Finance (No. 3) Bill (HC Bill 200)

(6) For subsection (8) substitute—

“(8) If, during the pension input period, the annual rate of the pension, or
the amount of the lump sum, to which the individual would be
entitled under the arrangement has been reduced by any surrender
5made in return for any other entitlement, any allocation made, or any
similar action taken, pursuant to an option available to the
individual under the arrangement, the amount of the reduction (to
the extent that it is not reflected in an amount added under
subsection (8A)) is to be added to PE or LSE.

(8A) 10If, during the pension input period—

(a) benefit crystallisation event 2 occurs in relation to the
individual and the arrangement,

(b) benefit crystallisation event 3 occurs in relation to the
individual and the arrangement otherwise than by reason of
15a provision contained in, or made under, any enactment, or

(c) benefit crystallisation event 6 occurs in relation to the
individual and the arrangement by virtue of the individual
becoming entitled to a pension commencement lump sum or
a lifetime allowance excess lump sum,

20the relevant amount is to be added to PE or LSE.

(8B) In subsection (8A) “the relevant amount” is—

(a) in the case of benefit crystallisation event 2, the annual rate of
the pension to which the individual became entitled,

(b) in the case of benefit crystallisation event 3, the increase in the
25annual rate of the pension, and

(c) in the case of benefit crystallisation event 6, the amount of the
lump sum.

(8C) If, during the pension input period, an adjustment to the annual rate
of the pension, or the amount of the lump sum, to which the
30individual would be entitled under the arrangement has been made
in consequence of the scheme administrator satisfying a liability
under section 237B in respect of the individual, if and to the extent
that the adjustment is reflected in PE or LSE the amount of the
adjustment is to be added to PE or LSE.

(8D) 35But no amount is to be added under subsection (8C) by reason of an
adjustment made in consequence of the scheme administrator
satisfying a liability under section 237B in a case where subsection (6)
of that section applied.”

(7) Omit subsection (9).

13 40After section 236 insert—

“236A Post-entitlement enhancements

(1) This section applies in relation to the arrangement if, during the
pension input period (“the affected pension input period”), the
individual enters into a scheme for the making of an avoidance-
45inspired post-entitlement enhancement.

(2) A “post-entitlement enhancement” is an increase in the annual rate
of a scheme pension under the arrangement, at a time after the
member has become entitled to the scheme pension.

(3) A post-entitlement enhancement is “avoidance-inspired” if the main
5purpose, or one of the main purposes, of the individual in entering
into the scheme was to avoid or reduce a liability to the annual
allowance charge.

(4) This Part has effect in relation to the arrangement and the individual,
as respects the affected pension input period and all subsequent
10pension input periods, as if—

(a) section 234 were modified in accordance with subsection (5),
and

(b) sections 235 and 236 were omitted.

(5) The modifications of section 234 are that—

(a) 15in subsection (4), for the words after “the arrangement is”
there are substituted “such amount as, applying normal
actuarial practice, is the expected cost of giving effect to the
individual’s rights under the arrangement at the end of the
immediately preceding pension input period (or is nil if the
20pension input period is the first pension input period of the
arrangement).”,

(b) in subsection (5), for the words after “the arrangement is”
there are substituted “such amount as, applying normal
actuarial practice, is the expected cost of giving effect to the
25individual’s rights under the arrangement at the end of the
pension input period.”, and

(c) subsection (6) is omitted.

(6) In this section “scheme” includes any arrangements, agreement,
understanding, transaction or series of transactions (whether or not
30legally enforceable).”

14 In subsection (5) of section 237 (hybrid arrangements), for “236” substitute
“236A”.

15 After that section insert—

“237A Liability of individual

(1) 35The individual is liable to the annual allowance charge.

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

(a) the individual, and

(b) the scheme administrator of the pension scheme or pension
40schemes concerned,

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

237B Liability of scheme administrator

(1) This section applies if—

(a) 45the amount of the individual’s liability to the annual
allowance charge for a tax year exceeds £2,000, and

(b) the pension scheme input amount in the case of the
individual in relation to a registered pension scheme for the
tax year exceeds the amount of the annual allowance
specified in section 228(1) for the tax year.

