Legalize / United Kingdom / Public General Act

Finance Act 2004

Type Public General Act

Publication 2004-07-22

Last updated 2025-04-24

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(7B) For the purposes of subsection (7A), a “relevant overseas transfer” is a transfer of sums or assets held for the purposes of, or representing accrued rights under, a relevant overseas scheme (“the transferring scheme”) so as to become held for the purposes of, or to represent rights under—

(a) another relevant overseas scheme, or

(b) a registered pension scheme,

in connection with a member of that pension scheme.

(7C) In subsection (7B) “relevant overseas scheme” means—

(a) a QROPS, or

(b) a relevant non-UK scheme (see paragraph 1(5) of Schedule 34).

(7D) Regulations under subsection (7A) may—

(a) apply generally or only in specified cases, and

(b) make different provision for different cases.

(8) In subsections (4) to (6) , (7A) to (7D) and this subsection—

“the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs;

“prescribed” means prescribed by regulations;

“QROPS” means a qualifying recognised overseas pension scheme, and “former QROPS” means a scheme that has at any time been a QROPS;

“regulations” means regulations made by the Commissioners;

“relevant requirement” means—a requirement imposed by regulations under subsection (4), ora requirement imposed by virtue of Part 1 of Schedule 36 to FA 2008 (powers to obtain information and documents), or a requirement to pay overseas transfer charge, or interest on overseas transfer charge, imposed by regulations under section 244L(2) or by an assessment under such regulations.

Appeal against decision to exclude recognised overseas pension scheme

170

(1) This section applies where a recognised overseas pension scheme is excluded from being a qualifying recognised overseas pension scheme by a decision of the Inland Revenue under section 169(5).

(2) The scheme manager may appeal against the decision.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) An appeal under this section against a decision must be brought within the period of 30 days beginning with the day on which the notification of the decision was given.

(6) On an appeal that is notified to the tribunal, the tribunal must consider whether the recognised overseas pension scheme ought to have been excluded from being a qualifying recognised overseas pension scheme.

(7) If the tribunal decides that the recognised overseas pension scheme ought to have been excluded from being a qualifying recognised overseas pension scheme, the tribunal must dismiss the appeal.

(8) If the tribunal decides that the recognised overseas pension scheme ought not to have been excluded from being a qualifying recognised overseas pension scheme, the recognised overseas pension scheme is to be treated as having remained a qualifying recognised overseas pension scheme (but subject to any further appeal ...).

Scheme administration member payments

171

(1) A “scheme administration member payment” is a payment by a registered pension scheme to or in respect of a person who is or has been a member of the pension scheme which is made for the purposes of the administration or management of the pension scheme.

(2) But if a payment falling within subsection (1) exceeds the amount which might be expected to be paid to a person who was at arm’s length, the excess is not a scheme administration member payment.

(3) Scheme administration member payments include in particular—

(a) the payment of wages, salaries or fees to persons engaged in administering the pension scheme, and

(b) payments made for the purchase of assets to be held for the purposes of the pension scheme.

(4) A loan to or in respect of a person who is or has been a member of the pension scheme is not a scheme administration member payment.

(5) Regulations made by the Board of Inland Revenue may provide that payments of a description specified in the regulations are, or are not, scheme administration member payments.

Unauthorised member payments

Assignment

172

(1) Subsection (2) applies if a member of a registered pension scheme (or the member’s personal representatives) assigns or agrees to assign

(a) any benefit, other than an excluded pension, to which the member (or any dependant, nominee or successor of the member) has an actual or prospective entitlement under the pension scheme, or

(b) any right in respect of any sums or assets held for the purposes of any arrangement under the pension scheme.

(2) Unless the assignment or agreement is pursuant to a pension sharing order or provision, the pension scheme is to be treated as making an unauthorised payment to the member (or to the member’s personal representatives in respect of the member).

(3) Subsection (4) applies if a person (or a person’s personal representatives) assigns or agrees to assign

(a) any benefit, other than an excluded pension, to which the person has a prospective entitlement under the pension scheme in respect of a member of the pension scheme, or

(b) any right in respect of any sums or assets held for the purposes of any arrangement relating to a member of the pension scheme under the pension scheme.

(4) Unless the assignment or agreement is pursuant to a pension sharing order or provision, the pension scheme is to be treated as making an unauthorised payment to the person (or the person’s personal representatives) in respect of the member.

(5) The amount of the unauthorised payment is the greater of—

(a) the consideration received in respect of the assignment or agreement, and

(b) the consideration which might be expected to be received in respect of the assignment or agreement if the parties to the transaction were at arm’s length and any power to reduce the entitlement to the benefit or right did not exist.

(6) Where a pension scheme is treated by this section as having made an unauthorised payment in relation to an assignment (or an agreement to assign), payments by the pension scheme of the benefit or right assigned (or agreed to be assigned) are not unauthorised payments.

(6A) References in this section to a benefit to which the member or a person has an entitlement under the pension scheme includes rights to payments under—

(a) a scheme pension or dependants' scheme pension provided by the scheme administrator or as a result of the application of sums or assets held for the purposes of the pension scheme, or

(b) a lifetime annuity or dependants' annuity, or nominees' annuity or successors' annuity, purchased by the application of sums or assets held for the purposes of the pension scheme.

(7) An excluded pension is so much of any pension which under pension rule 2 may continue to be paid after the member's death as may be so paid.

(8) “Assignment” includes assignation and related expressions are to be read accordingly.

Benefits

173

(1) A registered pension scheme is to be treated as having made an unauthorised payment to a person who is or has been a member of the pension scheme if an asset held for the purposes of the pension scheme is used to provide a benefit (other than a payment) to—

(a) the person, or

(b) a member of the person's family or household.

(2) If the benefit is received by reason of an employment which is not lower-paid employment as a minister of religion, subsection (1) does not apply.

(3) If the benefit is received by reason of an employment which is lower-paid employment as a minister of religion, subsection (1) only applies if—

(a) it is a benefit to which Chapter 6 or 10 of the benefits code (cars and vans, and benefits not dealt with elsewhere in benefits code) would apply if the employment were not lower-paid employment as a minister of religion,

(b) the pension scheme is an occupational pension scheme, and

(c) the person, or a member of the person's family or household, is a director of, and has a material interest in, a sponsoring employer.

(4) A registered pension scheme is to be treated as having made an unauthorised payment in respect of a person who is or has been a member of the pension scheme if, after the person's death, an asset held for the purposes of the pension scheme is used to provide a benefit (other than a payment) to a person who, at the date of the person's death, was a member of the person's family or household.

(5) The person who receives the benefit is to be treated as having received the unauthorised payment.

(6) If the benefit is received by reason of an employment which is not lower-paid employment as a minister of religion, subsections (4) and (5) do not apply.

