The Armed Forces (Enhanced Learning Credit Scheme and Further and Higher Education Commitment Scheme) Order 2012

EXPLANATORY NOTE

(This note is not part of the Order)

Part 2 of this Order establishes the Enhanced Learning Credit Scheme (“ELC Scheme”) and the Further and Higher Educational Commitment Scheme (“FHEC Scheme”) for former members of the armed forces (“service leavers”).

Part 3 of the Order makes provision for the ELC Scheme. The ELC Scheme gives financial help to service leavers who qualify under the Scheme rules with up to three payments towards the cost of achieving a nationally recognised qualification at Level 3 or above as defined by the Qualifications and Credits Framework (or equivalent qualifications). Article 5 of this Order specifies when a person may register as a member of the ELC Scheme. Article 6 sets out the conditions which a service leaver must meet in order to be eligible for payments under the ELC Scheme (including a requirement that certain periods of service must have been completed in order to qualify for payments at either the lower or higher tier). Where a member of the armed forces is discharged due to an injury caused wholly or predominantly by service, or predominantly worsened by service, then article 7 provides that they may qualify for a lower tier payment under the ELC Scheme even if the usual required periods of service have not been completed.

In some circumstances the benefits under the ELC Scheme may be transferred to a spouse, civil partner or other eligible adult dependant (or, where the member of the armed forces has died, to a surviving spouse, surviving civil partner or surviving eligible partner) and the transfer provisions are set out in article 8.

Part 4 of the Order makes provision for the FHEC scheme. The FHEC Scheme pays the tuition fees of service leavers who are resident in England, Scotland or Wales when they are studying for a first full Level 3 qualification or a first higher education qualification. A service leaver who has any remaining entitlement to a payment under the ELC Scheme must use that entitlement and, provided that the service leaver meets the relevant conditions for public funding of tuition fees in England, Scotland or Wales, the ELC payment will be increased to the full amount of the actual fees charged to the applicant (subject to maximum “capped fees”). Where the service leaver has no remaining entitlement to any ELC payment then the full amount of the actual fees (again subject to maximum “capped fees”) will be met. Article 10 deals with the conditions of entitlement under the FHEC Scheme. In some circumstances benefits under the FHEC Scheme may be transferred to a spouse, civil partner or eligible partner (or to a surviving spouse, surviving civil partner or surviving eligible partner as the case may be) and the transfer provisions are contained in article 11. Payments under the FHEC Scheme are dealt with in article 12.

Following the coming into force of this Order, ELC and FHEC payments to service leavers will be exempt from the tax charge that would otherwise arise by virtue of the application of Chapter 3 of Part 6 of the Income Tax (Earnings and Pensions) Act 2003 (“ITEPA”) (Payments and Benefits on Termination of Employment Etc). This Order will fall under the exception provided for in section 411(2) of the same Chapter in that Act.

ELC and FHEC payments to service leavers are exempt from the separate tax charge that would otherwise arise by virtue of the application of Chapter 2 of Part 6 of ITEPA (Employer-Financed Retirement Benefits) as, by virtue of the amendments made by the Employer-Financed Retirement Benefits (Excluded Benefits for Tax Purposes) (Amendment) Regulations 2011 to the Employer Financed Retirement Benefits (Excluded Benefits for Tax Purposes) Regulations 2007, they are excluded benefits for the purposes of section 393B(3) in Chapter 2 of ITEPA.