Finance Act 2009

Special annual allowance charge

1 (1) A charge to income tax, to be known as the special annual allowance charge, arises where—

(a) the total adjusted pension input amount for a tax year in the case of a high-income individual who is a member of one or more registered pension schemes, exceeds

(b) the amount of the special annual allowance.

(2) The individual is a high-income individual if the individual’s relevant income for the tax year is £150,000 or more.

Paragraph 2 makes provision for calculating the individual’s relevant income.

(3) Paragraphs 3 to 16 explain what is the total adjusted pension input amount.

(4) The special annual allowance is £20,000 (but subject to paragraph 17).

(5) But if, in calculating the total adjusted pension input amount of the individual for the tax year, a deduction is made in respect of—

(a) protected pension input amounts (see paragraphs 7 to 14), or

(b) a pre-22 April 2009 pension input amount that is such an amount by virtue of paragraph 16(3),

(or both) the special annual allowance is £20,000 less the amount of the deduction or, if the deduction is £20,000 or more, is nil.

(6) The person liable to the special annual allowance charge is the individual.

(7) The individual is liable to the special annual allowance charge whether or not—

(a) the individual, and

(b) the scheme administrator of the pension scheme or schemes concerned,

are UK resident, ordinarily UK resident or domiciled in the United Kingdom.

(8) The special annual allowance charge is a charge at the rate of 20% in respect of the amount by which—

(a) the total adjusted pension input amount, exceeds

(b) the amount of the special annual allowance.

(9) But where—

(a) the individual’s total pension input amount under section 229 of FA 2004 (annual allowance charge) for the tax year, exceeds

(b) the amount of the annual allowance for the tax year (see section 228 of that Act and orders made under it),

the amount in respect of which the special annual allowance charge is charged is reduced by the amount of the excess.

(10) In calculating the individual’s liability to income tax for the tax year the amount of any income tax to which the individual is liable under this section is to be added at Step 7 of the calculation in section 23 of ITA 2007 (which applies as if this Schedule were a provision listed in section 30 of that Act).

(11) The amount in respect of which the special annual allowance charge is charged is not to be treated as income for any purpose of the Tax Acts.