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Income Tax (Earnings and Pensions) Act 2003


2490.This Chapter identifies certain pensions paid since 6 April 1973 under the Overseas Pensions Act 1973 as pension income.

Section 629: Pre-1973 pensions paid under the Overseas Pensions Act 1973

2491.This section derives from section 616(3) of ICTA.

2492.Section 616(3) of ICTA was introduced to deal with a consequence of the Overseas Pensions Act 1973. Under the Overseas Pensions Act 1973 the United Kingdom government took responsibility for paying certain pensions previously paid by Commonwealth governments. This converted the pensions from foreign pensions taxed under Schedule D Case V to United Kingdom pensions taxed under Schedule E. This might have been to the taxpayer’s disadvantage because the income could no longer be taxed on the remittance basis.

2493.The effect of section 616(3) of ICTA is to treat the pensions as if they are still paid by the overseas government. To qualify the pension must have been paid since 6 April 1973 to the original pensioner, or to the original pensioner’s widow or widower.

2494.Subsection (1)(b) introduces the term “pre-1973 pension”. That term is defined in section 630.

2495.Subsection (2) prevents the section applying to any part of the pension that is paid under the Pensions (Increase) Act 1971. These increases to the pension have always been paid by the United Kingdom government and have always been taxed as United Kingdom pensions.

Section 630: Interpretation

2496.This section defines various terms used in the Chapter. It derives from section 616(3) and (4) of ICTA.

2497.Subsection (1) defines “original pensioner”. It derives from section 616(4) of ICTA. The pensioner must be the person whose service earned the pension and he or she must have retired before 6 April 1973.

2498.Subsection (2) defines “pre-1973 pension”. The pension must have been paid since 6 April 1973 to the original pensioner or to the pensioner’s widow or widower. The recipient must be resident in the United Kingdom.

Section 631: Taxable pension income

2499.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.

2500.It derives from section 616(3) of ICTA and invokes sections 65 and 68 of ICTA.

2501.Section 616(3) of ICTA treats the pension as if the original overseas government or body paid it. This section adopts a different approach. The practical effect of section 616(3) is to tax the pension as a foreign pension. The section legislates the practical effect.

2502.In ICTA the basis of assessment for a foreign pension is given by the rules of Schedule D Case V. The pension income Part does not repeat those rules but cross-refers the reader to them. There is no cross-reference to sections 584 and 585 of ICTA. These sections will not apply if the United Kingdom government pays the pensions.

Section 632: Person liable for tax

2503.This section identifies the person chargeable. It derives from section 59(1) of ICTA.

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