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Finance Act 2017

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Employer-financed retirement benefit schemes: ending of foreign-service reliefE+W+S+N.I.

5(1)Section 395B (exemption or reduction for foreign service) is amended as follows.E+W+S+N.I.

(2)In subsection (1) (conditions for entitlement to exemption or reduction), after paragraph (c) insert—

(ca)the recipient is not resident in the United Kingdom in the tax year in which the lump sum is received,.

(3)In subsection (8) (meaning of “foreign service”), for “413(2)” substitute “ 395C ”.

(4)The amendments made by this paragraph have effect for the tax year 2017-18 and subsequent tax years.

6After section 395B insert—E+W+S+N.I.

395CMeaning of “foreign service” in section 395B

(1)In section 395B “foreign service” means service to which subsection (2), (3), (6) or (8) applies.

(2)This subsection applies to service in or after the tax year 2013–14—

(a)to the extent that it consists of duties performed outside the United Kingdom in respect of which earnings would not be relevant earnings, or

(b)if a deduction equal to the whole amount of the earnings from the employment was or would have been allowable under Chapter 6 of Part 5 (deductions from seafarers' earnings).

(3)This subsection applies to service in or after the tax year 2003–04 but before the tax year 2013–14 such that—

(a)any earnings from the employment would not be relevant earnings, or

(b)a deduction equal to the whole amount of the earnings from the employment was or would have been allowable under Chapter 6 of Part 5 (deductions from seafarers' earnings).

(4)In subsection (2) “relevant earnings” means earnings for a tax year that are earnings to which section 15 applies and to which that section would apply even if the employee made a claim under section 809B of ITA 2007 (claim for remittance basis) for that year.

(5)In subsection (3) “relevant earnings” means—

(a)for service in or after the tax year 2008–09, earnings—

(i)which are for a tax year in which the employee is ordinarily UK resident,

(ii)to which section 15 applies, and

(iii)to which that section would apply even if the employee made a claim under section 809B of ITA 2007 (claim for remittance basis) for that year, and

(b)for service before the tax year 2008–09, general earnings to which section 15 or 21 as originally enacted applies.

(6)This subsection applies to service before the tax year 2003–04 and after the tax year 1973–74 such that—

(a)the emoluments from the employment were not chargeable under Case I of Schedule E, or would not have been so chargeable had there been any, or

(b)a deduction equal to the whole amount of the emoluments from the employment was or would have been allowable under a foreign earnings deduction provision.

(7)In subsection (6) “foreign earnings deduction provision” means—

(a)paragraph 1 of Schedule 2 to FA 1974,

(b)paragraph 1 of Schedule 7 to FA 1977, or

(c)section 192A or 193(1) of ICTA.

(8)This subsection applies to service before the tax year 1974-75 such that tax was not chargeable in respect of the emoluments of the employment—

(a)in the tax year 1956–57 or later, under Case I of Schedule E, or

(b)in earlier tax years, under Schedule E,

or it would not have been so chargeable had there been any such emoluments.

7In section 554Z4 (treatment of relevant step: residence issues), after subsection (6) insert—E+W+S+N.I.

(7)Subsections (8) and (9) apply if—

(a)the relevant step is the payment of a lump sum,

(b)the payment of the lump sum is the provision of a relevant benefit under an employer-financed retirement benefits scheme, and

(c)the person by whom the lump sum is received is resident in the United Kingdom in the tax year in which the lump sum is received.

(8)If the lump sum is wholly in respect of rights which have accrued on or after 6 April 2017, there is no reduction under subsection (4).

(9)If the lump sum is wholly or partly in respect of rights which accrued before 6 April 2017, the amount of any reduction under subsection (4) is given by—

where—

A is so much of the lump sum as is in respect of rights which accrued before 6 April 2017,

LS is the amount of the lump sum, and

R is the amount which (ignoring this subsection) is given by subsection (4) as the amount of the reduction.

(10)In subsection (7)—

  • employer-financed retirement benefits scheme” has the same meaning as in Chapter 2 of Part 6 (see section 393A), and

  • relevant benefit” has the same meaning as in that Chapter (see section 393B).

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