(7) If the benefit is received by reason of an employment which is lower-paid employment as a minister of religion, subsections (4) and (5) only apply if—

(a) paragraphs (a) and (b) of subsection (3) apply, and

(b) at the date of the person's death the person, or a member of the person's family or household, was a director of, and had a material interest in, a sponsoring employer.

(7A) This section does not apply if—

(a) the pension scheme is an investment-regulated pension scheme, and

(b) the asset consists of taxable property.

(8) The amount of an unauthorised payment treated as having been made by this section—

(a) in relation to such benefits, and in such circumstances, as may be prescribed by regulations made by the Board of Inland Revenue, is an amount determined in accordance with the regulations, and

(b) otherwise, is the amount which would be the cash equivalent of the benefit under the benefits code if the benefit were received by reason of an employment and the benefits code applied to it.

(9) For the purposes of subsection (8)—

(a) references in the benefits code to the employee are to be treated as references to the person who is or has been a member, and

(b) references in the benefits code to the employer are to be treated as references to the pension scheme.

(10) In this section—

“the benefits code” has the meaning given by section 63(1) of ITEPA 2003,

“director” has the meaning given by section 67 of that Act,

“lower-paid employment as a minister of religion” has the meaning given by section 290D of that Act, and

“material interest” has the meaning given by section 68 of that Act.

(11) Section 721 of ITEPA 2003 applies for the purposes of determining the members of a person’s family or household.

Value shifting

174

(1) A registered pension scheme is to be treated as having made an unauthorised payment to a person who is or has been a member of the pension scheme if, in connection with any of the events mentioned in subsection (3) or a change in the value of a currency—

(a) the value of an asset held for the purposes of the pension scheme is reduced or a liability of the pension scheme is increased, and

(b) the value of an asset held by or for the benefit of the person is increased, a liability of the person is reduced, or a liability of another person is reduced for the benefit of the person.

(2) But if the event or the change in the value of the currency occurs after the person's death—

(a) the pension scheme is to be treated as having made an unauthorised payment in respect of the person (rather than to the person), and

(b) the person who holds the asset or is subject to the liability in relation to which subsection (1)(b) is satisfied is to be treated as having received the unauthorised payment.

(3) The events are—

(a) the creation, alteration, release or extinction of any power, right, option or liability relating to assets held for the purposes of the pension scheme (whether or not provided for in the terms on which the asset is acquired or held),

(b) the creation, alteration, release or extinction of any power, right or option relating to a liability of the pension scheme (whether or not provided for in the terms on which the liability is incurred),

(c) the exercise of, or failure to exercise, any power, right or option in relation to assets held for the purposes of the pension scheme or a liability of the pension scheme, or

(d) the exercise of, or failure to exercise, any power, right or option which constitutes an asset held for the purposes of the pension scheme,

in a way which differs from that which might be expected if the parties to the transaction were at arm’s length.

(4) The amount of the unauthorised payment is the amount by which the reduction in value of the asset held for the purposes of the pension scheme, or the increase in the liability of the pension scheme, exceeds that which might be expected if the parties to the transaction were at arm’s length.

(5) Regulations made by the Board of Inland Revenue may make provision as to how the excess is to be calculated in relation to events of a description specified in the regulations (including provision as to the times at which the asset or liability is to be valued).

Authorised employer payments

175

The only payments which a registered pension scheme that is an occupational pension scheme is authorised to make to or in respect of a person who is or has been a sponsoring employer are—

(a) public service scheme payments (see section 176),

(b) authorised surplus payments (see section 177),

(d) authorised employer loans (see section 179),

(e) scheme administration employer payments (see section 180), and

(f) payments of a description prescribed by regulations made by the Board of Inland Revenue.

Public service scheme payment

176

A payment is a public service scheme payment if—

(a) it is made by a public service pension scheme, and

(b) it is not of a description prescribed by regulations made by the Board of Inland Revenue.

Authorised surplus payment

177

For the purposes of this Part a payment is an authorised surplus payment if it is of a description prescribed by regulations made by the Board of Inland Revenue.

Compensation payments

178

A payment is a compensation payment if it is made in respect of a member’s liability to a sponsoring employer in respect of a criminal, fraudulent or negligent act or omission by the member.

Authorised employer loan

179

(1) A loan made to or in respect of a person who is or has been a sponsoring employer is an authorised employer loan if—

(a) the amount loaned does not exceed an amount equal to 50% of the aggregate of the amount of the sums, and the market value of the assets, held for the purposes of the pension scheme immediately before the loan is made,

(b) the loan is secured by a charge which is of adequate value, and

(2) The repayment terms comply with this subsection if—

(a) the rate of interest payable on the loan is not less than the rate prescribed by regulations made by the Board of Inland Revenue,

(b) the loan repayment date is before the end of the period of five years beginning with the date on which the loan is made, or has been postponed to a date after the end of that period under subsection (3), and

(c) the amount payable in each period beginning with the date on which the loan is made, and ending with the last day of a loan year, is not less than the required amount.

(3) If on a standard loan repayment date any amount (including interest) is owing, the loan repayment date may be postponed to a date before the end of the period of five years beginning with the standard loan repayment date.

(4) The loan repayment date may be postponed under subsection (3) only once.

(5) If the amount of a loan to or in respect of a person who is or has been a sponsoring employer is increased, the amount of the increase is to be treated as a loan made on the date of the increase.

(6) Schedule 30 gives the meaning of expressions used in this section and explains how to calculate the amount of the unauthorised payment when a loan to or in respect of a person who is or has been a sponsoring employer does not comply with subsection (1).

(7) In this section and that Schedule “charge” includes a right in security or an agreement to create a right in security; and any reference to assets subject to a charge or assets charged includes a reference to the property over which such a right is granted.

(8) Schedule 36 contains (in Part 4) transitional provision about loans to sponsoring employers.

Scheme administration employer payments

180

(1) A “scheme administration employer payment” is a payment made—

(a) by a registered pension scheme that is an occupational pension scheme, and

(b) to or in respect of a person who is or has been a sponsoring employer,

for the purposes of the administration or management of the pension scheme.

(2) But if a payment falling within subsection (1) exceeds the amount which might be expected to be paid to a person who was at arm’s length, the excess is not a scheme administration employer payment.

(3) Scheme administration employer payments include in particular—

(a) the payment of wages, salaries or fees to persons engaged in administering the pension scheme, and

(b) payments made for the purchase of assets to be held for the purposes of the pension scheme.

(4) A loan to or in respect of a person who is or has been a sponsoring employer is not a scheme administration employer payment.

(5) Payments made to acquire shares in a sponsoring employer are not scheme administration employer payments if, when the payment is made—

(a) the market value of shares in the sponsoring employer held for the purposes of the pension scheme is equal to or greater than 5% of the aggregate of the amount of the sums, and the market value of the assets, held for the purposes of the pension scheme, or

(b) the total market value of shares in sponsoring employers held for the purposes of the pension scheme is equal to or greater than 20% of the aggregate of the amount of the sums, and the market value of the assets, held for the purposes of the pension scheme.