(2) 5The pension scheme input amount in the case of the individual in
relation to a pension scheme for a tax year is the aggregate of the
pension input amounts for the tax year in respect of arrangements
relating to the individual under the pension scheme.

(3) The individual may give a notice to the scheme administrator of the
10pension scheme specifying that the individual and the scheme
administrator are to be jointly and severally liable in respect of so
much of the annual allowance charge arising in the case of the
individual as—

(a) does not exceed the amount of the annual allowance charge
15which would be chargeable on the excess mentioned in
subsection (1)(b) if it were charged at the relevant rate, and

(b) is specified in the notice,

(“the joint liability amount”).

(4) In subsection (3)(a) “the relevant rate” means—

(a) 20in relation to so much of the excess as does not exceed the
amount (if any) on which tax is chargeable in the case of the
individual for the tax year at the additional rate by virtue of
paragraph (c) of subsection (4A) of section 227, the additional
rate,

(b) 25in relation to so much of the excess as is not within paragraph
(a) and does not exceed the amount (if any) on which tax is so
chargeable at the higher rate by virtue of paragraph (b) of that
subsection, the higher rate, and

(c) in relation to any remaining part of the excess, the basic rate.

(5) 30The notice—

(a) must be given not later than 31 July in the year following that
in which the tax year ends (but subject to subsection (6)),

(b) must be made in such manner and form, and contain such
particulars, as may be prescribed by regulations made by the
35Commissioners for Her Majesty’s Revenue and Customs,
and

(c) may be amended by giving the scheme administrator notice
in accordance with provision made by regulations made by
the Commissioners for Her Majesty’s Revenue and Customs
40but may not be revoked.

(6) In a case in which the individual becomes actually entitled to all of
the individual’s benefits under the pension scheme in the tax year or
benefit crystallisation event 5, 5A or 5B occurs in the tax year in
relation to the individual and the pension scheme, the notice must be
45given before the date on which the individual becomes so entitled or
the benefit crystallisation event occurs.

(7) On receipt by the scheme administrator of the notice the scheme
administrator and the individual become jointly and severally liable
to pay the joint liability amount, but subject to sections 237C and

237D and to any amendment made to the notice in accordance with
regulations under subsection (5)(c).

(8) The scheme administrator is liable under subsection (7) whether or
not—

(a) 5the individual, and

(b) the scheme administrator,

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

(9) Where (but for this subsection) a notice could be given to a scheme
10administrator of a pension scheme but, before it is given, there is a
transfer of all of the sums or assets—

(a) held for the purposes of, or

(b) representing accrued rights under,

the pension scheme so as to become held for the purposes of, or to
15represent rights under, another registered pension scheme, the
notice may not be given to that scheme administrator but may
instead be given to the scheme administrator of that other pension
scheme.

(10) The Treasury may by regulations make provision modifying the
20operation of this section in other cases in which there is a transfer of
any of the sums or assets—

(a) held for the purposes of, or

(b) representing accrued rights under,

the pension scheme so as to become held for the purposes of, or to
25represent rights under, another registered pension scheme.

(11) The Treasury may by order amend paragraph (a) of subsection (1) so
as to increase the sum for the time being specified in that paragraph.

237C Exceptions

(1) The scheme administrator of a pension scheme does not become
30liable under section 237B if the time when the scheme administrator
would become liable is during an assessment period in relation to the
pension scheme; and if an assessment period in relation to a pension
scheme begins at a time when the scheme administrator is already so
liable (but has not satisfied the liability), the liability ceases when the
35assessment period begins.

References to an assessment period are to be construed in accordance
with sections 132 and 159 of the Pensions Act 2004 and articles 116
and 143 of the Pensions (Northern Ireland) Order 2005 (S.I. 2005/255S.I. 2005/255
(N.I. 1)).

(2) 40The scheme administrator of a pension scheme is not liable under
section 237B in respect of any amount if there is no power to make a
consequential adjustment to the entitlement of the individual
concerned to benefits under the pension scheme in respect of the
amount because of section 237E(2) (inalienability of guaranteed
45minimum pension etc).

(3) The Treasury may by regulations prescribe other circumstances in
which a scheme administrator of a pension scheme does not become,
or ceases to be, liable under section 237B.

