Finance Act 2004

Chapter 4 U.K. Registered pension schemes: tax reliefs and exemptions

Modifications etc. (not altering text)

C9 Pt. 4 applied (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 18

Scheme investments U.K.

186 Income U.K.

(1) No liability to income tax arises in respect of—

(a) income derived from investments or deposits held for the purposes of a registered pension scheme, or

(b) underwriting commissions applied for the purposes of a registered pension scheme [F1 which are not relevant foreign income and which would otherwise be chargeable to income tax under Chapter 8 of Part 5 of ITTOIA 2005 (income not otherwise charged).]

(2) The exemption provided by subsection (1) does not apply to income derived from investments or deposits held as a member of a property investment LLP; and for this purpose “income” includes relevant stock lending fees, in relation to any investments, to which subsection (1) would apply by virtue of section 129B of ICTA (inclusion of relevant stock lending fees in income).

[F2 (2A) The exemption provided by subsection (1) does not prevent the income from being charged to tax by virtue of section 185A.]

(3) In this Part “investments”, in relation to a registered pension scheme, includes futures contracts and options contracts; and income derived from transactions relating to futures contracts or options contracts is to be treated as derived from the contracts.

(4) For that purpose a contract is not prevented from being a futures contract or an options contract by the fact that a party is or may be entitled to receive or liable to make, or entitled to receive and liable to make, only a payment of a sum (as opposed to a transfer of assets) in full settlement of all obligations.

Textual Amendments

F1 Words in s. 186(1)(b) substituted (6.4.2006) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 644, Sch. 2 para. 161 (with Sch. 2)

F2 S. 186(2A) inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 158(2), Sch. 21 para. 7

Modifications etc. (not altering text)

C10 S. 186 applied (with modifications) (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 17

Commencement Information

I1 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

187 Chargeable gains U.K.

(1) Section 271 of TCGA 1992 (exemptions) is amended as follows.

(2) In paragraph (b) of subsection (1), for the words after “part of” substitute “ the Fund mentioned in section 613(4) of the Taxes Act (House of Commons Members' Fund); ”.

(3) In subsection (1), omit—

(a) paragraph (d) (retirement annuity contracts),

(b) paragraph (g) (exempt approved schemes),

(c) paragraph (h) (approved personal pension schemes), and

(d) paragraph (j) (authorised unit trusts which are also approved personal pension schemes or exempt approved schemes),

and the second sentence.

(4) After that subsection insert—

“(1A) A gain accruing to a person on a disposal of investments held for the purposes of a registered pension scheme is not a chargeable gain.”

(5) Omit subsection (2) (superannuation funds approved before 6th April 1980).

(6) In subsection (10)—

(a) for “subsections (1)(g) and (h) and (2)” substitute “ subsection (1A) ”, and

(b) omit the words after “options contracts”.

(7) In subsection (12), for “Subsection (1)(b), (c), (d), (g) and (h) and subsection (2)” substitute “ Subsections (1)(b) and (c) and (1A) ”.

Commencement Information

I2 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

Members' contributions U.K.

188 Relief for contributions U.K.

(1) An individual who is an active member of a registered pension scheme is entitled to relief under this section in respect of relievable pension contributions paid during a tax year if the individual is a relevant UK individual for that year.

(2) In this Part “relievable pension contributions”, in relation to an individual and a pension scheme, means contributions by or on behalf of the individual under the pension scheme other than contributions to which subsection (3) applies.

(3) This subsection applies to—

(a) any contributions paid after the individual has reached the age of 75,

[F3 (aa) any contributions which are life assurance premium contributions (see section 195A),]

(b) any contributions paid by an employer of the individual (as to which see sections 196 to 201), and

(c) any amounts paid by the Board of Inland Revenue under section 42A(3) or 43 of the Pension Schemes Act 1993 (c. 48) or section 38A(3) or 39 of the Pension Schemes (Northern Ireland) Act 1993 (c. 49) (rebates and minimum contributions).

(4) For the purposes of this Part a pension credit which increases the rights of the individual under the pension scheme is only to be treated as a contribution on behalf of the individual if it derives from a pension scheme that is not a registered pension scheme.

(5) For the purposes of this Part—

(a) any other transfer of any sum held for the purposes of, or representing accrued rights under, a pension scheme so as to become held for the purposes of, or to represent rights under, another pension scheme, F4 ...

F4 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

is not to be treated as a contribution.

(6) Any amount recovered by the individual’s employer under regulations made under—

(a) section 8(3) of the Pension Schemes Act 1993 (recovery of minimum payments), or

(b) section 4(3) of the Pension Schemes (Northern Ireland) Act 1993, (corresponding provision for Northern Ireland),

in respect of minimum payments made to a registered pension scheme is to be treated for the purposes of this section (and sections 191 to 194) as a contribution paid by the individual under the pension scheme.

(7) References in the Income Tax Acts to relief in respect of life assurance premiums do not include relief under this section.

(8) The following sections make further provision about relief under this section—

• section 189 (relevant UK individual),

• section 190 (annual limit for relief),

• sections 191 to 194 (methods of giving relief), and

• section 195 (transfer of certain shares to be treated as payment of contribution).

