Income Tax (Earnings and Pensions) Act 2003
Paragraph 592: section 325A of ITEPA
3504.This new section of ITEPA gives a person receiving payments under an insurance policy which insures against a health and employment risk exemption from taxation on those payments as employment income.
3505.This rewrites section 580A(7) of ICTA to the extent that it relates to employment income.
3506.The payment must first have the capacity for exemption under section 735 (health and employment insurance payments) on the assumption that it is an annual payment (and thus exempt under that section). But it must also meet two further conditions.
3507.First the payments must be to an employee (or to his or her spouse) who contributed under a policy that another person took out for his or her benefit and secondly the payments must represent the contributions the employee has made.
Paragraph 594: section 360A of ITEPA
3508.This new section of ITEPA rewrites part of the rule in section 617(3) and (4) of ICTA, which prohibits the deduction of most social security contributions in calculating income for tax purposes. The remainder of the rule is rewritten, for income tax, in section 868 (social security contributions) of this Act.
3509.In some circumstances an employee may be allowed a deduction for wages paid. In that case, the associated employer’s national insurance contributions may also be allowed. The deduction is allowed if it would meet the tests in section 336 of ITEPA (see section 617(4)(d) of ICTA). But it should also be allowed if it meets the tests in any of sections 337 to 342 of ITEPA. See Change 153 in Annex 1.
Paragraph 606: section 575 of ITEPA
3510.Section 575 of ITEPA is amended because the ICTA references on which it depends are rewritten and repealed for income tax purposes. This paragraph is based on sections 65, 68, 584 and 585 of ICTA.
3511.The paragraph provides rules for calculating the income charged by virtue of Chapter 4 of Part 9 of ITEPA. The income is treated as relevant foreign income for the purposes of Chapters 2 and 3 of Part 8 of this Act. See section 830(4) of this Act (meaning of “relevant foreign income”) and the commentary on Part 8 of this Act (overview and Chapter 1 of that Part) for further detail.
3512.Sub-paragraph (3) rewrites the 10% deduction given from pension income in the source legislation by sections 65(2) and 68(5) of ICTA. It does not rewrite one of the conditions for that deduction imposed by section 68(5) of ICTA for pension income arising in the Republic of Ireland. See Change 154 in Annex 1.
3513.Section 575(4) of ITEPA, which is inserted by sub-paragraph (3), reflects small differences in the source legislation between the conditions attached to the deduction for annual payments in section 68(3) of ICTA (income from the Republic of Ireland) and section 65(1) of ICTA (other foreign income).
Paragraph 607: section 613 of ITEPA
3514.Section 613 of ITEPA is amended because the ICTA references on which it depends are rewritten and repealed for income tax purposes. This paragraph is based on sections 65, 68, 584 and 585 of ICTA.
3515.The commentary on paragraph 606, amending section 575 of ITEPA, applies equally here, with the necessary modifications for the fact that this section deals with annuities rather than a pension. See Change 154 in Annex 1.
3516.The 10% deduction given in the source legislation by sections 65(2) and 68(5) of ICTA does not extend to annuities from the Republic of Ireland. This paragraph extends the deduction to such annuities. See Change 155 in Annex 1.
Paragraph 608: section 631 of ITEPA
3517.Section 631 of ITEPA is amended because the ICTA references on which it depends are rewritten and repealed for income tax purposes. This paragraph is based on sections 65 and 68 of ICTA.
3518.Some of the commentary on paragraph 606, amending section 575 of ITEPA, applies equally here. See Change 154 in Annex 1.
3519.The main difference between that section and this is that, although the income to which this section applies is treated as relevant foreign income, it is income paid in the United Kingdom. Chapters 2 and 4 of Part 8 of this Act (which rewrite sections 584 and 585 of ICTA) cannot apply. And the only provision in Chapter 3 of that Part which can apply is section 838 as the other provisions in that Chapter do not apply to income paid in the United Kingdom.
Paragraph 609: section 635 of ITEPA
3520.Section 635 of ITEPA is amended because the ICTA references on which it depends are rewritten and repealed for income tax purposes. This paragraph is based on sections 65, 68, 584 and 585 of ICTA.
3521.The commentary on the paragraph 606, amending section 575 of ITEPA, applies equally here. See Change 154 in Annex 1.
Paragraph 610: section 644A of ITEPA
3522.This new section of ITEPA gives a person receiving payments under an insurance policy which ensures against a health and employment risk exemption from taxation on those payments as pension or annuity income.
3523.This rewrites section 580A(7) of ICTA to the extent that it relates to pension income.
3524.The commentary on new section 325A of ITEPA applies equally to this section except that the insurance payments must be to the pensioner rather than the employee.
Paragraph 611: section 646A of ITEPA
3525.This new section of ITEPA provides a similar exemption for consular employees’ foreign pension income to that in section 771 of this Act.
3526.The section is based on section 322 of ICTA and brings into ITEPA the exemption for income within subsection (1A)(b) and (c) of that section. This is income that was previously charged under Schedule D Case V. This section now brings the exemption for foreign pension income into ITEPA under which the income would be charged if it were not exempt.
3527.The commentary on section 771 (relevant foreign income of consular officers and employees) applies also to this paragraph when read as for pension income.
Paragraph 613: section 679 of ITEPA
3528.Section 679 of ITEPA is amended because the ICTA references on which it depended are rewritten and repealed for income tax purposes. This paragraph is based on sections 65, 68, 584 and 585 of ICTA.
3529.The commentary on paragraph 606, amending section 575 of ITEPA, applies substantially here, with the necessary modifications for the fact that this section deals with social security income rather than a pension. This income does not benefit from the 10% deduction provided for pension income, nor are there any special rules affecting social security income from the Republic of Ireland to be mentioned.
Paragraph 614: section 681A of ITEPA
3530.This new section of ITEPA provides a similar exemption for consular employees’ foreign social security benefits to that in section 771 of this Act.
3531.This new section is based on section 322 of ICTA and brings into ITEPA the exemption for income within subsection (1A)(d) of that section. This is income that was previously charged under Schedule D Case V. This section now brings the exemption for foreign benefits into ITEPA under which the income would be charged if it were not exempt.
3532.The commentary on section 771 of this Act (relevant foreign income of consular officers and employees) applies to this new section of ITEPA also when read as for foreign benefits.