237D Discharge of scheme administrator’s liability

(1) If the scheme administrator of a pension scheme is liable under
section 237B, the scheme administrator may apply to an officer of
Revenue and Customs for the discharge of the scheme
5administrator’s liability on either of the following grounds.

(2) The grounds are—

(a) that paying the amount to which the scheme administrator is
liable would be to the substantial detriment of the interests of
the members of the pension scheme, and

(b) 10that in all the circumstances of the case it would not be just
and reasonable for the scheme administrator to be liable to
that amount.

(3) On receiving an application under subsection (1), an officer of
Revenue and Customs must decide whether to discharge the scheme
15administrator’s liability.

(4) An officer of Revenue and Customs must notify the scheme
administrator of the decision on the application.

(5) The discharge of the scheme administrator’s liability does not affect
the liability of any other person in respect of the same amount.

(6) 20The Treasury may by regulations amend this section so as to alter the
grounds on which an application under subsection (1) may be made.

(7) Regulations made by the Commissioners for Her Majesty’s Revenue
and Customs may make provision supplementing this section; and
the regulations may in particular make provision as to the time limits
25for the making of an application.

237E Consequential benefit adjustments to be reasonable etc

(1) Where the scheme administrator of a pension scheme satisfies a
liability under section 237B in respect of the individual,
consequential adjustment must be made to the entitlement of the
30individual to benefits under the pension scheme on a basis that is just
and reasonable having regard to normal actuarial practice.

(2) Any power to make such consequential adjustment is subject to
section 159 of the Pension Schemes Act 1993 or section 155 of the
Pension Schemes (Northern Ireland) Act 1993 (inalienability of
35guaranteed minimum pension etc).

237F Power to modify rules

The Commissioners for Her Majesty’s Revenue and Customs may by
regulations make any modification of the rules of registered pension
schemes that appear appropriate to facilitate the operation of
40sections 237A to 237E.”

16 (1) Section 238 (pension input period) is amended as follows.

(2) In subsection (1)(a), for the words after “ending with” substitute “—

(i) a nominated date falling before the anniversary of the
relevant commencement date, or

(ii) if there is not such a nominated date, the first 5 April
after the relevant commencement date (or, if the
relevant commencement date is itself 5 April, that
date), and”

(3) 5After subsection (4) insert—

“(4A) A date nominated for the purposes of subsection (3) must not be a
date before that on which the nomination is made.”

(4) In subsection (6)—

(a) omit “the earlier of”,

(b) 10for “and” substitute “or”, and

(c) insert at the beginning of paragraph (b) “if there is not such a
nominated date,”.

(5) In subsection (7), for “to be treated as having ended when” substitute “that
in which”.

17 15After that section insert—

“238A Power to make orders about charge

(1) The Treasury may by order make provision about the annual
allowance charge.

(2) The provision may include modifications of any of sections 227 to
20238.

(3) The provision may include provision consequential on, or
supplementary or incidental to, the provision made by those sections
and transitional provisions (including provision making
modifications of enactments).

(4) 25“Modifications” includes amendments.”

18 In section 254 (accounting for tax by scheme administrators), after
subsection (7) insert—

“(7A) Where a scheme administrator is liable under section 237B in respect
of the annual allowance charge for a tax year, for the purposes of
30subsection (2) the tax is to be taken to be charged on the scheme
administrator in the period ending with 31 December in the year
following that in which that tax year ended (or such earlier period as
the scheme administrator may elect in a return for that earlier
period).

(7B) 35But if the notice which gave rise to the liability is amended in
accordance with regulations under section 237B(5)(c), any additional
tax to which the scheme administrator becomes liable is to be taken
for the purposes of subsection (2) to be charged in the later of the
period in which it is taken to be charged by virtue of subsection (7A)
40and the period in which the scheme administrator receives notice of
the amendment.”

19 In section 255(1) (assessments), after paragraph (c) insert—

“(ca) liability to the annual allowance charge by virtue of section
237B,”.

20 In section 269(1)(a) (appeal against discharge of liability), after “under”
insert “section 237D (discharge of scheme administrator’s liability to annual
allowance charge),”.

