Finance Bill

House of Commons

Session 2002 - 03
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Finance Bill

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 11 — Miscellaneous
139

(6)
In this section “care” means accommodation, goods or services which it
is necessary or desirable to provide to a person because of—
(a)
mental or physical impairment, or
(b)
injury, sickness or other infirmity,

which is expected to be permanent.
5
(7)
In this section “life annuity” means an annuity to which section 656
(read with section 657) applies.
(8)
The Treasury may by order amend—
(a)
the definition of “immediate needs annuity” in subsection (3)
above;
10
(b)
the definitions of “care provider” in subsection (4) above and of
“the relevant enactment” in subsection (5) above.”.
(4)
The amendment made by subsection (2) has effect in relation to accounting
periods beginning on or after 1st January 2005.
(5)
For the purposes of section 547(5A)(b) of the Taxes Act 1988 (chargeable event
15
gains: method of charging gain to tax), an immediate needs annuity made
before 1st January 2005 shall not be taken, by virtue of the amendment made
by subsection (2), to fall or to have at any time fallen to be regarded as not
forming part of an insurance company or friendly society’s basic life assurance
and general annuity business the income and gains of which are subject to
20
corporation tax.
(6)
The amendment made by subsection (3) has effect in relation to annual
payments made on or after 1st October 2004 (whenever the immediate needs
annuity in question was made).
145
Corporation tax: health service bodies
25
At the end of section 519A of the Income and Corporation Taxes Act 1988 (c. 1)
(health service bodies: exemptions from income and corporation tax) add—
“(3)
The Treasury may by order disapply subsection (1)(b) in relation to a
specified activity, or class of activity, of an NHS foundation trust.
(4)
An order under subsection (3) shall make provision for determining the
30
amount of the profits relating to an activity that are to be charged to
corporation tax as a result of the disapplication of subsection (1)(b).
(5)
An order under subsection (3) may, in particular—
(a)
make provision for disregarding profits of less than a specified
amount in respect of a financial year or accounting period or a
35
specified part of a financial year or accounting period;
(b)
make provision for disregarding a specified part of profits in
respect of a financial year or accounting period or a specified
part of a financial year or accounting period;
(c)
make provision for disregarding all or part of profits relating to
40
activity in respect of which receipts or turnover (as defined by
the order) are less than a specified amount in respect of a
financial year or accounting period or a specified part of a
financial year or accounting period.
(6)
An order under subsection (3)—
45

Finance Bill
Part 4 — Pension schemes etc
Chapter 1 — Introduction
140

(a)
may apply, with or without modification, a provision of the Tax
Acts,
(b)
may disapply a provision of the Tax Acts,
(c)
may make provision similar to a provision of the Tax Acts, and
(d)
may make provision generally or in relation to a specified body
5
or class of bodies.
(7)
The Treasury may make an order under subsection (3) only—
(a)
in relation to an activity or class of activity that appears to the
Treasury to be of a commercial nature,
(b)
where it appears to the Treasury to be expedient for the purpose
10
of avoiding, removing or reducing differences between—
(i)
the fiscal treatment of the body undertaking the activity,
and
(ii)
the fiscal treatment of another body or class of body
which is of a commercial nature and which undertakes
15
or might undertake the same or a similar activity, and
(c)
if a draft has been laid before, and approved by resolution of,
the House of Commons.
(8)
An activity authorised under section 14(1) of the Health and Social Care
(Community Health and Standards) Act 2003 (c. 43) shall not be treated
20
as an activity of a commercial nature for the purposes of subsection
(7)(a).”.
Part 4
Pension schemes etc
Chapter 1
25
Introduction
Introductory
146
Overview of Part 4
(1)
This Part contains tax provision about pension schemes and other similar
schemes.
30
(2)
This Chapter defines some basic concepts.
(3)
As for the rest of this Part—

Chapter 2 is about the registration and de-registration of pension
schemes,

Chapter 3 is about the payments that may be made by registered pension
35
schemes and related matters,

Chapter 4 deals with tax reliefs and exemptions in connection with
registered pension schemes,

Chapter 5 imposes tax charges in connection with registered pension
schemes,
40

Chapter 6 is about some schemes that are not registered pension schemes,

Chapter 7 makes provision about compliance, and

Finance Bill
Part 4 — Pension schemes etc
Chapter 1 — Introduction
141


Chapter 8 contains interpretation and other supplementary provisions.
Main concepts
147
Meaning of “pension scheme”
(1)
In this Part “pension scheme” means a scheme or other arrangements,
comprised in one or more instruments or agreements, having or capable of
5
having effect so as to provide benefits to or in respect of persons—
(a)
on retirement,
(b)
on death,
(c)
on having reached a particular age,
(d)
on the onset of serious ill-health or incapacity, or
10
(e)
in similar circumstances.
(2)
A pension scheme is a registered pension scheme for the purposes of this Part
at any time if it is at that time registered under Chapter 2.
(3)
In this Part “public service pension scheme” means a pension scheme—
(a)
established by or under any enactment,
15
(b)
approved by a relevant governmental or Parliamentary person or body,
or
(c)
specified in an order made by the Treasury.
(4)
In subsection (3) “a relevant governmental or Parliamentary person or body”
means—
20
(a)
a Minister of the Crown or a government department,
(b)
the Scottish Parliament, the Scottish Parliamentary Corporate Body or
a member of the Scottish Executive,
(c)
the National Assembly for Wales, or
(d)
the Northern Ireland Assembly, the Northern Ireland Assembly
25
Commission, a Northern Ireland Minister, the head of a Northern
Ireland department or a Northern Ireland department.
(5)
In this Part “occupational pension scheme” means a pension scheme
established by an employer or employers and having or capable of having
effect so as to provide benefits to or in respect of any or all of the employees
30
of—
(a)
that employer or those employers, or
(b)
any other employer,

