Finance Bill

House of Commons

Session 2002 - 03
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Finance Bill

Finance Bill
Part 4 — Pension schemes etc
Chapter 4 — Registered pension schemes: tax reliefs and exemptions
168

189
Relief under net pay arrangements
(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
5
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
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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
15
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
20
include the individual.
(6)
On the making of the claim for excess relief the amount of the excess may be
deducted from the total income of the individual for the tax year.
(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
25
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
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any other provision of the Income Tax Acts.
190
Relief on making of claim
(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 from the total income of the
35
individual for the tax year in which the payment is made.
(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
40
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
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Finance Bill
Part 4 — Pension schemes etc
Chapter 4 — Registered pension schemes: tax reliefs and exemptions
169

(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.
191
Transfer of certain shares to be treated as payment of contribution
(1)
For the purposes of sections 184 to 190 (relief for contributions) references to
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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
10
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
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(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,
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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
25
individual.
(5)
In this section—

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

“share incentive plan” has the same meaning as in the SIP code (see
30
section 488 of ITEPA 2003 (approved share incentive plans)).
Employers’ contributions
192
Relief for employers in respect of contributions paid
(1)
This section makes provision about an employer’s entitlement to relief in
respect of contributions paid by the employer under a registered pension
35
scheme in respect of any individual.
(2)
For the purposes of Case I or II of Schedule D—
(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
40
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 section 75 of ICTA (expenses of management: companies
with investment business), the contributions—

Finance Bill
Part 4 — Pension schemes etc
Chapter 4 — Registered pension schemes: tax reliefs and exemptions
170

(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 ICTA (expenses of insurance companies), the
contributions—
5
(a)
are to be brought into account at Step 1 in subsection (7) of that section
to the extent that they otherwise would not be, and
(b)
are referable to the accounting period in which they are paid.
(5)
The references in this section to contributions include minimum payments
under—
10
(a)
section 8 of the Pension Schemes Act 1993 (c. 48), or
(b)
section 4 of the Pension Schemes (Northern Ireland) Act 1993 (c. 49),

other than any part recovered from a member of the pension scheme under
regulations made under subsection (3) of either of those sections.
(6)
This section is subject to sections 193 and 194 (spreading of relief) (and to
15
transitional provision contained in Part 4 of Schedule 34).
193
Spreading of relief
(1)
This section applies where—
(a)
contributions are paid by an employer under a registered pension
scheme in two consecutive chargeable periods (“the previous
20
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”).
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(2)
Relief under section 192 (relief for employers in respect of contributions paid)
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)—
30
(a)
does not apply if the amount of the relevant excess contributions is less
than £500,000, and
(b)
has effect subject to section 194 (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 section 192 as if it had been paid in the chargeable
35
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)—
40
(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.
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Finance Bill
Part 4 — Pension schemes etc
Chapter 4 — Registered pension schemes: tax reliefs and exemptions
171

AMOUNT OF THE RELEVANT
FRACTION AND CHARGEABLE

EXCESS CONTRIBUTIONS
PERIOD OR PERIODS

£500,000 or more but less than
One-half of the whole of the amount

£1,000,000
of the relevant excess contributions

is to be treated as paid in the

5

chargeable period immediately after

the current chargeable period

£1,000,000 or more but less than
One-third of the whole of the

£2,000,000
amount of the relevant excess

contributions is to be treated as paid

10

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

15

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
20
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
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(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
30
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—
where—
DCCP is the number of days in the current chargeable period, and
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DPCP is the number of days in the previous chargeable period.
(10)
In this section “chargeable period” means—
(a)
in a case where the contributions are deducted in computing profits to
be charged under Case I or II of Schedule D, a period of account, and
(b)
in a case where relief in respect of the contributions is given under
40
section 75 or 76 of ICTA (expenses of management: companies with
investment business and expenses of insurance companies), an
accounting period.