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Income Tax (Earnings and Pensions) Act 2003

Chapter 7: Former approved superannuation funds

2364.This Chapter identifies the payments made by former approved superannuation funds that are charged to tax as pension income.

Section 590: Annuities

2365.This section applies to annuities paid by former approved superannuation funds. It derives from section 608(4) of ICTA.

2366.“Former approved superannuation fund” means an occupational pension scheme that was approved under section 208 of ICTA 1970. These schemes lost their approval in 1980 when the code for retirement benefit schemes in Chapter 1 of Part 14 of ICTA took full effect. But section 608 of ICTA allows a scheme approved under section 208 of ICTA 1970 to remain exempt from income tax on its fund income provided two conditions are met. First, no further contributions are made into the scheme. Second, no changes are made to the scheme rules.

2367.The section uses the same language as section 580 to identify the arrangements under which the annuities are paid.

Section 591: Taxable pension income

2368.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.

2369.The section derives from section 608(4) of ICTA.

2370.ICTA charges section 608(4) annuities under Schedule E. But they are not included in the list, in section 41 of FA 1989, of income that is taxed on the amount accruing in the tax year. The basis of assessment indicated in section 608(4) of ICTA is the annuity paid in the tax year. This section makes that basis of charge clear.

Section 592: Person liable for tax

2371.This section identifies the person chargeable. It is new.

2372.ICTA taxes this income under Schedule E. It does not identify the person chargeable. This section identifies the person liable for tax on annuities within section 590 as the person receiving or entitled to the income. See Change 135 in Annex 1.

Section 593: Unauthorised payments: application of section 583

2373.This section applies to unauthorised payments from former approved superannuation funds. It derives from sections 599A(9) and 600 of ICTA.

2374.Section 600(1) of ICTA imposes a charge on:

  • a payment made out of funds which are held for the purposes of a scheme which is approved for the purposes of -

this Chapter; … or


section 208 … of the 1970 Act.

2375.Schemes can no longer be approved under section 208 of ICTA 1970. The present tense, “is approved”, was introduced into the opening paragraph of section 600 of ICTA by Schedule 6 of FA 1989. It is used because subsection (1)(a) of section 600 applies to retirement benefits schemes approved under Chapter 1 of Part 14 of ICTA (dealt with by section 583 in Chapter 6 of this Part). But the charge on unauthorised payments still applies to schemes approved under section 208 ICTA 1970. That charge is rewritten in this section so that this Chapter deals with all the charges on former approved superannuation funds.

2376.The rules in section 600 of ICTA that apply to former approved superannuation funds are the same as those that apply to approved retirement benefits schemes. Rather than repeating those rules this section applies sections 583, 584, 585 and 588.

2377.Subsection (1) identifies the payments to which section 593 is applied. The payment must not be authorised by the rules of the fund or be made as a consequence of paragraph 33 of Schedule 6 to FA 1989. The effect of paragraph 33 of Schedule 6 to FA 1989 is discussed in paragraph 2342.

2378.Subsection (2) prevents section 593 applying if the payment has been taxed by section 623 as a return of surplus funds from an additional voluntary contributions scheme. It derives from section 599A(9) of ICTA.

2379.Subsection (3) clarifies the meaning of payment. It derives from section 600(4) of ICTA.

Section 594: Meaning of “former approved superannuation fund”

2380.This section identifies the superannuation funds that are covered by this Chapter. It derives from section 608(1) of ICTA.

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