Income and Corporation Taxes Act 1988

13 The following paragraphs shall be inserted immediately before paragraph 3—

“2A In computing the charge to tax in respect of a payment chargeable to tax under section 148, not being a payment of compensation for loss of office, there shall be deducted from the payment a sum equal to the amount (if any) by which the standard capital superannuation benefit for the office or employment in respect of which the payment is made exceeds £10,000.

2B (1) In this Schedule “the standard capital superannuation benefit”, in relation to an office or employment, means a sum arrived at as follows, that is to say—

(a) there shall be ascertained the average for one year of the holder’s emoluments from the office or employment for the last three years of his service before the relevant date (or for the whole period of his service if less than three years);

(b) one-twentieth of the amount ascertained at (a) shall be multiplied by the whole number of complete years of the service of the holder in the office or employment; and

(c) there shall be deducted from the product at (b) a sum equal to the amount, or, as the case may be, to the value at the relevant date, of any lump sum (not chargeable to tax) received or receivable by the holder in respect of the office or employment in pursuance of any such scheme or fund as was described in section 221(1) and (2) of the 1970 Act or is described in section 596.

(2) In sub-paragraph (1)(c) above the reference to a lump sum receivable by the holder includes a reference to a lump sum that would be receivable by him if he had exercised or refrained from exercising (with any necessary consent) any option or other right conferred on him by the rules of the scheme or fund.

2C Where tax is chargeable under section 148 in respect of two or more payments to which paragraph 2A above applies, being payments made to or in respect of the same person in respect of the same office or employment or in respect of different offices or employments held under the same employer or under associated employers, then—

(a) paragraph 2A above shall apply as if those payments were a single payment of an amount equal to their aggregate amount and, where they are made in respect of different offices or employments, as if the standard capital superannuation benefit were an amount equal to the sum of the standard capital superannuation benefits for those offices or employments, and

(b) where the payments are treated as income of different chargeable periods, the relief to be granted under that paragraph in respect of a payment chargeable for any such period shall be the amount by which the relief computed in accordance with the preceding provision in respect of that payment and any payments chargeable for previous chargeable periods exceeds the relief in respect of the last mentioned payments;

and where the standard capital superannuation benefit for an office or employment in respect of which two or more of the payments are made is not the same in relation to each of those payments, it shall be treated for the purpose of this paragraph as equal to the higher or highest of those benefits.”