Part 2Income tax, corporation tax and capital gains tax

Chapter 2Personal taxation

Armed forces

19Armed forces pensions and compensation schemes

1

ITEPA 2003 is amended as follows.

2

In subsection (1) of section 393 as originally enacted (application of Chapter 2 of Part 6) after “non-approved retirement benefits scheme” insert “ other than a scheme established by an order under section 1(2) of the Armed Forces (Pensions and Compensation) Act 2004 (armed and reserve forces compensation schemes) ”.

3

In paragraph (a) of section 639 (exemption from income tax for pensions due to military service etc)—

a

for “the Department of Work and Pensions” substitute “ the Ministry of Defence ”;

b

for “any Order in Council, Royal Warrant, order or scheme” substitute “ instrument specified in subsection (2), ”.

4

At the end of section 639 (which becomes subsection (1)) insert—

2

The instruments referred to in subsection (1)(a) are—

  • Defence (Local Defence Volunteers) Regulations 1940 (S.R. & O. 1940/748),

  • War Pensions (Coastguards) Scheme 1944 (S.R. & O. 1944/500),

  • War Pensions (Naval Auxiliary Personnel) Scheme 1964 (S.I. 1964/1985),

  • Pensions (Polish Forces) Scheme 1964 (S.I. 1964/2007),

  • War Pensions (Mercantile Marine) Scheme 1964 (S.I. 1964/2058),

  • Order by Her Majesty concerning pensions and other grants in respect of disablement or death due to service in the Home Guard (1964 Cmnd. 2563),

  • Order by Her Majesty concerning pensions and other grants in respect of disablement or death due to service in the Home Guard after 27th April 1952 (1964 Cmnd. 2564),

  • Order by Her Majesty concerning pensions and other grants in respect of disablement or death due to service in the Ulster Defence Regiment (1971 Cmnd. 4567),

  • Personal Injuries (Civilians) Scheme 1983 (S.I. 1983/686),

  • Naval, Military and Air Forces etc. (Disablement and Death) Service Pensions Order 1983 (S.I. 1983/883).

3

The Treasury may by order amend subsection (2).

5

After section 640 insert—

640ALump sums provided under armed forces early departure scheme

No liability to income tax arises on a lump sum provided under a scheme established by the Armed Forces Early Departure Payments Scheme Order 2005 (S.I. 2005/437).

6

In section 641 (exemption from income tax for armed forces disability pensions etc), after paragraph (g) of subsection (1) insert—

h

a benefit under a scheme established by an order under section 1(2) of the Armed Forces (Pensions and Compensation) Act 2004 payable to a person by reason of his illness or injury—

i

by way of a lump sum, or

ii

following the termination of the person's service in the armed forces or reserve forces.

7

The amendment made by subsection (2) has effect for the year 2005-06.

8

The amendments made by subsections (3) and (4) are deemed always to have had effect.

9

The amendments made by subsections (5) and (6) have effect for the year 2005-06 and subsequent years of assessment.