under sub-paragraph (4)

(a) is to be determined on a just and reasonable basis, and

(b) 40may be the full amount of the employment income or nil or an
amount in between (depending on the circumstances).

(6) Section 554Z5 of ITEPA 2003 does not apply in relation to the early step and,
in the application of that section in relation to any other relevant step
(whenever taken), the early step is to be ignored.

(7) 45Section 554Z12 of ITEPA 2003 does not apply in relation to the early step.

Finance (No. 3) BillPage 118

(8) For the purposes of section 687A(3)(a) of ITEPA 2003 (as inserted by
paragraph 29 of this Schedule), the early step is treated as having been taken
on 6 April 2012.

(9) For the purposes of section 41(1A) of ITTOIA 2005 (as inserted by paragraph
538(3) of this Schedule), the early step is treated as having been taken on 6
April 2012; and for the purpose of determining whether section 41(1A) of
that Act applies, section 41(1) is to be read as substituted by paragraph 38(2)
of this Schedule.

(10) For the purposes of section 1293(1A) of CTA 2009 (as inserted by paragraph
1047(3) of this Schedule), the early step is treated as having been taken on 6
April 2012; and for the purpose of determining whether section 1293(1A) of
that Act applies, section 1293(1) is to be read as substituted by paragraph
47(2) of this Schedule.

54 (1) This paragraph applies if—

(a) 15on or after 9 December 2010 but before 6 April 2011 a relevant step
(“the early step”) within section 554C(1)(d) of ITEPA 2003 is taken,

(b) the relevant step does not involve a sum of money within the
meaning of section 554Z(10) of ITEPA 2003,

(c) the asset which is the subject of the early step is a readily convertible
20asset which P makes available to secure the payment of a sum of
money,

(d) Chapter 2 of Part 7A of ITEPA 2003 would have applied by reason of
the early step had the reference in paragraph 52(1) of this Schedule
to 6 April 2011 been a reference to 9 December 2010, and

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