Finance Act 2004

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 [F1 Part 2 of ITTOIA 2005] [F2 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 [F3 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

F1 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)

F2 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)

F3 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

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

[F4 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 [F5 or Part 3 of CTA 2009 (trading income)],

(b) their being expenses of management of the employer for the purposes of [F6 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

F4 S. 196A inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 39, 64(1)

F5 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)

F6 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 [F7 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 [F8 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.

[F9 (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 [F10 Part 2 of ITTOIA 2005] [F11 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 [F12 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

F7 Words in s. 197(2) substituted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 29 para. 14(2)(a)

F8 Words in s. 197(4) substituted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 29 para. 14(2)(b)

F9 S. 197(9A) inserted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 29 para. 14(2)(c)

F10 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)

F11 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)

F12 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)

C10 S. 197 excluded (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 20

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

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)

C11 S. 198 excluded (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 20

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

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 [F13 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

F13 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)

C12 S. 199 applied (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 21

C13 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

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

[F14 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 [F15 or Part 3 of CTA 2009 (trading income)],

(b) being expenses of management of E for the purposes of [F16 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

F14 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)

F15 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)

F16 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 [F17 Part 2 of ITTOIA 2005] [F18 or Part 3 of CTA 2009 (trading income)],

(b) are expenses of management for the purposes of [F19 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

F17 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)

F18 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)

F19 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)

C14 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

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

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

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