(whether or not it also has or is capable of having effect so as to provide benefits
to or in respect of other persons).
35
(6)
In this Part “sponsoring employer”, in relation to an occupational pension
scheme, means the employer, or any of the employers, to or in respect of any
or all of whose employees the pension scheme has, or is capable of having,
effect so as to provide benefits.
(7)
In this Part “recognised overseas pension scheme” means a pension scheme
40
which—
(a)
is established in a country or territory, other than the United Kingdom,
prescribed by regulations made by the Board of Inland Revenue,
(b)
is regulated as a pension scheme in the country or territory in which it
is established, and
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Finance Bill
Part 4 — Pension schemes etc
Chapter 1 — Introduction
142

(c)
satisfies any requirements so prescribed.
148
Meaning of “member”
(1)
In this Part “member” in relation to a pension scheme, means any active
member, pensioner member, deferred member or pension credit member of
the pension scheme.
5
(2)
For the purposes of this Part a person is an active member of a pension scheme
if there are presently arrangements made under the pension scheme for the
accrual of benefits to or in respect of the person.
(3)
For the purposes of this Part a person is a pensioner member of a pension
scheme if the person is entitled to the present payment of benefits under the
10
pension scheme and is not an active member.
(4)
A person is a deferred member of a pension scheme if the person has accrued
rights under the pension scheme and is neither an active member nor a
pensioner member.
(5)
A person is a pension credit member of a pension scheme if the person has
15
rights under the pension scheme which are attributable (directly or indirectly)
to pension credits.
149
Meaning of “arrangement”
(1)
In this Part “arrangement”, in relation to a member of a pension scheme, means
an arrangement relating to the member under the pension scheme.
20
(2)
For the purposes of this Part an arrangement is a “money purchase
arrangement” at any time if, at that time, all the benefits that may be provided
to or in respect of the member under the arrangement are cash balance benefits
or other money purchase benefits.
(3)
For the purposes of this Part a money purchase arrangement is a “cash balance
25
arrangement” at any time if, at that time, all the benefits that may be provided
to or in respect of the member under the arrangement are cash balance benefits.
(4)
In this Part “money purchase benefits”, in relation to a member of a pension
scheme, means benefits the rate or amount of which is calculated by reference
to an amount available for the provision of benefits to or in respect of the
30
member (whether the amount so available is calculated by reference to
payments made under the pension scheme by the member or any other person
in respect of the member or any other factor).
(5)
In this Part “cash balance benefits” means benefits the rate or amount of which
is calculated by reference to an amount available for the provision of benefits
35
to or in respect of the member calculated otherwise than wholly by reference
to payments made under the arrangement by the member or by any other
person in respect of the member (or transfers or other credits).
(6)
For the purposes of this Part an arrangement is a “defined benefits
arrangement” at any time if, at that time, all the benefits that may be provided
40
to or in respect of the member under the arrangement are defined benefits.
(7)
In this Part “defined benefits”, in relation to a member of a pension scheme,
means benefits which are not money purchase benefits (but which are

Finance Bill
Part 4 — Pension schemes etc
Chapter 2 — Registration of pension schemes
143

calculated by reference to earnings or service of the member or any other factor
other than an amount available for their provision).
(8)
For the purposes of this Part an arrangement is a “hybrid arrangement” at any
time if, at that time, all of the benefits that may be provided to or in respect of
the member under the arrangement are, depending on the circumstances, to be
5
of one of any two or three of the following varieties—
(a)
cash balance benefits,
(b)
other money purchase benefits, and
(c)
defined benefits.
(9)
Where not all of the benefits that may be provided under an arrangement to or
10
in respect of the member are of the same one of those varieties of benefits, the
arrangement is to be treated for the purposes of this Part as being two or three
separate arrangements one of which relates to each of the two or three varieties
of benefits that may be so provided.
Chapter 2
15
Registration of pension schemes
Registration
150
Registration of pension schemes
(1)
An application may be made to the Inland Revenue for a pension scheme to be
registered.
20
(2)
The application—
(a)
must contain any information which is reasonably required by the
Inland Revenue in any form specified by the Board of Inland Revenue,
and
(b)
must be accompanied by a declaration that the application is made by
25
the scheme administrator (see section 264) and any other declarations
by the scheme administrator which are reasonably required by the
Inland Revenue.
(3)
The declarations which the Inland Revenue may require to accompany an
application for the registration of a pension scheme include, in particular, a
30
declaration that the instruments or agreements by which it is constituted do
not entitle any person to unauthorised payments (see section 157(5)).
(4)
On receipt of an application for a pension scheme to be registered the Inland
Revenue must decide whether or not to register the pension scheme.
(5)
The Inland Revenue’s decision must be to register the pension scheme unless
35
it appears that—
(a)
any information contained in the application is incorrect, or
(b)
any declaration accompanying it is false.
(6)
The Inland Revenue must notify the scheme administrator of the decision on
the application.
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Finance Bill
Part 4 — Pension schemes etc
Chapter 2 — Registration of pension schemes
144