21 In section 279(1) (other definitions), insert at the appropriate places—

• 5““consumer prices index” means—

  (a)

  the general index for consumer prices published by
  the Statistics Board, or

  (b)

  if that index is not published for a relevant month,
  any substituted index or index figures published by
  10the Statistics Board,”, and

• ““pensionable age” has the meaning given by the rules in
  paragraph 1 of Schedule 4 to the Pensions Act 1995 or
  paragraph 1 of Schedule 2 to the Pensions (Northern Ireland)
  Order 1995,”.

22 15In section 280(2) (general index), insert at the appropriate places—

23 In section 282(1A) (orders and regulations subject to Commons-only draft
affirmative procedure)—

(a) 20for “227(5A),” substitute “237B(11),”, and

(b) after “242(5)” insert “, no order may be made under section 228(2)
which specifies an amount for any tax year less than the annual
allowance for the immediately preceding tax year and no order may
be made under section 238A which increases any person’s liability to
25tax”.

24 (1) Schedule 34 (currently-relieved non-UK pension schemes etc) is amended as
follows.

(2) In paragraph 8(1), after “a currently-relieved non-UK pension scheme”
insert “and its scheme manager”.

(3) 30After paragraph 9 insert—

“9A (1) This paragraph applies where an individual—

(a) is a currently-relieved member of a currently-relieved non-
UK pension scheme in relation to a tax year, but

(b) was a member, but not a currently-relieved member, of the
35currently-relieved non-UK pension scheme in relation to
any one or more of the 3 immediately preceding tax years
(a “relevant tax year”).

(2) Section 228A has effect in relation to the individual for the tax year
as it would if the individual had been a currently-relieved member
40of the pension scheme for the relevant tax year (or each of the
relevant tax years) and paragraphs 10 and 11 of this Schedule were
omitted.

9B (1) This paragraph applies where an individual—

(a) is a member of a registered pension scheme in relation to a
45tax year, and

(b) was a currently-relieved member of a currently-relieved
non-UK pension scheme in relation to any one or more of
the 3 immediately preceding tax years (a “relevant tax
year”).

(2) 5Section 228A has effect in relation to the individual for the tax year
as it would if the currently-relieved non-UK pension scheme had
been a registered pension scheme for the relevant tax year (or each
of the relevant tax years).”

(4) In paragraph 12(1), after “a currently-relieved non-UK pension scheme”
10insert “and its scheme manager”.

25 In Schedule 36 (transitional provision etc), omit paragraph 49
(disapplication of annual allowance charge for individuals with enhanced
protection) and the heading before it.

26 (1) In FA 2009—

(a) 15in Schedule 2, omit paragraph 15, and

(b) in Schedule 35, omit paragraph 22.

(2) In the Registered Pension Schemes (Standard Lifetime and Annual
Allowances) Order 2010 (S.I. 2010/922S.I. 2010/922), omit article 3.

Part 2 20Commencement and transitional provision

27 (1) The amendments made by Part 1 have effect for the tax year 2011-12 and
subsequent tax years.

(2) Apart from the amendments made by paragraph 16(2) and (4), such of the
amendments as apply in relation to pension input periods have effect in
25relation to pension input periods ending in the tax year 2011-12 but
beginning earlier (as well as those beginning in that tax year).

28 (1) This paragraph applies where—

(a) the pension input period in respect of any arrangement relating to
the individual which ends in the tax year 2011-12 begins before 14
30October 2010 (a “straddling pension input period”), and

(b) the total pension input amount in the case of the individual for that
tax year exceeds £50,000.

(2) The following provisions apply for arriving at the amount in respect of
which the annual allowance charge is charged for that tax year (instead of
35the charge being in respect of the amount by which the total pension input
amount exceeds the amount of the annual allowance).

(3) Treat each straddling pension input period as if it were 2 separate pension
input periods—

(a) one beginning when the straddling pension input period begins and
40ending with 13 October 2010 (a “pre-announcement period”), and

(b) the other beginning with 14 October 2010 and ending when the
straddling pension input period ends (a “post-announcement
period”).

And treat any pension input period in respect of any arrangement relating
to the individual which ends in the tax year 2011-12 which is not a straddling
pension input period as if it were a post-announcement period.