Textual Amendments

F3 S. 188(3)(aa) inserted (19.7.2007) (with effect in accordance with Sch. 18 paras. 4-7 of the amending Act) by Finance Act 2007 (c. 11), Sch. 18 para. 2

F4 S. 188(5)(b) and preceding word repealed (19.7.2007) (with effect in accordance with Sch. 19 para. 29(3) of the amending Act) by Finance Act 2007 (c. 11), Sch. 19 para. 7, Sch. 27 Pt. 3(1)

Commencement Information

I3 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

189 Relevant UK individual U.K.

(1) For the purposes of this Part an individual is a relevant UK individual for a tax year if—

(a) the individual has relevant UK earnings chargeable to income tax for that year,

(b) the individual is resident in the United Kingdom at some time during that year,

(c) the individual was resident in the United Kingdom both at some time during the five tax years immediately before that year and when the individual became a member of the pension scheme, or

(d) the individual, or the individual’s spouse [F5 or civil partner], has for the tax year general earnings from overseas Crown employment subject to UK tax.

(2) In this Part “relevant UK earnings” means—

(a) employment income,

(b) income which is chargeable under [F6 Part 2 of ITTOIA 2005] and is immediately derived from the carrying on or exercise of a trade, profession or vocation (whether individually or as a partner acting personally in a partnership), F7 ...

[F8 (ba) income which is chargeable under Part 3 of ITTOIA 2005 and is immediately derived from the carrying on of a UK furnished holiday lettings business (whether individually or as a partner acting personally in a partnership), and]

[F9 (c) income to which subsection (2A) applies.]

[F10 (2A) This subsection applies to income if—

(a) it is patent income, and

(b) the individual, alone or jointly, devised the invention for which the patent in question was granted.]

(3) For the purposes of this section and section 190 relevant UK earnings are to be treated as not being chargeable to income tax if, in accordance with arrangements having effect by [F11 under section 2(1) of the Taxation (International and Other Provisions) Act 2010] (double taxation agreements), they are not taxable in the United Kingdom.

(4) “General earnings from overseas Crown employment subject to UK tax” has the meaning given by section 28 of ITEPA 2003.

[F12 (5) “UK furnished holiday lettings business” means a UK property business so far as consisting of the commercial letting of furnished holiday accommodation (within the meaning of Chapter 6 of Part 3 of ITTOIA 2005).

(6) If there is a letting of accommodation only part of which is holiday accommodation, just and reasonable apportionments are to be made for the purpose of determining what is comprised in a UK furnished holiday lettings business.

(7) “Patent income” means—

(a) royalties or other sums paid in respect of the use of a patent charged to tax under section 579 of ITTOIA 2005,

(b) amounts on which tax is payable under section 587 or 593 of ITTOIA 2005, or

(c) amounts on which tax is payable under—

(i) section 472(5) of the Capital Allowances Act, or

(ii) paragraph 100 of Schedule 3 to that Act.]

Textual Amendments

F5 Words in s. 189(1)(d) inserted (with effect in accordance with reg. 1(7) of the amending S.I.) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 176

F6 Words in s. 189(2)(b) substituted (6.4.2006) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 645(2), Sch. 2 para. 161 (with Sch. 2)

F7 Word in s. 189(2) repealed (with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 473(2)(a), Sch. 3 Pt. 1 (with Sch. 2)

F8 S. 189(2)(ba) inserted (with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 473(2)(b) (with Sch. 2)

F9 S. 189(2)(c) substituted (with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 473(2)(c) (with Sch. 2)

F10 S. 189(2A) inserted (with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 473(3) (with Sch. 2)

F11 Words in s. 189(3) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 63 (with Sch. 9 paras. 1-9, 22)

F12 S. 189(5)-(7) inserted (with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 473(4) (with Sch. 2)

Commencement Information

I4 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

190 Annual limit for relief U.K.

(1) The maximum amount of relief to which an individual is entitled under section 188 (relief for contributions) for a tax year is (subject as follows) the amount of the individual’s relevant UK earnings which are chargeable to income tax for the tax year.

(2) If the amount of the individual’s relevant UK earnings which are chargeable to income tax for the tax year is less than the basic amount, the maximum amount of relief to which the individual is entitled under section 188 for the tax year is increased by the difference between—

(a) the amount of the individual’s relevant UK earnings which are so chargeable, and

(b) the basic amount,

(so that, if the individual has no relevant UK earnings which are so chargeable, the maximum amount of such relief is the basic amount).

(3) Subsection (2) is subject to section 191(7) (limit on methods of giving relief to which individual is entitled by virtue of subsection (2)).

(4) “The basic amount” is £3,600 or such greater amount as the Treasury may by order specify.

(5) Subsections (1) and (2) do not apply in relation to any amount of relief to which an individual is entitled under section 188 in respect of any amount recovered by the individual’s employer under regulations made under—

(a) section 8(3) of the Pension Schemes Act 1993 (c. 48) (recovery of minimum payments), or

(b) section 4(3) of the Pension Schemes (Northern Ireland) Act 1993 (c. 49) (corresponding provision for Northern Ireland).

Commencement Information

I5 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

191 Methods of giving relief U.K.

(1) Relief to which an individual is entitled under section 188 (relief for contributions) in respect of contributions is to be given as provided by this section.

