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625 Person liable for tax | |
If section 623 applies, the person liable for any tax charged under this Part is | |
the employee mentioned in condition C in section 623(4) to whom or for whose | |
benefit the payment is made. | |
626 Income tax treated as paid | 5 |
(1) An employee who is liable for the tax charged on a payment to which section | |
623 applies is treated as having paid income tax at the basic rate on the amount | |
chargeable. | |
(2) The income tax treated as paid under subsection (1) is not repayable. | |
627 Meaning of “grossing up” | 10 |
(1) In section 624 “grossing up” by reference to the basic rate means calculating the | |
amount (“the gross amount”) which after deduction of income tax at the basic | |
rate would equal the amount to be grossed up (“the net amount”). | |
(2) The gross amount is the sum of the net amount and the tax deducted. | |
628 Interpretation | 15 |
(1) In this Chapter— | |
“employee”— | |
(a) includes a person who is to be, or has been, an employee, and | |
(b) in relation to a company, includes any officer or director of the | |
company and any other person taking part in the management | 20 |
of the affairs of the company; | |
“exempt approved scheme” has the meaning given in section 592(1) of | |
ICTA; | |
“relevant statutory scheme” has the meaning given in section 611A(1) of | |
ICTA. | 25 |
(2) For the purposes of the definition of “employee” in subsection (1), “director”, | |
in relation to a company, includes— | |
(a) in the case of a company the affairs of which are managed by a board | |
of directors or similar body, a member of that board or body, | |
(b) in the case of a company the affairs of which are managed by a single | 30 |
director or similar person, that person, | |
(c) in the case of a company the affairs of which are managed by the | |
members themselves, a member of that company; | |
and includes a person who is to be or has been a director. | |
(3) If section 623 applies to a payment made out of funds which are or have been | 35 |
held for the purposes of a relevant statutory scheme established under a public | |
general Act, any reference in this Chapter to an employee includes references | |
to a person who holds an office, to a person who is to hold an office and to a | |
person who has ceased to hold an office. | |
This is without prejudice to subsection (1). | 40 |
(4) For the purposes of subsection (3), “office” includes in particular any position | |
which has an existence independent of the person who holds it and may be | |
filled by successive holders. | |
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Chapter 14 | |
Pre-1973 pensions paid under the Overseas Pensions Act 1973 | |
629 Pre-1973 pensions paid under the Overseas Pensions Act 1973 | |
(1) This section applies to a pension if— | |
(a) it is paid under section 1 of OPA 1973 (whether or not paid out of a fund | 5 |
established under a scheme made under that section), | |
(b) it is a pre-1973 pension, and | |
(c) it is paid to— | |
(i) the original pensioner, or | |
(ii) the widow or widower of the original pensioner. | 10 |
(2) But this section does not apply to a part of a pension which is paid because the | |
Pensions (Increase) Act 1971 (c. 56) applies to it (and accordingly section 569 | |
applies to that part of the pension). | |
(3) Chapter 18 of this Part provides an exemption where a pension to which this | |
section applies is paid to a person who is not resident in the United Kingdom | 15 |
(see sections 647 and 651). | |
630 Interpretation | |
(1) For the purposes of this Chapter a person is the “original pensioner” in relation | |
to a pension if— | |
(a) the pension is payable by virtue of the person’s service, and | 20 |
(b) the person retired from that service before 6th April 1973. | |
(2) For the purposes of this Chapter a pension is a “pre-1973 pension” if, | |
immediately before 6th April 1973— | |
(a) the pension was payable to— | |
(i) the original pensioner, or | 25 |
(ii) the widow or widower of the original pensioner, and | |
(b) that person was resident in the United Kingdom. | |
631 Taxable pension income | |
(1) If section 629 applies, the taxable pension income for a tax year is the amount | |
on which tax would be chargeable if the pension were charged to tax under | 30 |
Case V of Schedule D for that year (see in particular the provisions of ICTA | |
listed in subsection (2)). | |
(2) Those provisions of ICTA are sections 65 and 68 (calculation of the amount of | |
the income on which tax is to be charged in the tax year). | |
632 Person liable for tax | 35 |
If section 629 applies, the person liable for any tax charged under this Part is | |
