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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

10

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

30

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

5

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

15

(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—equation: over[times[char[D],char[C],char[C],char[P]],times[char[D],char[P],char[C],char[P]]]

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.

 

 

 
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