(2) Subject as follows, the relief is to be given in accordance with section 192 (relief at source).

(3) Subject to subsection (7), relief in respect of contributions under a pension scheme made by a member of the pension scheme may (instead of being given in accordance with section 192) be given in accordance with section 193 (relief under net pay arrangements) if—

(a) the pension scheme is an occupational pension scheme,

(b) the member is an employee of a sponsoring employer, and

(c) relief in respect of contributions made under the pension scheme by all of the other members of the pension scheme who are employees of the sponsoring employer is given in accordance with that section.

(4) Subject to subsection (7), relief in respect of contributions under a pension scheme made by a member of the pension scheme may (instead of being given in accordance with section 192) be given in accordance with section 193 if—

(a) the pension scheme is a public service pension scheme or marine pilots' benefits fund, and

(b) the member is an employee.

(5) Subject to subsection (7), subsection (6) applies where—

(a) contributions are made under a public service pension scheme or marine pilots' benefit fund by a member who is not an employee, or

(b) contributions are made otherwise than by a member of the pension scheme under a net pay pension scheme.

(6) Relief in respect of the contributions—

(a) may (but need not) be given in accordance with section 192, but

(b) where not so given, is to be given in accordance with section 194 (relief on making of claim).

(7) Relief to which an individual is entitled by virtue of section 190(2)—

(a) may only be given in accordance with section 192, and

(b) is not required to be given in respect of contributions under a net pay pension scheme.

(8) In this section “marine pilots' benefits fund” means—

(a) a fund established under section 15(1)(i) of the Pilotage Act 1983 (c. 21), or

(b) any scheme supplementing or replacing such a fund.

(9) In this Part “net pay pension scheme” means a pension scheme in the case of which some or all of the members of the pension scheme are entitled to be given relief in accordance with section 193 in respect of the payment of contributions by them under the pension scheme.

(10) Schedule 36 contains (in Part 4) transitional provision about relief in respect of contributions to pre-commencement retirement annuity contracts.

Commencement Information

I6 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

192 Relief at source U.K.

(1) Where an individual is entitled to be given relief in accordance with this section in respect of the payment of a contribution under a pension scheme, the individual or other person by whom the contribution is paid is entitled, on making the payment, to deduct and retain out of it a sum equal to income tax on the contribution at the basic rate for the tax year in which the payment is made.

(2) If a sum is deducted from the payment of the contribution—

(a) the scheme administrator must allow the deduction on receipt of the residue,

(b) the individual or other person is acquitted and discharged of so much money as is represented by the deduction as if the sum had actually been paid, and

(c) the sum deducted is to be treated as income tax paid by the scheme administrator.

(3) When the payment of the contribution is received—

(a) the scheme administrator is entitled to recover from the Board of Inland Revenue the amount which is treated as income tax paid by the scheme administrator in relation to the contribution, and

(b) any amount so recovered is to be treated for the purposes of the Tax Acts in the same manner as the payment of the contribution.

[F13 (4) If (apart from this section) income tax at the higher rate or the additional rate is chargeable in respect of any part of the individual's total income for the tax year, on the making of a claim the basic rate limit and the higher rate limit for the tax year in the individual's case are increased by the amount of the contribution.]

F14 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) Subsections (1) and (2) have effect subject to such conditions as the Board of Inland Revenue may prescribe by regulations.

(7) The Board of Inland Revenue may by regulations make provision for carrying subsections (1) to (3) into effect, in particular by making provision—

(a) about how a sum is to be recovered under subsection (3)(a) (including the manner in which a claim for the recovery of a sum is to be made),

(b) for the giving of such information, in such form, as may be prescribed by or under the regulations,

(c) for the inspection of documents by persons authorised by the Board of Inland Revenue, and

(d) specifying the consequences of failure to comply with conditions prescribed by virtue of subsection (6).

(8) Regulations under this section may, in particular—

(a) modify the operation of any provision of the Tax Acts, or

(b) provide for the application of any provision of the Tax Acts (with or without modification).

(9) Where, after relief is given to an individual in accordance with this section for a tax year, an assessment, alteration of an assessment or other adjustment of the individual’s liability to tax is made, any appropriate consequential adjustments are to be made in relief given to the individual in accordance with this section.

(10) Where relief is given to an individual in accordance with this section for a tax year in respect of a contribution, relief is not to be given—

(a) in respect of the contribution under any other provision of the Income Tax Acts, or

(b) (in the case of a contribution under an annuity contract) in respect of any other premium or consideration for an annuity under the same contract.

Textual Amendments

F13 S. 192(4) substituted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 11

F14 S. 192(5) repealed (with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 474, Sch. 3 Pt. 1 (with Sch. 2)

Commencement Information

I7 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

193 Relief under net pay arrangements U.K.

(1) This section applies where an individual is entitled to be given relief in accordance with this section in respect of the payment of a contribution under a pension scheme.

(2) The amount of the contribution is to be allowed to be deducted by the sponsoring employer from the employment income from the individual’s employment with the employer for the tax year in which the payment is made.

(3) A deduction may be made only once in respect of the same contribution.

