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Income Tax (Earnings and Pensions) Act 2003

Chapter 11: Certain overseas government pensions paid in the UK

2448.This Chapter identifies certain pensions paid in respect of government service overseas as pension income.

Section 615: Certain overseas government pensions paid in the United Kingdom

2449.This section derives from paragraph 4 of Schedule E (section 19(1) and section 133(2) of ICTA).

2450.Paragraph 4 of Schedule E imposes a charge on certain pensions paid by or on behalf of overseas governments to United Kingdom residents. It refers to a “pension or annuity”. As in paragraph 2 of Schedule E “annuity” is used here in the sense of a regular income payment rather than a purchased annuity. The word “pension” has a wide meaning. An annuity taxed by paragraph 4 of Schedule E is within that meaning. It is not necessary for this Act to rewrite the reference to annuities.

2451.Subsection (2) identifies the categories of person to whom the pension must be paid. The effect of the Interpretation Act 1978 is that “widow” includes “widower”. The subsection incorporates this effect. The pension must be payable in respect of overseas government service.

2452.Subsection (4) identifies the countries covered by the section. It does this by reference to other legislation. In December 2002 the countries covered were:


A country which forms part of Her Majesty’s dominions. These are:

Anguilla, Bermuda, British Antarctic Territory, British Indian Ocean Territory, British Virgin Islands, Cayman Islands, Falkland Islands, Gibraltar, Montserrat, Pitcairn, Henderson, Ducie and Oeno Islands, St Helena, St Helena Dependencies (Ascension Island, Tristan da Cunha), South Georgia and South Sandwich Islands, Turks and Caicos Islands.


Any other country mentioned in Schedule 3 of British Nationality Act 1981. These are:

Antigua and Barbuda, Australia, The Bahamas, Bangladesh, Barbados, Belize, Botswana, Brunei, Canada, Republic of Cyprus, Dominica, Fiji, The Gambia, Ghana, Grenada, Guyana, India, Jamaica, Kenya, Kiribati, Lesotho, Malawi, Malaysia, Maldives, Malta, Mauritius, Namibia, Nauru, New Zealand, Nigeria, Pakistan, Papua New Guinea, Saint Christopher and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Seychelles, Sierra Leone, Singapore, Solomon Islands, South Africa, Sri Lanka, Swaziland, Tanzania, Tonga, Trinidad and Tobago, Tuvalu, Uganda, Vanuatu, Western Samoa, Zambia, Zimbabwe.


Any territory under Her Majesty’s protection. There are no such countries at present.

2453.The section does not identify the individual countries. This is because it would then be necessary to amend primary tax legislation to take account of any changes. A recent example is Hong Kong’s change of status. The section follows the pragmatic approach of ICTA.

2454.Subsection (5) prevents the section applying to payments made by the United Kingdom government. The phrase “public revenue of the United Kingdom” is retained because it has a settled technical meaning. It means a payment out of the United Kingdom Consolidated Fund. The reference to Northern Ireland is needed because there is also a Northern Ireland Consolidated Fund.

2455.Subsection (6) defines “overseas government service”. It derives from the definition of “relevant service” in paragraph 4 of Schedule E (section 19(1) of ICTA).

2456.Subsection (7) derives from section 133(2) of ICTA. That section extends the charge on pensions taxed under Schedule E to voluntary pensions. Section 133(2) applies to these overseas government pensions if any are paid on a voluntary basis.

Section 616: Taxable pension income

2457.This section deals with the basis of assessment. It identifies the amount of taxable pension income, which feeds into the computation of net taxable pension income in section 567.

2458.It derives from section 41 of FA 1989. Section 41 charges pensions on the amount accruing in the tax year. This means that the charge is calculated on the amount accruing from day to day without regard to when the income is actually paid.

Section 617 Deduction allowed from taxable pension income

2459.This section allows a deduction of 10% from the amount chargeable. It derives from section 196 of ICTA. The deduction feeds into the calculation of net taxable pension income in section 567(3).

Section 618: Person liable for tax

2460.This section identifies the person chargeable. It is new.

2461.In ICTA this income is taxed under Schedule E. ICTA does not identify the person chargeable. This section identifies the person liable for tax on pensions within section 615 as the person receiving or entitled to the income. See Change 135 in Annex 1.

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