(7)
Unless the Inland Revenue’s decision is not to register the pension scheme, the
notification must state the day on and after which the pension scheme will be
a registered pension scheme.
(8)
An annuity contract—
(a)
by means of which benefits under a registered pension scheme have
5
been secured, but
(b)
which does not provide for the immediate payment of benefits,

is to be treated as having become a registered pension scheme on the day on
which it is made.
(9)
Schedule 34 contains (in Part 1) provisions treating certain pension schemes in
10
existence immediately before 6th April 2006 as registered pension schemes
(and related provisions).
151
Persons by whom registered pension scheme may be established
(1)
An application to register a pension scheme may be made only if the pension
scheme is an occupational pension scheme or has been established by—
15
(a)
an insurance company (see section 269),
(b)
a unit trust scheme manager,
(c)
an operator, trustee or depositary of a recognised EEA collective
investment scheme,
(d)
an authorised open-ended investment company,
20
(e)
a building society,
(f)
a bank, or
(g)
an EEA investment portfolio manager.
(2)
But subsection (1) does not apply to a public service pension scheme.
(3)
Section 152 defines terms used in subsection (1)(b) to (g).
25
(4)
The Treasury may by order amend this section and section 152.
152
Persons by whom scheme may be established: supplementary
(1)
This section has effect for defining terms used in section 151(1)(b) to (g).
(2)
“Unit trust scheme manager” means—
(a)
a person who has permission under Part 4 of FISMA 2000 to manage
30
unit trust schemes authorised under section 243 of FISMA 2000, or
(b)
a firm which has permission under paragraph 4 of Schedule 4 to FISMA
2000 (as a result of qualifying for authorisation under paragraph 2 of
that Schedule: Treaty firms) to manage unit trust schemes authorised
under that section.
35
(3)
“Recognised EEA collective investment scheme” means a collective investment
scheme (within the meaning given by section 235 of FISMA 2000) which is
recognised by virtue of section 264 of FISMA 2000 (schemes constituted in
other EEA States).
(4)
“Authorised open-ended investment company” has the meaning given by
40
section 237(3) of FISMA 2000.
(5)
“Building society” means a building society within the Building Societies Act
1986 (c. 53).

Finance Bill
Part 4 — Pension schemes etc
Chapter 2 — Registration of pension schemes
145

(6)
“Bank” means—
(a)
a person falling within section 840A(1)(b) of ICTA (persons, other than
building societies etc. permitted to accept deposits), or
(b)
a body corporate which is a subsidiary or holding company of a person
falling within section 840A(1)(b) of ICTA or is a subsidiary of the
5
holding company of such a person.

In paragraph (b) “subsidiary” and “holding company” are to be read in
accordance with section 736 of the Companies Act 1985 (c. 6) or Article 4 of the
Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)).
(7)
“EEA investment portfolio manager” means an institution which—
10
(a)
is an EEA firm of the kind mentioned in paragraph 5(a), (b) or (c) of
Schedule 3 to FISMA 2000 (certain credit and financial institutions),
(b)
qualifies for authorisation under paragraph 12(1) or (2) of that
Schedule, and
(c)
has permission under FISMA 2000 to manage portfolios of investments.
15
153
Appeal against decision not to register
(1)
This section applies where, on an application for a pension scheme to be
registered, the Inland Revenue’s decision is not to register the pension scheme.
(2)
The scheme administrator may appeal against the decision.
(3)
The appeal is to the General Commissioners, except that the scheme
20
administrator may elect (in accordance with section 46(1) of TMA 1970) to
bring the appeal before the Special Commissioners instead of the General
Commissioners.
(4)
Paragraphs 1, 2, 8 and 9 of Schedule 3 to TMA 1970 (rules for assigning
proceedings to General Commissioners) have effect to identify the General
25
Commissioners before whom an appeal under this section is to be brought, but
subject to modifications specified in an order made by the Board of Inland
Revenue.
(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 scheme administrator
30
was notified of the decision.
(6)
The Commissioners before whom an appeal under this section is brought must
consider whether the pension scheme ought to have been registered by the
Inland Revenue.
(7)
If they decide that the pension scheme ought not to have been registered by the
35
Inland Revenue, they must dismiss the appeal.
(8)
If they decide that the pension scheme ought to have been registered by the
Inland Revenue, the pension scheme is to be treated as having been registered
on such date as the Commissioners determine (but subject to any further
appeal or any determination on, or in consequence of, a case stated).
40
De-registration
154
De-registration
(1)
The Inland Revenue may withdraw the registration of a pension scheme.