(6) Regulations made by the Board of Inland Revenue may provide that payments of a description specified in the regulations are, or are not, scheme administration employer payments.

Unauthorised employer payments

Value shifting

181

(1) A registered pension scheme that is an occupational pension scheme is to be treated as having made an unauthorised payment to a person who is or has been a sponsoring employer if, in connection with any of the events mentioned in subsection (2) or a change in the value of a currency—

(a) the value of an asset held for the purposes of the pension scheme is reduced or a liability of the pension scheme is increased, and

(b) the value of an asset held by or for the benefit of the person is increased, a liability of the person is reduced, or a liability of another person is reduced for the benefit of the person.

(2) The events are—

(a) the creation, alteration, release or extinction of any power, right, option or liability relating to assets held for the purposes of the pension scheme (whether or not provided for in the terms on which the asset is acquired or held),

(b) the creation, alteration, release or extinction of any power, right or option relating to a liability of the pension scheme (whether or not provided for in the terms on which the liability is incurred),

(c) the exercise of, or failure to exercise, any power, right or option in relation to assets held for the purposes of the pension scheme or a liability of the pension scheme, or

(d) the exercise of, or failure to exercise, any power, right or option which constitutes an asset held for the purposes of the pension scheme,

in a way which differs from that which might be expected if the parties to the transaction were at arm’s length.

(3) The amount of the unauthorised payment is the amount by which the reduction in value of the asset held for the purposes of the pension scheme, or the increase in the liability of the pension scheme, exceeds that which might be expected if the parties to the transaction were at arm’s length.

(4) Regulations made by the Board of Inland Revenue may make provision as to how the excess is to be calculated in relation to events of a description specified in the regulations (including provision as to the times at which the asset or liability is to be valued).

Borrowing

Unauthorised borrowing: money purchase arrangements

182

(1) A registered pension scheme is not authorised to borrow an amount in respect of a money purchase arrangement that is not a collective money purchase arrangement unless the arrangement borrowing condition is met.

(2) The arrangement borrowing condition is met if—

$$(APB+PB)<VA2$where—APB is the aggregate of the amounts previously borrowed in respect of the arrangement (excluding any amounts which have been repaid),PB is the amount proposed to be borrowed in respect of the arrangement, andVA is the value of the arrangement.$

(3) The value of the arrangement is the aggregate of—

(a) the amount of such of the sums and the market value of such of the assets as represent the member's drawdown pension fund in respect of the arrangement (if any),

(aa) the amount of such of the sums and the market value of such of the assets as represent the member's flexi-access drawdown fund in respect of the arrangement (if any),

(b) the amount of such of the sums and the market value of such of the assets as represent dependants' drawdown pension funds or dependants' flexi-access drawdown funds in respect of the arrangement (if any),

(ba) the amount of such of the sums and the market value of such of the assets as represent nominees' flexi-access drawdown funds in respect of the arrangement (if any),

(bb) the amount of such of the sums and the market value of such of the assets as represent successors' flexi-access drawdown funds in respect of the arrangement (if any),

(c) the aggregate of the value of each scheme pension or dependants' scheme pension payable in respect of the arrangement, and

(d) the value of the uncrystallised rights under the arrangement.

(4) The value of a scheme pension or dependants' scheme pension payable in respect of the arrangement is—

$$RVF×ARP$where—RVF is the relevant valuation factor (see section 276), andARP is the annual rate at which the pension is payable.$

(5) Rights are uncrystallised if no-one has become entitled to the present payment of benefits in respect of the rights; and a person is to be treated as entitled to the present payment of benefits in respect of the sums and assets representing the person’s drawdown pension fund or the person's flexi-access drawdown fund.

(6) If the arrangement is a cash balance arrangement, the value of the uncrystallised rights under the arrangement is the amount which would, on the valuation assumptions (see section 277), be available for the provision of benefits in respect of those rights if a person became entitled to benefits in respect of those rights.

(7) If the arrangement is a money purchase arrangement other than a cash balance arrangement, the value of the uncrystallised rights under the arrangement is the aggregate of the amount of such of the sums, and the market value of such of the assets, held for the purposes of the arrangement as represent those rights.

(8) If the arrangement is a hybrid arrangement under which either cash balance benefits or other money purchase benefits (but not defined benefits or collective money purchase benefits) may be provided, the value of the uncrystallised rights under the arrangement is the greater of—

(a) their value calculated under subsection (6) (on the assumption that cash balance benefits are provided), and

(b) their value calculated under subsection (7) (on the assumption that other money purchase benefits are provided).

Effect of unauthorised borrowing: money purchase arrangements

183

(1) Subsection (2) applies if a registered pension scheme borrows in respect of a money purchase arrangement an amount which it is not authorised to borrow under section 182.

(2) The pension scheme is to be treated as having made a scheme chargeable payment—

(a) if subsection (3) applies, of an amount calculated in accordance with subsection (4), and

(b) otherwise, of the amount borrowed.

(3) This subsection applies if, immediately before the amount is borrowed—

$APB<VA2$

(4) If subsection (3) applies, the amount of the scheme chargeable payment is—

$APB+AB-VA2$

(5) In subsections (3) and (4)—

APB is the aggregate of the amounts previously borrowed in respect of the arrangement (excluding any amounts which have been repaid),

AB is the amount borrowed, and

VA is the value of the arrangement, calculated in accordance with section 182(3), immediately before the amount is borrowed.

Unauthorised borrowing: other arrangements

184

(1) A registered pension scheme is not authorised to borrow an amount in respect of any relevant arrangement unless the scheme borrowing condition is met.

(1A) In this section “relevant arrangement” means an arrangement that—

(a) is not a money purchase arrangement, or

(b) is a collective money purchase arrangement.

(2) The scheme borrowing condition is met if—

$$(APB+PB)<AARA2$where—APB is the aggregate of the amounts previously borrowed by the pension scheme in respect of relevant arrangements (excluding any amounts which have been repaid),PB is the amount proposed to be borrowed by the pension scheme, andAARA is the aggregate amount of the relevant sums and assets.$

(3) The aggregate amount of the relevant sums and assets is the aggregate of—

(a) the amount of the sums held for the purposes of such of the arrangements under the pension scheme as are relevant arrangements, and

(b) the market value of the assets held for the purposes of such of the arrangements under the pension scheme as are relevant arrangements.

Effect of unauthorised borrowing: other arrangements

185

(1) Subsection (2) applies if a registered pension scheme borrows, in respect of an arrangement which is not a money purchase arrangement, an amount which it is not authorised to borrow under section 184.

(2) The pension scheme is to be treated as having made a scheme chargeable payment—

(a) if subsection (3) applies, of an amount calculated in accordance with subsection (4), and

(b) otherwise, of the amount borrowed.