(4) Arrive at the pension input amount in respect of each post-announcement
5period (as if it were a pension input period ending in the tax year 2011-12)
and aggregate those amounts.

(5) Deduct £50,000 from that aggregate.

(6) Arrive at the pension input amount in respect of each pre-announcement
period (as if it were a pension input period ending in the tax year 2011-12)
10and aggregate those amounts.

(7) Deduct from that aggregate the difference between £255,000 and the lesser
of—

(a) £50,000, and

(b) the aggregate arrived at under sub-paragraph (4).

15The result (or, if a negative amount, nil) is the pre-announcement periods
total.

(8) Aggregate the post-announcement periods total and the pre-announcement
periods total.

(9) Deduct any amount by which (apart from this paragraph) the annual
20allowance in the case of the individual for the tax year would have been
increased by virtue of section 228A of FA 2004 or, if less, by so much of any
such amount as equals that aggregate.

(10) Any result is the amount in respect of which the annual allowance charge is
charged for the tax year 2011-12.

29 25Where paragraph 28 applies in the case of the individual, section 228A of FA
2004 has effect in the case of the individual for tax years subsequent to the
tax year 2011-12—

(a) as if the references in subsections (3)(a) and (b) of that section to the
amount of the annual allowance for that tax year were to £50,000, and

(b) 30as if any amount deducted under sub-paragraph (9) of that
paragraph had been “used-up” within the meaning of that section.

30 (1) This paragraph has effect in relation to the application of section 228A of FA
2004 for the tax years 2011-12, 2012-13 and 2013-14.

(2) The assumptions in sub-paragraph (3) are to be made in determining—

(a) 35whether the amount of the annual allowance for the tax years 2008-
09, 2009-10 and 2010-11 exceeded the total pension input amount in
the case of the individual for the tax year, and

(b) whether any excess of the annual allowance over the total pension
input amount in the case of the individual for any of those tax years
40has been used up.

(3) The assumptions are—

(a) that the annual allowance for each of the tax years 2008-09, 2009-10
and 2010-11 was £50,000, and

(b) that the provisions of Part 4 of FA 2004 apply in relation to pension
input periods in respect of arrangements relating to the individual
5that end in any of those tax years subject to the amendments made
by this Schedule (including that inserting section 228A).

31 In determining under section 233 of FA 2004 the pension input amount in
respect of an arrangement relating to an individual for a pension input
period of the arrangement that ends in the tax year 2009-10, 2010-11 or 2011-
1012, there is to be deducted from what would otherwise be the pension input
amount so much of any contributions refund lump sum (within the meaning
of paragraph 15 of Schedule 35 to FA 2009) paid to the individual (or the
personal representatives of the individual) as is attributable to contributions
paid under the arrangement in the pension input period.

32 15Section 237B has effect in relation to the tax year 2011-12 as if the reference
in subsection (5)(a) of that section to 31 July in the year following that in
which the tax year ends were to 31 December 2013.

33 Section 254(7A) has effect in relation to the tax year 2011-12 as if the reference
in that provision to 31 December in the year following that in which the tax
20year ends were to 31 March 2014.

34 Expressions used in this Part of this Schedule and Part 4 of FA 2004 have the
same meaning in this Part of this Schedule as in that Part of that Act.

Section 67

SCHEDULE 18 Lifetime allowance charge

25Part 1 Amendments

1 Part 4 of FA 2004 (pension schemes etc) is amended as follows.

2 (1) Section 218 (individual’s lifetime allowance and standard lifetime
allowance) is amended as follows.

(2) 30For subsections (2) and (3) substitute—

“(2) The standard lifetime allowance for the tax year 2012-13 and, subject
to subsection (3), subsequent tax years is £1,500,000.

(3) The Treasury may by order provide that the standard lifetime
allowance for any tax year subsequent to the tax year 2012-13 is such
35amount, not being less than the standard lifetime allowance for the
immediately preceding tax year, as is specified in the order.”

(3) After subsection (5) insert—

“(5A) Where the operation of a lifetime allowance enhancement factor is
provided for by any of sections 220, 222, 223 and 224 and the time
40mentioned in the definition of SLA in the section concerned was
before 6 April 2012, subsection (4) has effect as if the amount to be