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Section 554K(5) and (6) ITEPA 2003

A fall-back charge will apply if:

• section 554K has prevented a relevant step from giving rise to Part 7A income, and
• broadly speaking, earmarked shares continue to be earmarked in circumstances in which the conditions for the exclusion are no longer met

More precisely, under section 554K(5), a fall-back charge will apply if, at any time (‘the relevant timeâ€�) 2 conditions are met. »Ê¹ÚÌåÓýappse conditions are bulleted below:

• any of the earmarked shares cease to be held solely with a view to the meeting of an award of relevant shares or of a sum of money which meets one of 2 alternative conditions.
  • the first alternative condition is that this award is to be made to A as mentioned in section 554K(1)(a) and is to meet the requirements of section 554K(1)(b) to (e)
  • the second alternative condition is that this award is expected to be made to A as mentioned in section 554K(1)(a) and, if this award is made, it will meet the requirements of section 554K(1)(b) to (e).

On section 554K(1)(a) to (e), see EIM45385.

• those shares continue to be held by or on behalf of the person taking the step on a section 554B basis.

In such a case, section 554K(6) deems a relevant step to be taken with the following features:

• the relevant step is within section 554B
• it is taken at the relevant time
• the subject of the relevant step is:
  • the shares which continue to be held as mentioned above, and
  • any ‘relevant incomeâ€� in relation to those shares - see EIM45475
• the relevant step gives rise to Part 7A income

»Ê¹ÚÌåÓýapp relevant step gives rise to Part 7A income subject to the exclusion in section 554A(4) (see EIM45095) and any relevant reliefs.