(3) This subsection applies if, immediately before the amount is borrowed—

$APB<AARA2$

(4) If subsection (3) applies, the amount of the scheme chargeable payment is—

$APB+AB-AARA2$

(5) In subsections (3) and (4)—

APB is the aggregate of the amounts previously borrowed by the pension scheme in respect of arrangements which are not money purchase arrangements (excluding any amounts which have been repaid),

AB is the amount borrowed, and

AARA is the aggregate amount of the relevant sums and assets, calculated in accordance with section 184(3), immediately before the amount is borrowed.

Chapter 4 — Registered pension schemes: tax reliefs and exemptions

Scheme investments

Income

186

(1) No liability to income tax arises in respect of—

(a) income derived from investments or deposits held for the purposes of a registered pension scheme, or

(b) underwriting commissions applied for the purposes of a registered pension scheme which are not relevant foreign income and which would otherwise be chargeable to income tax under Chapter 8 of Part 5 of ITTOIA 2005 (income not otherwise charged).

(2) The exemption provided by subsection (1) does not apply to income derived from investments or deposits held as a member of a property investment LLP; and for this purpose “income” includes relevant stock lending fees, in relation to any investments, to which subsection (1) would apply by virtue of section 129B of ICTA (inclusion of relevant stock lending fees in income).

(2A) The exemption provided by subsection (1) does not prevent the income from being charged to tax by virtue of section 185A.

(3) In this Part “investments”, in relation to a registered pension scheme, includes futures contracts and options contracts; and income derived from transactions relating to futures contracts or options contracts is to be treated as derived from the contracts.

(4) For that purpose a contract is not prevented from being a futures contract or an options contract by the fact that a party is or may be entitled to receive or liable to make, or entitled to receive and liable to make, only a payment of a sum (as opposed to a transfer of assets) in full settlement of all obligations.

Chargeable gains

187

(1) Section 271 of TCGA 1992 (exemptions) is amended as follows.

(2) In paragraph (b) of subsection (1), for the words after “part of” substitute “ the Fund mentioned in section 613(4) of the Taxes Act (House of Commons Members' Fund); ”.

(3) In subsection (1), omit—

(a) paragraph (d) (retirement annuity contracts),

(b) paragraph (g) (exempt approved schemes),

(d) paragraph (j) (authorised unit trusts which are also approved personal pension schemes or exempt approved schemes),

and the second sentence.

(4) After that subsection insert—

(1A) A gain accruing to a person on a disposal of investments held for the purposes of a registered pension scheme is not a chargeable gain.

(5) Omit subsection (2) (superannuation funds approved before 6th April 1980).

(6) In subsection (10)—

(a) for “subsections (1)(g) and (h) and (2)” substitute “ subsection (1A) ”, and

(b) omit the words after “options contracts”.

(7) In subsection (12), for “Subsection (1)(b), (c), (d), (g) and (h) and subsection (2)” substitute “ Subsections (1)(b) and (c) and (1A) ”.

Members' contributions

Relief for contributions

188

(1) An individual who is an active member of a registered pension scheme is entitled to relief under this section in respect of relievable pension contributions paid during a tax year if the individual is a relevant UK individual for that year.

(2) In this Part “relievable pension contributions”, in relation to an individual and a pension scheme, means contributions by or on behalf of the individual under the pension scheme other than contributions to which subsection (3) or (3A) applies.

(3) This subsection applies to—

(a) any contributions paid after the individual has reached the age of 75,

(aa) any contributions which are life assurance premium contributions (see section 195A),

(b) any contributions paid by an employer of the individual (as to which see sections 196 to 201), ...

(3A) This subsection applies to a contribution if the contribution results from the transfer of property or money, or the payment of a sum, towards the pension scheme pursuant to a relevant order in a case where—

(a) section 266A (members' liability in respect of unauthorised member payments) applies, and

(b) relief is claimed under that section in respect of the liability mentioned in subsection (1)(a) of that section.

(3B) In the case of a contribution which is greater than UMP (see section 266A(5)), subsection (3A) does not apply to the contribution so far as it is greater than UMP.

(3C) In subsection (3A) “relevant order” means an order under any of the following—

(a) section 16(1), 19(4) or 21(2)(a) of the Pensions Act 2004 (orders for money etc to be restored to pension schemes), or

(b) Article 12(1), 15(4) or 17(2)(a) of the Pensions (Northern Ireland) Order 2005 (corresponding provision for Northern Ireland).

(4) For the purposes of this Part a pension credit which increases the rights of the individual under the pension scheme is only to be treated as a contribution on behalf of the individual if it derives from a pension scheme that is not a registered pension scheme.

(5) For the purposes of this Part—

(a) any other transfer of any sum held for the purposes of, or representing accrued rights under, a pension scheme so as to become held for the purposes of, or to represent rights under, another pension scheme, ...

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

is not to be treated as a contribution.

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) References in the Income Tax Acts to relief in respect of life assurance premiums do not include relief under this section.

(8) The following sections make further provision about relief under this section—

section 189 (relevant UK individual),

section 190 (annual limit for relief),

sections 191 to 194 (methods of giving relief), and

section 195 (transfer of certain shares to be treated as payment of contribution).

Relevant UK individual

189

(1) For the purposes of this Part an individual is a relevant UK individual for a tax year if—

(a) the individual has relevant UK earnings chargeable to income tax for that year,

(b) the individual is resident in the United Kingdom at some time during that year,

(c) the individual was resident in the United Kingdom both at some time during the five tax years immediately before that year and when the individual became a member of the pension scheme, or

(d) the individual, or the individual’s spouse or civil partner, has for the tax year general earnings from overseas Crown employment subject to UK tax.

(2) In this Part “relevant UK earnings” means—

(a) employment income,

(b) income which is chargeable under Part 2 of ITTOIA 2005 and is immediately derived from the carrying on or exercise of a trade, profession or vocation (whether individually or as a partner acting personally in a partnership), ...

(ba) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(bb) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . and

(2A) This subsection applies to income if—

(a) it is patent income, and

(b) the individual, alone or jointly, devised the invention for which the patent in question was granted.

(2B) The income covered by subsection (2)(b) includes—

(a) an amount treated as a profit under section 863J(2) of ITTOIA 2005, and

(b) income treated as received under section 863J(4) of that Act.

(3) For the purposes of this section and section 190 relevant UK earnings are to be treated as not being chargeable to income tax if, in accordance with arrangements having effect by under section 2(1) of the Taxation (International and Other Provisions) Act 2010 (double taxation agreements), they are not taxable in the United Kingdom.

(4) “General earnings from overseas Crown employment subject to UK tax” has the meaning given by section 28 of ITEPA 2003.