(4) A claim for excess relief may be made if—

(a) the amount of the contributions paid by an individual under one or more relevant net pay pension schemes in a tax year exceeds the employment income from the individual’s employment or employments with the sponsoring employer or employers for the tax year, or

(b) it is not possible for the sponsoring employer or employers for any other reason to deduct the whole amount of the contribution from the individual’s employment income.

(5) A net pay pension scheme is a relevant net pay pension scheme if the members of the pension scheme entitled to be given relief in accordance with this section in respect of the payment of contributions by them under the pension scheme include the individual.

(6) On the making of the claim for excess relief the amount of the excess may be deducted [F15 in calculating the net income] of the individual for the tax year [F16 (see Step 2 of the calculation in section 23 of ITA 2007)].

(7) Where, after relief is given to an individual in accordance with this section for a tax year, an assessment, alteration of an assessment or other adjustment of the individual’s liability to tax is made, any appropriate consequential adjustments are to be made in relief given to the individual in accordance with this section.

(8) Where relief is given to an individual in accordance with this section for a tax year in respect of a contribution, relief is not to be given in respect of it under any other provision of the Income Tax Acts.

Textual Amendments

F15 Words in s. 193(6) substituted (with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 475(a) (with Sch. 2)

F16 Words in s. 193(6) inserted (with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 475(b) (with Sch. 2)

Modifications etc. (not altering text)

C11 S. 193 applied (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 19

Commencement Information

I8 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

194 Relief on making of claim U.K.

(1) Where an individual is entitled to be given relief in accordance with this section in respect of the payment of a contribution, on the making of a claim the amount of the contribution may be deducted [F17 in calculating the net income] of the individual for the tax year in which the payment is made [F18 (see Step 2 of the calculation in section 23 of ITA 2007)].

(2) Where, after relief is given to an individual in accordance with this section for a tax year, an assessment, alteration of an assessment or other adjustment of the individual’s liability to tax is made, any appropriate consequential adjustments are to be made in relief given to the individual in accordance with this section.

(3) Where relief is given to an individual in accordance with this section for a tax year in respect of a contribution, relief is not to be given—

(a) in respect of the contribution under any other provision of the Income Tax Acts, or

(b) (in the case of a contribution under an annuity contract) in respect of any other premium or consideration for an annuity under the same contract.

Textual Amendments

F17 Words in s. 194(1) substituted (with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 476(a) (with Sch. 2)

F18 Words in s. 194(1) inserted (with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 476(b) (with Sch. 2)

Commencement Information

I9 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

195 Transfer of certain shares to be treated as payment of contribution U.K.

(1) For the purposes of sections 188 to 194 (relief for contributions) references to contributions paid by an individual include contributions made in the form of the transfer by the individual of eligible shares in a company within the permitted period.

(2) For the purposes of those sections the amount of a contribution made by way of a transfer of shares is the market value of the shares at the date of the transfer.

(3) “Eligible shares”, in relation to a contribution made by an individual, means shares—

(a) which the individual has exercised a right to acquire in accordance with the provisions of an SAYE option scheme, or

(b) which have been appropriated to the individual in accordance with the provisions of a share incentive plan.

(4) “The permitted period”—

(a) in relation to shares which the individual has exercised a right to acquire in accordance with the provisions of an SAYE option scheme, is the period of 90 days following the exercise of that right, and

(b) in relation to shares which have been appropriated to the individual in accordance with the provisions of a share incentive plan, is the period of 90 days following the date when the individual directed the trustees of the share incentive plan to transfer the ownership of the shares to the individual.

(5) In this section—

• “SAYE option scheme” has the same meaning as in the SAYE code (see section 516 of ITEPA 2003 (approved SAYE option schemes)), and

• “share incentive plan” has the same meaning as in the SIP code (see section 488 of ITEPA 2003 (approved share incentive plans)).

Commencement Information

I10 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

[F19 195A Life assurance premium contributions U.K.

(1) Contributions paid by or on behalf of an individual under a registered pension scheme are life assurance premium contributions for the purposes of section 188(3)(aa) if—

(a) rights under a non-group life policy (see subsection (2)) are (or later become) held for the purposes of the pension scheme, and

(b) the contributions are treated by this section as paid in respect of premiums under the non-group life policy (see subsections (3) to (5)).

(2) For the purposes of this section a “non-group life policy” is a policy of insurance under which the only benefits which may become payable are benefits payable in consequence, or in anticipation, of—

(a) the death of the individual or one of a group of individuals which includes the individual, or

(b) the deaths of more than one of a group of individuals—

(i) which includes the individual, and

(ii) the other members of which are connected with the individual.

(3) Contributions paid by or on behalf of the individual under the pension scheme are treated as paid in respect of premiums under the non-group life policy if—

(a) the payment of the contributions constitutes the payment of premiums under the policy, or

(b) the person by whom the contributions are paid intends the contributions (or an amount equivalent to them) to be applied towards paying premiums under the policy.

(4) Where the amount of the premiums under the policy in a tax year exceeds the amount of any contributions treated as paid in respect of the premiums by subsection (3), other contributions paid by or on behalf of the individual under the pension scheme in the tax year are treated as paid in respect of premiums under the policy to the extent that their amount does not exceed the difference between the amount of the premiums and the amount of any contributions treated as paid in respect of the premiums by subsection (3).

