Income Tax (Earnings and Pensions) Bill

House of Commons

Session 2002 - 03
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Income Tax (Earnings and Pensions) Bill

Income Tax (Earnings and Pensions) Bill
Part 9 — Pension income
Chapter 18 — Exemptions: Non-UK resident taxpayers
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651   Overseas Pensions Act 1973
     (1)    No liability to income tax arises on a pension which is paid under section 1 of
OPA 1973 if the foreign residence condition is met.
     (2)    Subsection (1) applies whether or not the pension is paid out of a fund
established under a scheme made under section 1 of OPA 1973.
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     (3)    But subsection (1) does not apply to any part of a pension paid because the
Pensions (Increase) Acts apply to it.
     (4)    In this section “the Pensions (Increase) Acts” means—
           (a)           the Pensions (Increase) Act 1971 (c. 56), and
           (b)           any Act passed after that Act for purposes which correspond to the
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purposes of that Act.
652   Overseas Service Act 1958
     (1)    No liability to income tax arises on a pension—
           (a)           which is paid under the authority of the Overseas Service Act 1958 (c.
14), and
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           (b)           which the Secretary of State certifies to be attributable to the
employment of a person in the public services of an overseas territory,
            if the foreign residence condition is met.
     (2)    If the Secretary of State certifies that only part of a pension paid under the
authority of the 1958 Act is attributable to the employment of a person in the
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public services of an overseas territory, subsection (1) applies only to that part
of the pension.
     (3)    For the purposes of subsections (1) and (2), a pension is paid under the
authority of the 1958 Act if condition A or B is met.
     (4)    Condition A is that the pension is paid under either of the following—
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           (a)           an order made under section 2 of the 1958 Act, or
           (b)           section 4(2) of the 1958 Act,
            as it has effect (by reason of section 2(3) of OPA 1973) as a scheme under section
2 of OPA 1973.
     (5)    Condition B is that the pension is paid under a scheme which the Secretary of
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State—
           (a)           has made under section 2(1) of OPA 1973, and
           (b)           has certified to correspond to—
                  (i)                 an order made under section 2 of the 1958 Act, or
                  (ii)                section 4(2) of the 1958 Act.
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     (6)           For the purposes of this section, a person is taken to be employed in the public
service of an overseas territory at any time when—
           (a)           the person is employed in any capacity under the government of that
territory, or under any municipal or other local authority in it,
           (b)           the person is employed in circumstances not falling within paragraph
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(a), by a body corporate established for any public purpose in that
territory by an enactment of a legislature empowered to make laws for
that territory, or

Income Tax (Earnings and Pensions) Bill
Part 9 — Pension income
Chapter 18 — Exemptions: Non-UK resident taxpayers
    306

           (c)           the person is the holder of a public office in that territory in
circumstances not falling within paragraph (a) or (b).
     (7)           In subsection (6) references to the government of an overseas territory include
references to—
           (a)           a government constituted for two or more overseas territories, and
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           (b)           any authority established for the purpose of providing or
administering services which are common to, or relates to matters of
common interest to, two or more such territories.
     (8)    In this section—
                    “the 1958 Act” means the Overseas Service Act 1958 (c. 14);
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                    “certified” means certified for the purposes of ICTA 1970, ICTA or this
Act.
653   Overseas Service Pensions Fund
     (1)    No liability to income tax arises on a pension which is paid out of the Overseas
Service Pensions Fund if the foreign residence condition is met.
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     (2)    In this section “the Overseas Service Pensions Fund” means the fund with that
name established under section 7(1) of the Overseas Aid Act 1966 (c. 21).
     (3)    In this section “pension” includes not only the things mentioned in section
647(4) but also any sum payable in respect of ill-health.
654   The Pensions (India, Pakistan and Burma) Act 1955
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     (1)    No liability to income tax arises on a pension paid under the authority of the
Pensions (India, Pakistan and Burma) Act 1955 (c. 22) if the foreign residence
condition is met.
     (2)    A pension is paid under the authority of the 1955 Act if—
           (a)           the pension is paid under the 1955 Act as it has effect (by reason of
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section 2(3) of OPA 1973) as a scheme under section 2 of OPA 1973, or
           (b)           the pension is paid under a scheme which the Secretary of State—
                  (i)                 has made under section 2(1) of OPA 1973, and
                  (ii)                has certified to correspond to the provision made under the
1955 Act.
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     (3)    This section does not apply to any part of a pension paid because the Pensions
(Increase) Acts apply to it.
     (4)    In this section—
                    “the 1955 Act” means the Pensions (India, Pakistan and Burma) Act 1955
(c. 22);
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                    “certified” means certified for the purposes of ICTA 1970, ICTA or this
Act;
                    “the Pensions (Increase) Acts” means—
                  (a)                 the Pensions (Increase) Act 1971 (c. 56), and
                  (b)                 any Act passed after that Act for purposes which correspond to
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the purposes of that Act.

