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Finance Bill
Part 4 — Pension schemes etc
Chapter 5 — Registered pension schemes: tax charges

185

 

(2)   

Schedule 32 gives the meaning of expressions used in the table in subsection

(1).

213     

Persons liable to charge

(1)   

The persons liable to the lifetime allowance charge are—

(a)   

the individual, and

5

(b)   

the scheme administrator of the pension scheme,

   

and their liability is joint and several.

(2)   

But where the liability arises by reason of the payment of a relevant lump sum

death benefit it is a liability of the person to whom the lump sum death benefit

is paid.

10

(3)   

Subsection (4) applies if—

(a)   

more than one relevant lump sum death benefit is paid in respect of an

individual, and

(b)   

tax is not chargeable on the whole amount of all of them.

(4)   

In that case each of the persons to whom any of the relevant lump sum death

15

benefits is paid is liable under subsection (2) to such portion of the total amount

of the tax payable by reason of their having been paid as appears to the Inland

Revenue to be just and reasonable.

(5)   

A person is liable to the lifetime allowance charge whether or not—

(a)   

that person,

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(b)   

any other person who is liable to the lifetime allowance charge, and

(c)   

the scheme administrator (if not so liable),

   

are resident, ordinarily resident or domiciled in the United Kingdom.

214     

Individual’s lifetime allowance and standard lifetime allowance

(1)   

Subject as follows, the individual’s lifetime allowance is the standard lifetime

25

allowance.

(2)   

The standard lifetime allowance for the tax year 2006-07 is £1,500,000.

(3)   

The standard lifetime allowance for each subsequent tax year is such amount,

not being less than the standard lifetime allowance for the immediately

preceding tax year, as is specified by order made by the Treasury.

30

(4)   

Where one or more lifetime allowance enhancement factors operate in relation

to a benefit crystallisation event occurring in relation to the individual, the

individual’s lifetime allowance at the time of the benefit crystallisation event

is—equation: plus[times[char[S],char[L],char[A]],id[cross[times[char[S],char[L],char[A]],times[

char[L],char[A],char[E],char[F]]]]]

where—

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SLA is the standard lifetime allowance at the time of the benefit

crystallisation event, and

LAEF is the lifetime allowance enhancement factor which operates with

respect to the benefit crystallisation event and the individual or (where

more than one so operates) the aggregate of them.

40

(5)   

The following make provision for the operation of lifetime allowance

enhancement factors—

 

 

Finance Bill
Part 4 — Pension schemes etc
Chapter 5 — Registered pension schemes: tax charges

186

 

   

section 216 (pension credits from previously crystallised rights),

   

sections 217 to 219 (individuals who are not always relevant UK

individuals),

   

sections 220 to 222 (transfers from recognised overseas pension schemes),

   

paragraphs 7 to 11 of Schedule 34 (“primary protection”: pre-

5

commencement funds above £1,500,000), and

   

paragraph 18 of that Schedule (pre-commencement pension credits).

(6)   

Paragraph 19 of that Schedule makes provision for the reduction of what

would otherwise be the individual’s lifetime allowance in certain cases where

the individual is permitted to take pension before normal minimum pension

10

age.

(7)   

In this Part references (however expressed) to a person’s lifetime allowance at

any time are to what would be the person’s lifetime allowance, calculated in

accordance with this section, if a benefit crystallisation event occurred in

relation to the person at that time.

15

215     

Availability of individual’s lifetime allowance

(1)   

This section is about the availability of the individual’s lifetime allowance on

the occurrence of a benefit crystallisation event in relation to the individual

(“the current benefit crystallisation event”).

(2)   

If no benefit crystallisation event has occurred in relation to the individual

20

before the current benefit crystallisation event, the whole of the individual’s

lifetime allowance is available on the current benefit crystallisation event.

(3)   

If one or more benefit crystallisation events have occurred in relation to the

individual before the current benefit crystallisation event—

(a)   

in a case in which the previously-used amount is equal to or greater

25

than the amount of the individual’s lifetime allowance, none of the

individual’s lifetime allowance is available on the current benefit

crystallisation event, and

(b)   

in any other case, so much of the individual’s lifetime allowance as is

left after deducting the previously-used amount is available on the

30

current benefit crystallisation event.

(4)   

The previously-used amount is—

(a)   

where one benefit crystallisation event has occurred in relation to the

individual before the current benefit crystallisation event, the amount

crystallised by the previous benefit crystallisation event as adjusted

35

under subsection (5), or

(b)   

where two or more benefit crystallisation events have occurred in

relation to the individual before the current benefit crystallisation

event, the aggregate of the amounts crystallised by each previous

benefit crystallisation event as adjusted under subsection (5).

40

(5)   

The adjustment of the amount crystallised by a previous benefit crystallisation

event referred to in subsection (4)(a) and (b) is the multiplication of that

amount by—equation: over[times[char[C],char[S],char[L],char[A]],times[char[P],char[S],char[L],char[A]]]

   

where—

 

 

Finance Bill
Part 4 — Pension schemes etc
Chapter 5 — Registered pension schemes: tax charges

187

 

   

CSLA is the standard lifetime allowance at the time of the current benefit

crystallisation event, and

   

PSLA is the standard lifetime allowance at the time of the previous benefit

crystallisation event.

(6)   

Where more than one benefit crystallisation event occurs in relation to an

5

individual on the same day, it is for the individual to decide the order in which

they are to be treated as occurring for the purposes of this section; but this

subsection is subject to section 163(2) (entitlement to pension commencement

lump sum to arise immediately before entitlement to associated pension).