(5) But where—

(a) the benefits under the policy relate to the death of one or more of a group of individuals, and

(b) contributions are also paid under the pension scheme in the tax year by or on behalf of another member or other members of the group,

the amount of the contributions paid by or on behalf of the individual which are treated as paid in respect of premiums under the policy by subsection (4) does not exceed what is just and reasonable having regard to the operation of section 188(3)(aa) in relation to the contributions paid by or on behalf of another member or other members of the group.

(6) The Commissioners for Her Majesty's Revenue and Customs may by regulations amend subsections (2) to (5).

(7) Regulations under subsection (6) which limit—

(a) the policies of insurance which are non-group life assurance policies for the purposes of this section, or

(b) the contributions which are treated by this section as paid in respect of premiums under such policies,

may be made so as to have effect in relation to times before they are made.

(8) For the purposes of this section an individual (“A”) is connected with another individual (“B”) if—

(a) A is B's spouse or civil partner,

(b) A is a relative of B,

(c) A is the spouse or civil partner of a relative of B,

(d) A is a relative of B's spouse or civil partner, or

(e) A is the spouse or civil partner of a relative of B's spouse or civil partner;

and for the purposes of this subsection “relative” means brother, sister, ancestor or lineal descendant.]

Textual Amendments

F19 S. 195A inserted (19.7.2007) (with effect in accordance with Sch. 18 paras. 4-7 of the amending Act) by Finance Act 2007 (c. 11), Sch. 18 para. 3

Employers' contributions U.K.

196 Relief for employers in respect of contributions paid U.K.

(1) This section makes provision about an employer’s entitlement to relief in respect of contributions paid by the employer under a registered pension scheme in respect of any individual.

(2) For the purposes of [F20 Part 2 of ITTOIA 2005] [F21 or Part 3 of CTA 2009 (trading income)] —

(a) the contributions are to be treated as not being payments of a capital nature to the extent that they otherwise would be, and

(b) if they are allowed to be deducted in computing the amount of the profits of the employer, they are deductible in computing the amount of the profits for the period of account in which they are paid.

(3) For the purposes of [F22 Chapter 2 of Part 16 of CTA 2009] (expenses of management: companies with investment business), the contributions—

(a) are to be treated as being expenses of management to the extent that they otherwise would not be, and

(b) are referable to the accounting period in which they are paid.

(4) For the purposes of section 76 of ICTA (expenses of insurance companies), the contributions—

(a) are to be brought into account at Step 1 in subsection (7) of that section to the extent that they otherwise would not be, and

(b) are referable to the accounting period in which they are paid.

(5) The references in this section to contributions include minimum payments under—

(a) section 8 of the Pension Schemes Act 1993 (c. 48), or

(b) section 4 of the Pension Schemes (Northern Ireland) Act 1993 (c. 49),

other than any part recovered from a member of the pension scheme under regulations made under subsection (3) of either of those sections.

(6) This section is subject to sections 197 and 198 (spreading of relief) (and to transitional provision contained in Part 4 of Schedule 36).

Textual Amendments

F20 Words in s. 196(2) inserted (6.4.2006) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 646, Sch. 2 para. 161 (with Sch. 2)

F21 Words in s. 196(2) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 573(2) (with Sch. 2 Pts. 1, 2)

F22 Words in s. 196(3) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 573(3) (with Sch. 2 Pts. 1, 2)

Commencement Information

I11 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

[F23 196A Power to restrict relief U.K.

(1) The Board of Inland Revenue may make regulations for restricting the extent to which contributions paid by an employer under a registered pension scheme in respect of an individual are subject to relief in circumstances in which subsection (2) or (3) applies (or both do).

(2) This subsection applies where any of the benefits which will or may be payable to or in respect of the individual under the registered pension scheme will be payable only if relevant benefits expected to be so paid under an employer-financed retirement benefits scheme are not so paid.

(3) This subsection applies where, because relevant benefits are or may be payable to or in respect of the individual under an employer-financed retirement benefits scheme, the aggregate of the amount of any sums and the market value of any assets—

(a) held for the purposes of, or

(b) representing accrued rights under,

the registered pension scheme which may be transferred by way of a recognised transfer in respect of the individual will or may be less than it otherwise would be.

(4) The reference in subsection (1) to contributions paid by an employer being subject to relief is to—

(a) their being deductible in computing the amount of the profits of the employer for the purposes of Part 2 of ITTOIA 2005 [F24 or Part 3 of CTA 2009 (trading income)],

(b) their being expenses of management of the employer for the purposes of [F25 section 1219 of CTA 2009] (expenses of management: companies with investment business), or

(c) their being brought into account at Step 1 in section 76(7) of ICTA (expenses of insurance companies) in respect of the employer,

(depending on which is appropriate in relation to the employer).

(5) In this section—

• “employer-financed retirement benefits scheme”, and

• “relevant benefits”,

have the same meaning as in Chapter 2 of Part 6 of ITEPA 2003 (see sections 393A and 393B of that Act).]