the person receiving or entitled to the pension. | |
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Chapter 15 | |
Voluntary annual payments | |
633 Voluntary annual payments | |
(1) This section applies to an annual payment which— | |
(a) is paid voluntarily, or | 5 |
(b) is capable of being discontinued, | |
if conditions A and B are met. | |
(2) Condition A is that the payment is paid to— | |
(a) a former employee or a former office holder, | |
(b) the widow or widower of a former employee or former office holder, or | 10 |
(c) any child, relative or dependant of a former employee or a former office | |
holder. | |
(3) Condition B is that the payment is paid by or on behalf of— | |
(a) the person— | |
(i) who employed the former employee, or | 15 |
(ii) under whom the former office holder held the office, or | |
(b) the successors of that person. | |
(4) But this section applies to a payment which is paid by or on a behalf of a person | |
who is outside the United Kingdom only if it is paid to a person resident in the | |
United Kingdom. | 20 |
(5) In this section “office” includes in particular any position which has an | |
existence independent of the person who holds it and may be filled by | |
successive holders. | |
634 Taxable pension income: UK voluntary annual payments | |
(1) The taxable pension income for payments to which section 633 applies is | 25 |
determined in accordance with this section if the payments are made by or on | |
behalf of a person who is in the United Kingdom. | |
(2) The taxable pension income for a tax year is the full amount of the payments | |
accruing in that year irrespective of when any amount is actually paid. | |
635 Taxable pension income: foreign voluntary annual payments | 30 |
(1) The taxable pension income for payments to which section 633 applies is | |
determined in accordance with this section if the payments are made by or on | |
behalf of a person who is outside the United Kingdom. | |
(2) The taxable pension income for a tax year is the amount on which tax would be | |
chargeable if the pension were charged to tax under Case V of Schedule D for | 35 |
that year (see in particular the provisions of ICTA listed in subsection (3)). | |
(3) Those provisions of ICTA are— | |
(a) sections 65 and 68 (calculation of the amount of the income on which | |
tax is to be charged in the tax year); | |
(b) section 584 (relief for unremittable overseas income); | 40 |
(c) section 585 (relief on delayed remittances). | |
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636 Person liable for tax | |
If section 633 applies, the person liable for any tax charged under this Part is | |
the person receiving or entitled to the payment. | |
Chapter 16 | |
Exemption for certain lump sums | 5 |
637 Exemption for lump sums provided under certain pension schemes etc. | |
(1) No liability to income tax arises on a lump sum provided under— | |
(a) approved personal pension arrangements, | |
(b) a tax-exempt pension scheme, or | |
(c) a retirement annuity contract. | 10 |
(2) But subsection (1)(b) applies to a lump sum paid in compensation for loss of | |
office or employment, or for loss or diminution of earnings, only if— | |
(a) the payment is properly regarded as earned by past services, or | |
(b) the loss of office or employment, or the loss or diminution of earnings, | |
is due to ill-health. | 15 |
(3) Subsection (1)(b) does not apply to a lump sum to which section 583 (approved | |
retirement benefit schemes: unauthorised payments) or section 623 (return of | |
surplus AVCs) applies. | |
This includes cases where section 583 applies by virtue of section 593. | |
(4) Subsection (1)(c) applies to a lump sum only if it is provided in consequence of | 20 |
a right which meets the conditions in paragraphs (a) and (b) of section 620(3) | |
of ICTA. | |
(5) In this section— | |
“approved personal pension arrangements” has the same meaning as in | |
Chapter 4 of Part 14 of ICTA (see section 630(1) of ICTA); | 25 |
“earnings” means earnings or amounts treated as earnings which | |
constitute employment income (see section 7(2)(a) or (b)); | |
“office” includes in particular any position which has an existence | |
independent of the person who holds it and may be filled by successive | |
holders; | 30 |
“retirement annuity contract” has the same meaning as in Chapter 9 of this | |
Part (see section 606). | |
(6) In this section “tax-exempt pension scheme” means— | |
(a) a retirement benefits scheme which is— | |
(i) an approved scheme, | 35 |
(ii) a relevant statutory scheme, or | |
(iii) a scheme set up by a government outside the United Kingdom | |