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) “Patent income” means—

(a) royalties or other sums paid in respect of the use of a patent charged to tax under section 579 of ITTOIA 2005,

(b) amounts on which tax is payable under section 587 or 593 of ITTOIA 2005, or

(i) section 472(5) of the Capital Allowances Act, or

(ii) paragraph 100 of Schedule 3 to that Act.

Annual limit for relief

190

(1) The maximum amount of relief to which an individual is entitled under section 188 (relief for contributions) for a tax year is (subject as follows) the amount of the individual’s relevant UK earnings which are chargeable to income tax for the tax year.

(2) If the amount of the individual’s relevant UK earnings which are chargeable to income tax for the tax year is less than the basic amount, the maximum amount of relief to which the individual is entitled under section 188 for the tax year is increased by the difference between—

(a) the amount of the individual’s relevant UK earnings which are so chargeable, and

(b) the basic amount,

(so that, if the individual has no relevant UK earnings which are so chargeable, the maximum amount of such relief is the basic amount).

(3) Subsection (2) is subject to section 191(7) (limit on methods of giving relief to which individual is entitled by virtue of subsection (2)).

(4) “The basic amount” is £3,600 or such greater amount as the Treasury may by order specify.

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Methods of giving relief

191

(1) Relief to which an individual is entitled under section 188 (relief for contributions) in respect of contributions is to be given as provided by this section.

(2) Subject as follows, the relief is to be given in accordance with section 192 (relief at source).

(3) Subject to subsection (7), relief in respect of contributions under a pension scheme made by a member of the pension scheme may (instead of being given in accordance with section 192) be given in accordance with section 193 (relief under net pay arrangements) if—

(a) the pension scheme is an occupational pension scheme,

(b) the member is an employee of a sponsoring employer, and

(c) relief in respect of contributions made under the pension scheme by all of the other members of the pension scheme who are employees of the sponsoring employer is given in accordance with that section.

(4) Subject to subsection (7), relief in respect of contributions under a pension scheme made by a member of the pension scheme may (instead of being given in accordance with section 192) be given in accordance with section 193 if—

(a) the pension scheme is a public service pension scheme or marine pilots' benefits fund, and

(b) the member is an employee.

(5) Subject to subsection (7), subsection (6) applies where—

(a) contributions are made under a public service pension scheme or marine pilots' benefit fund by a member who is not an employee, or

(b) contributions are made otherwise than by a member of the pension scheme under a net pay pension scheme.

(6) Relief in respect of the contributions—

(a) may (but need not) be given in accordance with section 192, but

(b) where not so given, is to be given in accordance with section 194 (relief on making of claim).

(7) Relief to which an individual is entitled by virtue of section 190(2)—

(a) may only be given in accordance with section 192, and

(b) is not required to be given in respect of contributions under a net pay pension scheme.

(8) In this section “marine pilots' benefits fund” means—

(a) a fund established under section 15(1)(i) of the Pilotage Act 1983 (c. 21), or

(b) any scheme supplementing or replacing such a fund.

(9) In this Part “net pay pension scheme” means a pension scheme in the case of which some or all of the members of the pension scheme are entitled to be given relief in accordance with section 193 in respect of the payment of contributions by them under the pension scheme.

(10) Schedule 36 contains (in Part 4) transitional provision about relief in respect of contributions to pre-commencement retirement annuity contracts.

Relief at source

192

(1) Where an individual is entitled to be given relief in accordance with this section in respect of the payment of a contribution under a pension scheme, the individual or other person by whom the contribution is paid is entitled, on making the payment, to deduct and retain out of it a sum equal to income tax on the contribution at the relevant rate .

(1A) For the purposes of this section and sections 192A and 192B “the relevant rate” is—

(a) if the Commissioners for Her Majesty’s Revenue and Customs so notify the scheme administrator, the Scottish basic rate for the tax year in which the payment is made;

(aa) if the Commissioners for Her Majesty’s Revenue and Customs so notify the scheme administrator, the Welsh basic rate for the tax year in which the payment is made; and

(b) the basic rate for that tax year in all other cases.

(2) If a sum is deducted from the payment of the contribution—

(a) the scheme administrator must allow the deduction on receipt of the residue,

(b) the individual or other person is acquitted and discharged of so much money as is represented by the deduction as if the sum had actually been paid, and

(3) When the payment of the contribution is received—

(a) the scheme administrator is entitled to recover from the Board of Inland Revenue the amount which is treated as income tax paid by the scheme administrator in relation to the contribution, and

(b) any amount so recovered is to be treated for the purposes of the Tax Acts in the same manner as the payment of the contribution.

(4) If (apart from this section) income tax at the higher rate or the additional rate ... is chargeable in respect of any part of the individual's total income for the tax year, on the making of a claim the basic rate limit and the higher rate limit for the tax year in the individual's case are increased by the amount of the contribution.

(4A) Where—

(a) the individual is a Scottish taxpayer for the tax year,

(b) (apart from this section) income tax is chargeable in respect of any part of that individual’s total income for the tax year at a Scottish rate, and

on the making of a claim, the Scottish basic rate limit, and any other Scottish rate limit for the tax year in the individual’s case that is above the Scottish basic rate limit , are increased by the amount of the contribution.

(4B) Where—

(a) the individual is a Welsh taxpayer for the tax year, and

(b) (apart from this section) income tax is chargeable in respect of any part of that individual’s total income for the tax year at the Welsh higher rate or Welsh additional rate,

on the making of a claim, the basic rate limit and the higher rate limit for the tax year in the individual’s case, are increased by the amount of the contribution.

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) Subsections (1) and (2) have effect subject to such conditions as the Board of Inland Revenue may prescribe by regulations.

(7) The Board of Inland Revenue may by regulations make provision for carrying subsections (1) to (3) into effect, in particular by making provision—

(a) about how a sum is to be recovered under subsection (3)(a) (including the manner in which a claim for the recovery of a sum is to be made),

(b) for the giving of such information, in such form, as may be prescribed by or under the regulations,

(d) specifying the consequences of failure to comply with conditions prescribed by virtue of subsection (6).

(8) Regulations under this section may, in particular—

(a) modify the operation of any provision of the Tax Acts, or

(b) provide for the application of any provision of the Tax Acts (with or without modification).

(9) Where, after relief is given to an individual in accordance with this section for a tax year, an assessment, alteration of an assessment or other adjustment of the individual’s liability to tax is made, any appropriate consequential adjustments are to be made in relief given to the individual in accordance with this section.

(10) Where relief is given to an individual in accordance with this section for a tax year in respect of a contribution, relief is not to be given—

(a) in respect of the contribution under any other provision of the Income Tax Acts, or

(b) (in the case of a contribution under an annuity contract) in respect of any other premium or consideration for an annuity under the same contract.

(11) Subsection (10) does not apply to prevent the giving of relief in respect of the contribution in accordance with subsection 192A.

Relief under net pay arrangements

193

(1) This section applies where an individual is entitled to be given relief in accordance with this section in respect of the payment of a contribution under a pension scheme.