Income Tax (Earnings and Pensions) Bill
Part 10 — Social security income
Chapter 2 — Tax on social security income
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Part 10
Social security income
Chapter 1
Introduction
655   Structure of the social security income Part
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     (1)    The structure of this Part is as follows—
                    Chapter 2—
                  (a)                 imposes the charge to tax on social security income, and
                  (b)                 provides for deductions to be made from the amount of income
chargeable;
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                    Chapter 3 sets out the UK social security benefits which are charged to tax
under this Part and identifies—
                  (a)                 the amount of income chargeable to tax for a tax year, and
                  (b)                 the person liable to pay any tax charged;
                    Chapters 4 and 5 deal with exemptions from the charge to tax on UK social
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security benefits (whether under this Part or any other provision);
                    Chapters 6 and 7 make provision about foreign benefits.
     (2)    For other provisions about the taxation of social security benefits see—
                    section 151 of FA 1996 (power for the Treasury to make orders about the
taxation of benefits payable under Government pilot schemes);
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                    section 84 of FA 2000 (exemption of payments under New Deal 50plus);
                    section 85 of FA 2000 (exemption of payments under Employment Zones
programme).
     (3)    For the charge to tax on social security pensions, see Part 9 (pension income).
Chapter 2
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Tax on social security income
656   Nature of charge to tax on social security income
     (1)    The charge to tax on social security income is a charge to tax on that income
excluding any exempt income.
     (2)    “Exempt income” is social security income on which no liability to income tax
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arises as a result of any provision of Chapter 4, 5 or 7 of this Part.
            This definition applies for the purposes of this Part.
657   Meaning of “social security income”, “taxable benefits” etc.
     (1)    This section defines—
                    “social security income” for the purposes of the Tax Acts, and
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                    “taxable benefits”, “Table A” and “Table B” for the purposes of this Part.
     (2)    “Social security income” means—
           (a)           the United Kingdom social security benefits listed in Table A,

Income Tax (Earnings and Pensions) Bill
Part 10 — Social security income
Chapter 2 — Tax on social security income
    308

           (b)           the United Kingdom social security benefits listed in Table B,
           (c)           the foreign benefits to which section 678 applies, and
           (d)           the foreign benefits to which section 681(2) applies.
     (3)    “Taxable benefits” means—
           (a)           the United Kingdom social security benefits listed in Table A, and
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           (b)           the foreign benefits to which section 678 applies.
     (4)    Subsections (2) and (3) are subject to section 660(2).
     (5)    “Table A” means Table A in section 660.
     (6)    “Table B” means Table B in section 677.
658   Amount charged to tax
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     (1)    The amount of social security income which is charged to tax under this Part
for a particular tax year is as follows.
     (2)    In relation to a taxable benefit, the amount charged to tax is the net taxable
social security income for the tax year.
     (3)    The net taxable social security income for a taxable benefit for a tax year is
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given by the formula—
            where—
                    TSSI means the amount of taxable social security income for that benefit
for that year (see subsections (4) to (7)), and
                    PGD means the amount of the deduction (if any) allowed from the benefit
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under Part 12 (payroll giving).
     (4)    In relation to bereavement allowance, incapacity benefit and income support
(which are listed in Table A), the amount of taxable social security income is
determined in accordance with section 661.
     (5)    In relation to any other benefit listed in Table A, the amount of taxable social
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security income is the amount of the benefit that falls to be charged to tax.
     (6)    In relation to foreign benefits to which section 678 applies, the amount of
taxable social security income is determined in accordance with section 679.
     (7)    In determining for the purposes of this Act the amount of taxable social
security income, any exempt income is to be excluded.
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659   Person liable for tax
The person liable for any tax charged under this Part is identified in—
           (a)           section 662 (UK benefits), or
           (b)           section 680 (foreign benefits).