for the benefit, or primarily for the benefit, of its employees, | |
(b) any such scheme or fund as was described in section 221(1) and (2) of | |
ICTA 1970 (schemes to which payments could be made without charge | 40 |
to tax under section 220 of that Act). | |
(7) For the purposes of subsection (6)— | |
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“relevant statutory scheme” has the meaning given in section 611A(1) of | |
ICTA; | |
“retirement benefits scheme” has the meaning given in section 611 of | |
ICTA; | |
“approved”, in relation to a retirement benefits scheme, means that the | 5 |
scheme is approved by the Board of Inland Revenue for the purposes | |
of— | |
(a) Chapter 2 of Part 2 of FA 1970, or | |
(b) Chapter 1 of Part 14 of ICTA. | |
Chapter 17 | 10 |
Exemptions: any taxpayer | |
638 Awards for bravery | |
(1) No liability to income tax arises on a pension or annuity if it is paid to the | |
holder of an award for bravery in respect of the award. | |
(2) In this section “award for bravery” means— | 15 |
the Victoria Cross, | |
the George Cross, | |
the Albert Medal, | |
the Edward Medal, | |
the Military Cross, | 20 |
the Distinguished Flying Cross, | |
the Distinguished Conduct Medal, | |
the Conspicuous Gallantry Medal, | |
the Distinguished Service Medal, | |
the Military Medal, | 25 |
the Distinguished Flying Medal. | |
639 Pensions in respect of death due to military or war service | |
No liability to income tax arises on these pensions and allowances— | |
(a) a pension or allowance payable by or on behalf of the Department of | |
Work and Pensions under so much of any Order in Council, Royal | 30 |
Warrant, order or scheme as relates to death due to— | |
(i) service in the armed forces of the Crown, | |
(ii) wartime service in the merchant navy, or | |
(iii) war injuries; | |
(b) a pension or allowance— | 35 |
(i) payable by the Ministry of Defence in respect of death due to | |
peacetime service in the armed forces of the Crown before 3 | |
September 1939, and | |
(ii) payable at rates, and subject to conditions, similar to those of a | |
pension within paragraph (a); | 40 |
(c) a pension or allowance— | |
(i) payable under the law of a country other than the United | |
Kingdom, and | |
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(ii) of a character substantially similar to a pension within | |
paragraph (a) or (b). | |
640 Exemption under section 639 where income withheld | |
(1) This section applies if— | |
(a) an individual is entitled to both of the following— | 5 |
(i) a pension or allowance mentioned in section 639 (“pension A”), | |
and | |
(ii) any other pension or allowance (“pension B”), and | |
(b) the whole or a part of pension A is withheld because of the individual’s | |
entitlement to pension B. | 10 |
(2) In such a case, an amount of pension B equal to the withheld amount of | |
pension A is treated for the purposes of section 639 as part of pension A. | |
641 Wounds and disability pensions | |
(1) No liability to income tax arises on— | |
(a) a wounds pension granted to a member of the armed forces of the | 15 |
Crown; | |
(b) retired pay of a disabled officer granted on account of medical unfitness | |
attributable to or aggravated by service in the armed forces of the | |
Crown; | |
(c) a disablement or disability pension granted to a member of the armed | 20 |
forces of the Crown, other than a commissioned officer, on account of | |
medical unfitness attributable to or aggravated by service in the armed | |
forces of the Crown; | |
(d) a disablement pension granted to a person who has been employed in | |
the nursing services of any of the armed forces of the Crown on account | 25 |
of medical unfitness attributable to or aggravated by service in the | |
armed forces of the Crown; | |
(e) an injury or disablement pension payable under any scheme made | |
under— | |
(i) the Injuries in War (Compensation) Act 1914 (c. 30), or | 30 |
(ii) the Injuries in War (Compensation) Act 1914 (Session 2) | |
(5 & 6 Geo. 5 c. 18); | |
(f) an injury or disablement pension payable under any War Risks | |
Compensation Scheme for the Mercantile marine; | |
(g) a pension— | 35 |
(i) granted to a person on account of disablement, and | |
(ii) payable under any scheme made under section 3, 4 or 5 of the | |
Pensions (Navy, Army, Air Force and Mercantile Marine) Act | |
1939 (c. 83). | |
(2) But if the Secretary of State certifies that a pension or retired pay of a kind listed | 40 |
in subsection (1) is only partly attributable to disablement or disability, that | |
subsection applies only to the part attributable to disablement or disability. | |
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