(2) The amount of the contribution is to be allowed to be deducted by the sponsoring employer from the employment income from the individual’s employment with the employer for the tax year in which the payment is made.

(3) A deduction may be made only once in respect of the same contribution.

(4) A claim for excess relief may be made if—

(a) the amount of the contributions paid by an individual under one or more relevant net pay pension schemes in a tax year exceeds the employment income from the individual’s employment or employments with the sponsoring employer or employers for the tax year, or

(b) it is not possible for the sponsoring employer or employers for any other reason to deduct the whole amount of the contribution from the individual’s employment income.

(5) A net pay pension scheme is a relevant net pay pension scheme if the members of the pension scheme entitled to be given relief in accordance with this section in respect of the payment of contributions by them under the pension scheme include the individual.

(6) On the making of the claim for excess relief the amount of the excess may be deducted in calculating the net income of the individual for the tax year (see Step 2 of the calculation in section 23 of ITA 2007).

(7) Where, after relief is given to an individual in accordance with this section for a tax year, an assessment, alteration of an assessment or other adjustment of the individual’s liability to tax is made, any appropriate consequential adjustments are to be made in relief given to the individual in accordance with this section.

(8) Where relief is given to an individual in accordance with this section for a tax year in respect of a contribution, relief is not to be given in respect of it under any other provision of the Income Tax Acts.

Relief on making of claim

194

(1) Where an individual is entitled to be given relief in accordance with this section in respect of the payment of a contribution, on the making of a claim the amount of the contribution may be deducted in calculating the net income of the individual for the tax year in which the payment is made (see Step 2 of the calculation in section 23 of ITA 2007).

(2) Where, after relief is given to an individual in accordance with this section for a tax year, an assessment, alteration of an assessment or other adjustment of the individual’s liability to tax is made, any appropriate consequential adjustments are to be made in relief given to the individual in accordance with this section.

(3) Where relief is given to an individual in accordance with this section for a tax year in respect of a contribution, relief is not to be given—

(a) in respect of the contribution under any other provision of the Income Tax Acts, or

(b) (in the case of a contribution under an annuity contract) in respect of any other premium or consideration for an annuity under the same contract.

Transfer of certain shares to be treated as payment of contribution

195

(1) For the purposes of sections 188 to 194 (relief for contributions) references to contributions paid by an individual include contributions made in the form of the transfer by the individual of eligible shares in a company within the permitted period.

(2) For the purposes of those sections the amount of a contribution made by way of a transfer of shares is the market value of the shares at the date of the transfer.

(3) “Eligible shares”, in relation to a contribution made by an individual, means shares—

(a) which the individual has exercised a right to acquire in accordance with the provisions of an SAYE option scheme, or

(b) which have been appropriated to the individual in accordance with the provisions of a share incentive plan.

(4) “The permitted period”—

(a) in relation to shares which the individual has exercised a right to acquire in accordance with the provisions of an SAYE option scheme, is the period of 90 days following the exercise of that right, and

(b) in relation to shares which have been appropriated to the individual in accordance with the provisions of a share incentive plan, is the period of 90 days following the date when the individual directed the trustees of the share incentive plan to transfer the ownership of the shares to the individual.

(5) In this section—

“SAYE option scheme” has the same meaning as in the SAYE code (see section 516 of ITEPA 2003 (... SAYE option schemes)), and

“share incentive plan” has the same meaning as in the SIP code (see section 488 of ITEPA 2003 (... share incentive plans)).

Employers' contributions

Relief for employers in respect of contributions paid

196

(1) This section makes provision about an employer’s entitlement to relief in respect of contributions paid by the employer under a registered pension scheme in respect of any individual.

(2) For the purposes of Part 2 of ITTOIA 2005 or Part 3 of CTA 2009 (trading income) —

(a) the contributions are to be treated as not being payments of a capital nature to the extent that they otherwise would be, and

(b) if they are allowed to be deducted in computing the amount of the profits of the employer, they are deductible in computing the amount of the profits for the period of account in which they are paid.

(3) For the purposes of Chapter 2 of Part 16 of CTA 2009 (expenses of management: companies with investment business), the contributions—

(a) are to be treated as being expenses of management to the extent that they otherwise would not be, and

(b) are referable to the accounting period in which they are paid.

(4) For the purposes of section 76 of FA 2012 (expenses of insurance companies), the contributions—

(a) are to be treated as meeting the conditions in section 77(2)(a) and (c) of that Act to the extent that they would otherwise not meet them, and

(b) are referable to the accounting period in which they are paid.

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) This section is subject to sections 197 and 198 (spreading of relief) (and to transitional provision contained in Part 4 of Schedule 36).

Spreading of relief

197

(1) This section applies where—

(a) contributions are paid by an employer under a registered pension scheme in two consecutive chargeable periods (“the previous chargeable period” and “the current chargeable period”), and

(b) the amount of the contributions paid in the current chargeable period otherwise than for an excepted purpose (“CCCP”) exceeds 210% of the amount of the contributions paid in the previous chargeable period (“CPCP”).

(2) Relief under the relieving provisions is to be given in respect of so much of CCCP as exceeds 110% of CPCP (“the amount of the relevant excess contributions”) in accordance with subsections (4) and (5).

(3) But subsection (2)—

(a) does not apply if the amount of the relevant excess contributions is less than £500,000, and

(b) has effect subject to section 198 (cessation of business).

(4) A fraction of the whole of the amount of the relevant excess contributions is to be treated for the purposes of the relieving provisions as if it had been paid in the chargeable period, or in each of the two or three chargeable periods, immediately after the current chargeable period (leaving only the remainder to be treated as paid in the current chargeable period).

(5) The following table specifies (by reference to the amount of the relevant excess contributions)—

(a) the fraction of the whole of the amount of the relevant excess contributions which is to be treated as paid in the chargeable period, or in each of the two or three chargeable periods, immediately after the current chargeable period, and

(b) the chargeable period or periods in which it is to be treated as paid.

AMOUNT OF THE RELEVANT EXCESS CONTRIBUTIONS	FRACTION AND CHARGEABLE PERIOD OR PERIODS
500,000 or more but less than 1,000,000	One-half of the whole of the amount of the relevant excess contributions is to be treated as paid in the chargeable period immediately after the current chargeable period
1,000,000 or more but less than 2,000,000	One-third of the whole of the amount of the relevant excess contributions is to be treated as paid in each of the two chargeable periods immediately after the current chargeable period
2,000,000 or more	One-quarter of the whole of the amount of the relevant excess contributions is to be treated as paid in each of the three chargeable periods immediately after the current chargeable period

(6) Subsection (7) specifies for the purposes of subsection (1) when contributions paid by the employer in the current chargeable period are paid for an excepted purpose.