Textual Amendments

F23 S. 196A inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 39, 64(1)

F24 Words in s. 196A(4)(a) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 574(a) (with Sch. 2 Pts. 1, 2)

F25 Words in s. 196A(4)(b) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 574(b) (with Sch. 2 Pts. 1, 2)

197 Spreading of relief U.K.

(1) This section applies where—

(a) contributions are paid by an employer under a registered pension scheme in two consecutive chargeable periods (“the previous chargeable period” and “the current chargeable period”), and

(b) the amount of the contributions paid in the current chargeable period otherwise than for an excepted purpose (“CCCP”) exceeds 210% of the amount of the contributions paid in the previous chargeable period (“CPCP”).

(2) Relief under [F26 the relieving provisions] is to be given in respect of so much of CCCP as exceeds 110% of CPCP (“the amount of the relevant excess contributions”) in accordance with subsections (4) and (5).

(3) But subsection (2)—

(a) does not apply if the amount of the relevant excess contributions is less than £500,000, and

(b) has effect subject to section 198 (cessation of business).

(4) A fraction of the whole of the amount of the relevant excess contributions is to be treated for the purposes of [F27 the relieving provisions] as if it had been paid in the chargeable period, or in each of the two or three chargeable periods, immediately after the current chargeable period (leaving only the remainder to be treated as paid in the current chargeable period).

(5) The following table specifies (by reference to the amount of the relevant excess contributions)—

(a) the fraction of the whole of the amount of the relevant excess contributions which is to be treated as paid in the chargeable period, or in each of the two or three chargeable periods, immediately after the current chargeable period, and

(b) the chargeable period or periods in which it is to be treated as paid.

AMOUNT OF THE RELEVANT EXCESS CONTRIBUTIONS	FRACTION AND CHARGEABLE PERIOD OR PERIODS
500,000 or more but less than 1,000,000	One-half of the whole of the amount of the relevant excess contributions is to be treated as paid in the chargeable period immediately after the current chargeable period
1,000,000 or more but less than 2,000,000	One-third of the whole of the amount of the relevant excess contributions is to be treated as paid in each of the two chargeable periods immediately after the current chargeable period
2,000,000 or more	One-quarter of the whole of the amount of the relevant excess contributions is to be treated as paid in each of the three chargeable periods immediately after the current chargeable period

(6) Subsection (7) specifies for the purposes of subsection (1) when contributions paid by the employer in the current chargeable period are paid for an excepted purpose.

(7) They are paid for an excepted purpose if paid with a view to funding—

(a) an increase in the amount of pensions paid to pensioner members of the pension scheme to reflect increases in the cost of living, or

(b) benefits which may accrue under the pension scheme to or in respect of individuals who become members of the pension scheme in the current chargeable period as a result of future service as employees of the employer.

(8) Where the previous chargeable period and the current chargeable period are not of equal length, this section has effect as if CPCP were the amount it would otherwise be as adjusted by being multiplied by the appropriate factor.

(9) The appropriate factor is—

where—

DCCP is the number of days in the current chargeable period, and

DPCP is the number of days in the previous chargeable period.

[F28 (9A) In this section “the relieving provisions” means the provisions mentioned in subsections (2) to (4) of section 196 (relief for employers in respect of contributions paid), as they have effect under that section.]

(10) In this section “chargeable period” means—

(a) in a case where the contributions are deducted in computing profits to be charged under [F29 Part 2 of ITTOIA 2005] [F30 or Part 3 of CTA 2009 (trading income),] a period of account, and

(b) in a case where relief in respect of the contributions is given under [F31 section 76 of ICTA (expenses of insurance companies) or Chapter 2 of Part 16 of CTA 2009 (expenses of management: companies with investment business), an accounting period.]

Textual Amendments

F26 Words in s. 197(2) substituted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 29 para. 14(2)(a)

F27 Words in s. 197(4) substituted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 29 para. 14(2)(b)

F28 S. 197(9A) inserted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 29 para. 14(2)(c)

F29 Words in s. 197(10)(a) inserted (6.4.2006) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 647, Sch. 2 para. 161 (with Sch. 2)

F30 Words in s. 197(10)(a) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 575(a) (with Sch. 2 Pts. 1, 2)

F31 Words in s. 197(10)(b) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 575(b) (with Sch. 2 Pts. 1, 2)

Modifications etc. (not altering text)

C12 S. 197 excluded (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 20

Commencement Information

I12 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

198 Spreading of relief: cessation of business U.K.

(1) This section applies if—

(a) the employer ceases to carry on business in the current chargeable period or a later chargeable period in which section 197(4) would require a fraction of the amount of the relevant excess contributions to be treated as paid, and

(b) were section 197(4) to apply, relief in relation to the whole of the amount of the relevant excess contributions would not be given pre-cessation.

(2) Relief is given pre-cessation if it is given for the chargeable period in which the employer ceases to carry on business or any earlier chargeable period.

(3) The portion of the amount of the relevant excess contributions in relation to which relief would not have been given pre-cessation (“the unrelieved portion”) is be treated as paid (at the option of the employer) either—

(a) in the chargeable period in which the employer ceases to carry on business, or

(b) as provided by subsection (4).

(4) This subsection provides that the amount determined under subsection (5) is to be treated as paid on each day in the period—

(a) beginning with the current chargeable period, and

(b) ending with the day on which the employer ceases to carry on business,

(“the relevant period”).