Income Tax (Earnings and Pensions) Bill
Part 10 — Social security income
Chapter 3 — Taxable UK social security benefits
    309

Chapter 3
Taxable UK social security benefits
660   Taxable benefits: UK benefits — Table A
     (1)    This is Table A—

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TABLE A
TAXABLE UK BENEFITS

Social security benefit
Payable under

Bereavement allowance
SSCBA 1992
Section 39B

SSCB(NI)A 1992
Section 39B

10

Incapacity benefit
SSCBA 1992
Section 30A(1) or (5), 40 or 41

SSCB(NI)A 1992
Section 30A(1) or (5), 40 or 41

Income support
SSCBA 1992
Section 124

SSCB(NI)A 1992
Section 123

Jobseeker’s allowance
JSA 1995
Section 1

15

JS(NI)O 1995
Article 3(4)

Statutory adoption pay
SSCBA 1992 Section 171ZL

Any provision made for Northern Ireland which

corresponds to section 171ZL of SSCBA 1992

Statutory maternity pay
SSCBA 1992
Section 164

20

SSCB(NI)A 1992
Section 160

Statutory paternity pay
SSCBA 1992 Section 171ZA or 171ZB

Any provision made for Northern Ireland which

corresponds to section 171ZA or section 171ZB of

SSCBA 1992

25

Statutory sick pay
SSCBA 1992
Section 151

SSCB(NI)A 1992
Section 147


     (2)    A benefit listed below is not “social security income” or a “taxable benefit” if it
is charged to tax under another Part of this Act—
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                    statutory adoption pay;
                    statutory maternity pay;
                    statutory paternity pay;
                    statutory sick pay.
661   Taxable social security income
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     (1)    This section applies in relation to each of the following taxable benefits listed
in Table A—
                    bereavement allowance,
                    incapacity benefit, and

Income Tax (Earnings and Pensions) Bill
Part 10 — Social security income
Chapter 4 — Taxable UK social security benefits: exemptions
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                    income support.
     (2)    The amount of taxable social security income for a taxable benefit for a tax year
is the full amount of the benefit accruing in the tax year irrespective of when
any amount is actually paid.
662   Person liable for tax
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The person liable for any tax charged under this Part on a taxable benefit listed
in Table A is the person receiving or entitled to the benefit.
Chapter 4
Taxable UK social security benefits: exemptions
Incapacity benefit
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663   Long-term incapacity benefit: previous entitlement to invalidity benefit
     (1)    No liability to income tax arises on long-term incapacity benefit if—
           (a)           a person is entitled to the benefit for a day of incapacity for work which
falls in a period of incapacity for work which is treated for the purposes
of that benefit as having begun before 13th April 1995, and
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           (b)           the part of that period which is treated as having fallen before that date
includes a day for which that person was entitled to invalidity benefit.
     (2)    In this section—
                    “invalidity benefit” means invalidity benefit under—
                  (a)                 Part 2 of SSCBA 1992, or
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                  (b)                 Part 2 of SSCB(NI)A 1992;
                    “long-term incapacity benefit” means incapacity benefit payable under—
                  (a)                 section 30A(5), 40 or 41 of SSCBA 1992, or
                  (b)                 section 30A(5), 40 or 41 of SSCB(NI)A 1992.
664   Short-term incapacity benefit not payable at the higher rate
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     (1)    No liability to income tax arises on short-term incapacity benefit unless it is
payable at the higher rate.
     (2)    In this section—
           (a)           “short-term incapacity benefit” means incapacity benefit payable
under—
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                  (i)                 section 30A(1) of SSCBA 1992, or
                  (ii)                section 30A(1) of SSCB(NI)A 1992;
           (b)           the reference to short-term incapacity benefit payable at the higher rate
is to be construed in accordance with—
                  (i)                 section 30B of SSCBA 1992, or
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                  (ii)                section 30B of SSCB(NI)A 1992.



© Parliamentary copyright 2002	Revised 4 December 2002