(7) They are paid for an excepted purpose if paid with a view to funding—

(a) an increase in the amount of pensions paid to pensioner members of the pension scheme to reflect increases in the cost of living, or

(b) benefits which may accrue under the pension scheme to or in respect of individuals who become members of the pension scheme in the current chargeable period as a result of future service as employees of the employer.

(8) Where the previous chargeable period and the current chargeable period are not of equal length, this section has effect as if CPCP were the amount it would otherwise be as adjusted by being multiplied by the appropriate factor.

(9) The appropriate factor is—

$$DCCPDPCP$where—DCCP is the number of days in the current chargeable period, andDPCP is the number of days in the previous chargeable period.$

(9A) In this section “the relieving provisions” means the provisions mentioned in subsections (2) to (4) of section 196 (relief for employers in respect of contributions paid), as they have effect under that section.

(10) In this section “chargeable period” means—

(a) in a case where the contributions are deducted in computing profits to be charged under Part 2 of ITTOIA 2005 or Part 3 of CTA 2009 (trading income), a period of account, and

(b) in a case where relief in respect of the contributions is given under section 76 of FA 2012 (expenses of insurance companies) or Chapter 2 of Part 16 of CTA 2009 (expenses of management: companies with investment business), an accounting period.

Spreading of relief: cessation of business

198

(1) This section applies if—

(a) the employer ceases to carry on business in the current chargeable period or a later chargeable period in which section 197(4) would require a fraction of the amount of the relevant excess contributions to be treated as paid, and

(b) were section 197(4) to apply, relief in relation to the whole of the amount of the relevant excess contributions would not be given pre-cessation.

(2) Relief is given pre-cessation if it is given for the chargeable period in which the employer ceases to carry on business or any earlier chargeable period.

(3) The portion of the amount of the relevant excess contributions in relation to which relief would not have been given pre-cessation (“the unrelieved portion”) is be treated as paid (at the option of the employer) either—

(a) in the chargeable period in which the employer ceases to carry on business, or

(b) as provided by subsection (4).

(4) This subsection provides that the amount determined under subsection (5) is to be treated as paid on each day in the period—

(a) beginning with the current chargeable period, and

(b) ending with the day on which the employer ceases to carry on business,

(“the relevant period”).

(5) The amount referred to in subsection (4) is—

$$UPDRP$where—UP is the amount of the unrelieved portion, andDRP is the number of days in the relevant period.$

(6) Expressions used in this section and section 197 have the same meaning in this section as in that section.

Deemed contributions

199

(1) This section applies where a sum is paid to the trustees or managers of a registered pension scheme by an employer in or towards the discharge of any liability of the employer under—

(a) section 75 of the Pensions Act 1995 (c. 26)(deficiencies in the assets of a pension scheme), or

(b) Article 75 of the Pensions (Northern Ireland) Order 1995 (S.I. 1995/3213 (N.I. 22)) (corresponding provision for Northern Ireland).

(2) The making of the payment is to be treated for the purposes of the relieving provisions (within the meaning of section 197) and sections 197 and 198 as if it were the payment of a contribution by the employer under the pension scheme.

(3) Subsections (4) and (5) apply if the employer’s trade, profession, vocation or business is discontinued before the making of the payment.

(4) The payment is to be relieved—

(a) to the same extent as it would have been but for the discontinuance, and

(b) as if it had been made on the last day on which the trade, profession, vocation or business was carried on.

(5) And, for the purposes of section 76 of FA 2012, it is to be treated as meeting the conditions in section 77(2)(a) and (c) of that Act to the extent that it would otherwise not meet them.

No other relief for employers in connection with contributions

200

No sums other than contributions paid by an employer under a registered pension scheme—

(a) are deductible in computing the amount of the profits of the employer for the purposes of Part 2 of ITTOIA 2005 or Part 3 of CTA 2009 (trading income),

(b) are expenses of management for the purposes of Chapter 2 of Part 16 of CTA 2009 (expenses of management: companies with investment business), or

(c) are to count as ordinary BLAGAB management expenses of the employer for an accounting period for the purposes of section 76 of FA 2012,

in connection with the cost of providing benefits under the pension scheme.

Relief for employees

201

(1) In section 307(1) of ITEPA 2003 (exemption for provision made by employer for retirement or death benefit), after “employer” insert “ under a registered pension scheme or otherwise ”.

(2) For section 308 of ITEPA 2003 (exemption of contributions to approved personal pension arrangements) substitute—

(308) No liability to income tax arises in respect of earnings where an employee’s employer makes contributions under a registered pension scheme.

Inland Revenue contributions

Minimum contributions under pensions legislation

202

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) The Board of Inland Revenue may by regulations—

(a) prescribe circumstances in which this section does not apply, or

(b) make provision supplementing this section.

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Inheritance tax exemptions

203

(1) The Inheritance Tax Act 1984 (c. 51) is amended as follows.

(2) In section 12 (dispositions that are not transfers of value)—

(a) in subsection (2), for the words following “if” substitute “ it is a contribution under a registered pension scheme or section 615(3) scheme in respect of an employee of the person making the disposition. ”, and

(b) omit subsections (3) and (4).

(3) In section 58(1) (settled property in which no qualifying interest in possession subsists but which is not “relevant property”), for paragraph (d) substitute—

(d) property which is held for the purposes of a registered pension scheme or section 615(3) scheme;

(4) In section 151 (treatment of pension rights etc.)—

(a) omit subsections (1) and (1A),

(b) in subsections (2), (4) and (5), for “fund or scheme to which this section applies” substitute “ registered pension scheme or section 615(3) scheme ”, and

(5) In section 152 (cash options), for the words from the beginning to “or scheme” substitute “ Where on a person’s death an annuity becomes payable under a registered pension scheme or section 615(3) scheme to a widow, widower, surviving civil partner or dependant of that person and under the terms of the scheme ”.

(6) In section 272 (general interpretation), insert at the appropriate places—

“registered pension scheme” has the same meaning as in Part 4 of the Finance Act 2004;

, and

“section 615(3) scheme” means a superannuation fund to which section 615(3)of the Taxes Act 1988 applies;

Chapter 5 — Registered pension schemes: tax charges

Charges on authorised payments

Authorised pensions and lump sums

204

(1) Schedule 31 contains provision about the taxation of pensions and lump sums which are authorised to be paid by this Part.

(2) Schedule 36 contains (in Part 4) transitional provision about the taxation of annuities under existing retirement annuity contracts and other relevant transitional provision.

(3) For further provision, in addition to that contained in this Chapter, about the taxation of pensions and lump sums which are authorised to be paid by this Part, see—

(a) Chapter 5A of Part 9 of ITEPA 2003 (pensions under registered pension schemes);

(b) Chapter 15A of that Part of that Act (lump sums under registered pension schemes).

Short service refund lump sum charge

205

(1) A charge to income tax, to be known as the short service refund lump sum charge, arises where a short service refund lump sum is paid by a registered pension scheme.