(5) The amount referred to in subsection (4) is—

where—

UP is the amount of the unrelieved portion, and

DRP is the number of days in the relevant period.

(6) Expressions used in this section and section 197 have the same meaning in this section as in that section.

Modifications etc. (not altering text)

C13 S. 198 excluded (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 20

Commencement Information

I13 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

199 Deemed contributions U.K.

(1) This section applies where a sum is paid to the trustees or managers of a registered pension scheme by an employer in or towards the discharge of any liability of the employer under—

(a) section 75 of the Pensions Act 1995 (c. 26)(deficiencies in the assets of a pension scheme), or

(b) Article 75 of the Pensions (Northern Ireland) Order 1995 (S.I. 1995/3213 (N.I. 22)) (corresponding provision for Northern Ireland).

(2) The making of the payment is to be treated for the purposes of [F32 the relieving provisions (within the meaning of section 197) and sections 197 and 198] as if it were the payment of a contribution by the employer under the pension scheme.

(3) Subsections (4) and (5) apply if the employer’s trade, profession, vocation or business is discontinued before the making of the payment.

(4) The payment is to be relieved—

(a) to the same extent as it would have been but for the discontinuance, and

(b) as if it had been made on the last day on which the trade, profession, vocation or business was carried on.

(5) And for the purposes of section 76 of ICTA it is to be treated (to the extent that it would not otherwise be) as part of expenses payable falling to be brought into account at Step 1 in subsection (7) of that section.

Textual Amendments

F32 Words in s. 199(2) substituted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 29 para. 14(3)

Modifications etc. (not altering text)

C14 S. 199 applied (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 21

C15 S. 199 applied (1.5.2010) by The Financial Assistance Scheme (Tax) Regulations 2010 (S.I. 2010/1187), regs. 1(1), 3(2)

Commencement Information

I14 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

[F33 199A Indirect contributions U.K.

(1) This section applies where an employer (“E”)—

(a) pays contributions under a registered pension scheme (“the original scheme”) in a chargeable period, and

(b) would (apart from subsection (4)) be entitled in the next chargeable period to an amount of relief in respect of a payment within subsection (2),

and the avoidance condition is met.

(2) A payment is within this subsection if all or part of the payment is intended to facilitate the payment of pension contributions under the original scheme or a substitute scheme by a person other than E.

(3) The avoidance condition is that—

(a) section 197 would apply if, in the chargeable period mentioned in subsection (1)(b), E paid pension contributions under the original scheme of the amount of the relevant relief, and

(b) the purpose, or one of the purposes, of facilitating the payment of pension contributions by a person other than E is to enable pension contributions to be paid without that section applying.

(4) For the purposes of the spreading provisions, the amount of the relevant relief is to be treated as the amount of a pension contribution paid by E under the original scheme in the chargeable period mentioned in subsection (1)(b).

(5) The “relevant relief” is the relief to which the employer would (apart from subsection (4)) be entitled in that chargeable period in respect of—

(a) the payment within subsection (2), or

(b) where only part of the payment is intended to facilitate the payment of pension contributions as mentioned in that subsection, that part of the payment.

(6) A “substitute scheme” is any registered pension scheme—

(a) to which there is a relevant transfer in the period of 2 years ending with the day on which the payment within subsection (2) is made, or

(b) to which it is envisaged that a relevant transfer will or may be made after that day.

(7) A relevant transfer is a recognised transfer from the original scheme of more than 30% of the aggregate of—

(a) in a case within subsection (6)(a), the amount of the sums and the market value of the assets held for the purposes of, or representing accrued rights under, the original scheme immediately before the transfer, and

(b) in a case within subsection (6)(b), the amount of those sums and the market value of those assets on the day on which the payment is made.

(8) If there is a transfer from a substitute scheme to another registered pension scheme which would have been a relevant transfer had it been a transfer from the original scheme at the time the relevant transfer was made, that other scheme is also a substitute scheme.

(9) In subsection (1)(b) the reference to relief in respect of a payment within subsection (2) includes relief for a liability in respect of the making of the payment by a person other than E.

(10) In this section references to E being entitled to an amount of relief are to an amount—

(a) being deductible in computing the amount of the profits of E for the purposes of Part 2 of ITTOIA 2005 [F34 or Part 3 of CTA 2009 (trading income)],

(b) being expenses of management of E for the purposes of [F35 Chapter 2 of Part 16 of CTA 2009] (expenses of management: companies with investment business), or

(c) being brought into account at Step 1 in section 76(7) of ICTA (expenses of insurance companies) in respect of E.

(11) In this section—

• “the spreading provisions” means sections 197 and 198 and this section, and

• “chargeable period” has the meaning given by section 197.]

Textual Amendments

F33 S. 199A inserted (21.7.2008) (with effect in accordance with s. 90(2) of the amending Act) by Finance Act 2008 (c. 9), s. 90(1)

F34 Words in s. 199A(10)(a) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 576(a) (with Sch. 2 Pts. 1, 2)

F35 Words in s. 199A(10)(b) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 576(b) (with Sch. 2 Pts. 1, 2)

200 No other relief for employers in connection with contributions U.K.

No sums other than contributions paid by an employer under a registered pension scheme—

(a) are deductible in computing the amount of the profits of the employer for the purposes of [F36 Part 2 of ITTOIA 2005] [F37 or Part 3 of CTA 2009 (trading income)],

(b) are expenses of management for the purposes of [F38 Chapter 2 of Part 16 of CTA 2009] (expenses of management: companies with investment business), or

(c) are to be brought into account at Step 1 in section 76(7) of ICTA (expenses of insurance companies),

in connection with the cost of providing benefits under the pension scheme.

