Three’s A Crowd: HMRC’s Approach To Employee Share Plan Arrangements In Practice

We have seen a notable rise in HMRC targeting what may be regarded as relatively innocuous employee share plans under the so-called “disguised remuneration” rules in Part 7A of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA).

Part 7A ITEPA is anti-avoidance legislation that was introduced in 2011 principally to target employee benefit trusts and other similar arrangements that give employees or their families access to what is in reality employee remuneration in a way that avoids or defers liabilities to income tax and NICs.

In summary, Part 7A will apply (through the “main gateway”) where a “relevant third person” (someone other than the employee or employer) takes a “relevant step” (e.g. “earmarking” amounts, making a loan, transferring an asset, etc) that is in some way connected to a “relevant arrangement” (meaning that it wholly or partly relates to an employee or a person linked to the employee, or the employee or person linked to the employee is a party to the