(2) The person liable to the short service refund lump sum charge is the scheme administrator.

(3) The scheme administrator is liable to the short service refund lump sum charge whether or not—

(a) the scheme administrator, and

(b) the person to whom the short service refund lump sum is paid,

are resident... ... in the United Kingdom.

(4) The rate of the charge is—

(a) 20% in respect of so much of the lump sum as does not exceed £20,000, and

(b) 50% in respect of so much (if any) of it as exceeds that limit.

(5) The Treasury may by order amend subsection (4) so as to—

(a) increase or decrease either or both of the rates for the time being specified in that subsection, or

(b) increase the limit for the time being specified in paragraph (a) of that subsection.

(6) Tax under this section is to be charged on the amount of the lump sum paid or, if the rules of the pension scheme permit the scheme administrator to deduct the tax before payment, on the amount of the lump sum before deduction of tax.

(7) A short service refund lump sum is not to be treated as income for any purpose of the Tax Acts.

Special lump sum death benefits charge

206

(1) A charge to income tax, to be known as the special lump sum death benefits charge, arises where—

(a) a pension protection lump sum death benefit,

(b) an annuity protection lump sum death benefit, ...

(d) a flexi-access drawdown fund lump sum death benefit,

is paid , to a non-qualifying person, by a registered pension scheme in respect of a member who had reached the age of 75 at the date of the member's death.

(1ZA) In subsection (1) the reference to a member (and to the member's death) are to be read—

(a) in relation to—

(i) a drawdown pension fund lump sum death benefit under paragraph 17(2) of Schedule 29, or

(ii) a flexi-access drawdown fund lump sum death benefit under paragraph 17A(2) of Schedule 29,

as a reference to a dependant (and to the dependant's death),

(b) in relation to a flexi-access drawdown fund lump sum death benefit under paragraph 17A(3) of Schedule 29, as a reference to a nominee (and to the nominee's death), and

(c) in relation to a flexi-access drawdown fund lump sum death benefit under paragraph 17A(4) of Schedule 29, as a reference to a successor (and to the successor's death).

(1A) The special lump sum death benefits charge also arises where—

(a) a defined benefits lump sum death benefit, or

(b) an uncrystallised funds lump sum death benefit,

is paid , to a non-qualifying person, by a registered pension scheme in respect of a member who had reached the age of 75 at the date of the member's death.

(1B) The special lump sum death benefits charge also arises where—

(a) a lump sum death benefit is paid , to a non-qualifying person, by a registered pension scheme in respect of a member of the scheme who had not reached the age of 75 at the date of the member's death,

(b) the lump sum death benefit is—

(i) a drawdown pension fund lump sum death benefit under paragraph 17(1) of Schedule 29,

(ii) a flexi-access drawdown fund lump sum death benefit under paragraph 17A(1) of Schedule 29,

(iia) a defined benefits lump sum death benefit,or

(iii) an uncrystallised funds lump sum death benefit, and

(c) the lump sum death benefit is not paid before the end of the period of two years beginning with the earlier of the day on which the scheme administrator of the scheme first knew of the member's death and the day on which the scheme administrator could first reasonably have been expected to have known of it.

(1C) The special lump sum death benefits charge also arises where—

(a) a lump sum death benefit is paid , to a non-qualifying person, by a registered pension scheme on the death of a dependant, nominee or successor of a deceased member of the scheme,

(b) the dependant, nominee or successor (“the beneficiary”) had not reached the age of 75 at the date of the beneficiary's death,

(i) a drawdown pension fund lump sum death benefit under paragraph 17(2) of Schedule 29, or

(ii) a flexi-access drawdown fund lump sum death benefit under paragraph 17A(2), (3) or (4) of Schedule 29, and

(d) the lump sum death benefit is not paid before the end of the period of two years beginning with the earlier of the day on which the scheme administrator of the scheme first knew of the beneficiary's death and the day on which the scheme administrator could first reasonably have been expected to have known of it.

(2) The person liable to the special lump sum death benefits charge is the scheme administrator.

(3) The scheme administrator is liable to the special lump sum death benefits charge whether or not—

(a) the scheme administrator, and

(b) the person to whom the lump sum death benefit is paid,

are resident ... ... in the United Kingdom.

(4) The rate of the charge is 45% in respect of the lump sum death benefit.

(5) The Treasury may by order increase or decrease the rate for the time being specified in subsection (4).

(6) Tax under this section is to be charged on the amount of the lump sum paid or, if the rules of the pension scheme permit the scheme administrator to deduct the tax before payment, on the amount of the lump sum before deduction of tax.

(7) A lump sum death benefit in respect of which income tax is charged under this section is not to be treated as income for any purpose of the Tax Acts (but see subsection (8)).

(8) Where—

(a) a lump sum death benefit in respect of which tax is charged under this section is one paid to a non-qualifying person in the person's capacity as a trustee, and

(b) a payment of any part of the lump sum is made out of a settlement to a beneficiary who is an individual,

the amount received by the beneficiary, together with so much of the tax charged under this section on the lump sum as is attributable to the amount received by the beneficiary, is income of the beneficiary for income tax purposes but the beneficiary may claim to deduct that much of that tax from the income tax charged on the beneficiary's total income for the tax year in which the payment is made to the beneficiary.

(9) For the purposes of this section, a person is a “non-qualifying person” in relation to payment of a lump sum if—

(a) the person is not an individual, or

(b) the person is an individual and the payment is made to the person in the person's capacity as—

(i) a trustee or personal representative,

(ii) a director of a company,

(iii) a partner in a firm, or

(iv) a member of a limited liability partnership,

except that a person is not a “non-qualifying person” in relation to payment of a lump sum if the payment is made to the person in the person's capacity as a bare trustee.

(10) In subsection (9)—

“bare trustee” means a person acting as trustee for—an individual absolutely entitled as against the trustee,two or more individuals who are so entitled,an individual who would be so entitled but for being a minor or otherwise lacking legal capacity, ortwo or more individuals who would be so entitled but for all or any of them being a minor or otherwise lacking legal capacity,

“director” is read in accordance with section 452 of CTA 2010, and

references to a firm are to be read in the same way as references to a firm in Part 9 of ITTOIA 2005 (which contains special provision about partnerships).

Authorised surplus payments charge

207

(1) A charge to income tax, to be known as the authorised surplus payments charge, arises where an authorised surplus payment is made to a sponsoring employer by an occupational pension scheme that is a registered pension scheme.

(2) The person liable to the authorised surplus payments charge is the scheme administrator.

(3) The scheme administrator is liable to the authorised surplus payments charge whether or not—

(a) the scheme administrator, and

(b) the sponsoring employer,

are resident ... ... in the United Kingdom.

(4) The rate of the charge is 25% in respect of the authorised surplus payment.

(5) The Treasury may by order increase or decrease the rate for the time being specified in subsection (4).

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