Textual Amendments

F36 Words in s. 200(a) inserted (6.4.2006) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 649, Sch. 2 para. 161 (with Sch. 2)

F37 Words in s. 200(a) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 577(a) (with Sch. 2 Pts. 1, 2)

F38 Words in s. 200(b) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 577(b) (with Sch. 2 Pts. 1, 2)

Modifications etc. (not altering text)

C16 S. 200 applied (1.5.2010) by The Financial Assistance Scheme (Tax) Regulations 2010 (S.I. 2010/1187), regs. 1(1), 3(3)

Commencement Information

I15 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

201 Relief for employees U.K.

(1) In section 307(1) of ITEPA 2003 (exemption for provision made by employer for retirement or death benefit), after “employer” insert “ under a registered pension scheme or otherwise ”.

(2) For section 308 of ITEPA 2003 (exemption of contributions to approved personal pension arrangements) substitute—

“308 Exemption of contributions to registered pension scheme

No liability to income tax arises in respect of earnings where an employee’s employer makes contributions under a registered pension scheme.”

Commencement Information

I16 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

Inland Revenue contributions U.K.

202 Minimum contributions under pensions legislation U.K.

(1) This section applies where under—

(a) section 43 of the Pension Schemes Act 1993 (c. 48), or

(b) section 39 of the Pension Schemes (Northern Ireland) Act 1993 (c. 49),

the Board of Inland Revenue pays minimum contributions for the purposes of a registered pension scheme.

(2) The amount of the minimum contributions is to be increased by the difference between—

(a) the amount of the employee’s share of the minimum contributions, and

(b) the grossed-up equivalent of that amount.

(3) The amount of the employee’s share of the minimum contributions is the amount that would be the amount of the minimum contributions if—

(a) for the reference to the age-related percentage in section 45(1) of the Pension Schemes Act 1993 (amount of minimum contributions) there were substituted a reference to the percentage mentioned in section 41(1A) of that Act (percentage used to reduce primary Class 1 contribution), or

(b) for the reference to the age-related percentage in section 41(1) of the Pension Schemes (Northern Ireland) Act 1993 there were substituted a reference to the percentage mentioned in section 37(1A) of that Act (corresponding provisions for Northern Ireland).

(4) The “grossed-up equivalent” of the amount of the employee’s share of the minimum contributions is the sum which, after deduction of income tax at the basic rate in force for the tax year for which the minimum contributions are paid, is equal to that amount.

(5) The Board of Inland Revenue may by regulations—

(a) prescribe circumstances in which this section does not apply, or

(b) make provision supplementing this section.

(6) The Board of Inland Revenue must—

(a) pay into the National Insurance Fund out of money provided by Parliament the amount of any increase attributable to this section in the sums paid out of that Fund under the Pension Schemes Act 1993, and

(b) pay into the Northern Ireland National Insurance Fund out of money provided by Parliament the amount of any increase attributable to this section in the sums paid out of that Fund under the Pension Schemes (Northern Ireland) Act 1993.

Commencement Information

I17 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

Inheritance tax exemptions U.K.

203 Inheritance tax exemptions U.K.

(1) The Inheritance Tax Act 1984 (c. 51) is amended as follows.

(2) In section 12 (dispositions that are not transfers of value)—

(a) in subsection (2), for the words following “if” substitute “ it is a contribution under a registered pension scheme or section 615(3) scheme in respect of an employee of the person making the disposition. ”, and

(b) omit subsections (3) and (4).

(3) In section 58(1) (settled property in which no qualifying interest in possession subsists but which is not “relevant property”), for paragraph (d) substitute—

“(d) property which is held for the purposes of a registered pension scheme or section 615(3) scheme;”.

(4) In section 151 (treatment of pension rights etc.)—

(a) omit subsections (1) and (1A),

(b) in subsections (2), (4) and (5), for “fund or scheme to which this section applies” substitute “ registered pension scheme or section 615(3) scheme ”, and

(c) in subsection (2)(b), for the “fund or scheme” (in both places) substitute “ scheme ”.

(5) In section 152 (cash options), for the words from the beginning to “or scheme” substitute “ Where on a person’s death an annuity becomes payable under a registered pension scheme or section 615(3) scheme to a widow, widower[F39 , surviving civil partner] or dependant of that person and under the terms of the scheme ”.

(6) In section 272 (general interpretation), insert at the appropriate places—

““registered pension scheme” has the same meaning as in Part 4 of the Finance Act 2004;”, and

““section 615(3) scheme” means a superannuation fund to which section 615(3)of the Taxes Act 1988 applies;”.

Textual Amendments

F39 Words in s. 203(5) inserted (with effect in accordance with reg. 1(7) of the amending S.I.) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 178

Commencement Information

I18 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284