(7)   

Where more than one benefit crystallisation event occurs by reason of the

10

payment of lump sum death benefits in respect of an individual the benefit

crystallisation events are to be treated for the purposes of this section as

occurring immediately before the individual’s death.

(8)   

Paragraph 20 of Schedule 34 makes provision affecting this section in relation

to pre-commencement pensions.

15

(9)   

In this Part references (however expressed) to the portion of a person’s lifetime

allowance that is available at any time are to the portion of the person’s lifetime

allowance that would be available, calculated in accordance with this section,

if a benefit crystallisation event occurred in relation to the person at that time.

216     

Pension credits from previously crystallised rights

20

(1)   

This section makes provision for the operation of a lifetime allowance

enhancement factor with respect to a benefit crystallisation event occurring in

relation to an individual where—

(a)   

the individual has (at any time after 5th April 2006 but before the

benefit crystallisation event) acquired rights under a registered pension

25

scheme by reason of having become entitled to a pension credit,

(b)   

the pension credit derived from the same or another registered pension

scheme, and

(c)   

the rights under that registered pension scheme which became subject

to the corresponding pension debit consisted of or included rights to a

30

post-commencement pension in payment.

(2)   

“Post-commencement pension in payment” means a pension to which a person

became (actually) entitled on or after 6th April 2006.

(3)   

The lifetime allowance enhancement factor is the pension credit factor.

(4)   

The pension credit factor is—equation: over[times[char[A],char[P],char[C]],times[char[S],char[L],char[A]]]

35

where—

APC is the amount which is the appropriate amount for the purposes of

section 29(1) of WRPA 1999 or Article 26(1) of WRP(NI)O 1999 in

relation to the pension credit, and

SLA is the standard lifetime allowance at the time when the rights were

40

acquired.

(5)   

This section only applies if notice of intention to rely on it is given to the Inland

Revenue in accordance with regulations made by the Board of Inland Revenue.

 

 

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Chapter 5 — Registered pension schemes: tax charges

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217     

Non-residence: general

(1)   

This section makes provision for the operation of a lifetime allowance

enhancement factor with respect to a benefit crystallisation event occurring in

relation to an individual where, during any part of the period that is the active

membership period in relation to an arrangement relating to the individual

5

under a registered pension scheme, the individual is a relevant overseas

individual.

(2)   

Section 218 provides the lifetime allowance enhancement factor in the case of

an arrangement that is a money purchase arrangement; and section 219

provides the lifetime allowance enhancement factor in the case of any other

10

arrangement.

(3)   

For the purposes of this Part an individual is a relevant overseas individual at

any time if, at that time, the individual either is not a relevant UK individual

or—

(a)   

is a relevant UK individual only by virtue of paragraph (c) of section

15

185(1) (individuals resident in UK at some time in previous five tax

years), and

(b)   

is not employed by a person resident in the United Kingdom.

(4)   

In this section and sections 218 and 219 “the active membership period”, in

relation to a benefit crystallisation event occurring in relation to an

20

arrangement relating to the individual, is the period—

(a)   

beginning with the date on which the benefits first began to accrue to

or in respect of the individual under the arrangement or, if later, 6th

April 2006, and

(b)   

ending immediately before the benefit crystallisation event.

25

(5)   

But if benefits ceased to accrue to or in respect of the individual under the

arrangement before the benefit crystallisation event, the active membership

period is to be treated as having ended then.

(6)   

This section only applies if notice of intention to rely on it is given to the Inland

Revenue in accordance with regulations made by the Board of Inland Revenue.

30

218     

Non-residence: money purchase arrangements

(1)   

This section applies in the case of an arrangement that is a money purchase

arrangement.

(2)   

The lifetime allowance enhancement factor is—

(a)   

if the arrangement is a cash balance arrangement, the cash balance

35

arrangement non-residence factor (see subsections (3) to (5)), and

(b)   

if the arrangement is any other sort of money purchase arrangement,

the other money purchase arrangement non-residence factor (see

subsections (6) and (7)).

(3)   

The cash balance arrangement non-residence factor is—

40

(a)   

the factor arrived at by the application of subsection (4) in relation to

the part of the active membership period during which the individual

was a relevant overseas individual, or

(b)   

if there have been two or more parts of that period during which the

individual was a relevant overseas individual, the aggregate of the

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Finance Bill
Part 4 — Pension schemes etc
Chapter 5 — Registered pension schemes: tax charges

189

 

factors arrived at by the application of subsection (4) in relation to each

of those parts of that period.

(4)   

The factor arrived at by the application of this subsection in relation to any part

of the active membership period is—equation: over[plus[times[char[C],char[V]],minus[times[char[O],char[V]]]],times[char[S],char[

L],char[A]]]

where—

5

CV is the closing value of the individual’s rights under the arrangement,

OV is the opening value of the individual’s rights under the arrangement,

and

SLA is the standard lifetime allowance at the time when that part of that

period ended.

10

(5)   

For the purposes of subsection (4)—

(a)   

the closing value of the individual’s rights under the arrangement is the

amount which would, on the valuation assumptions (see section 271),

be available for the provision of benefits to or in respect of the

individual under the arrangement if the individual became entitled to

15

the benefits at the end of that part of that period, and

(b)   

the opening value of the individual’s rights under the arrangement is

the amount which would, on the valuation assumptions, be available

for the provision of benefits to or in respect of the individual under the

arrangement if the individual became entitled to the benefits at the

20

beginning of that part of that period.

(6)   

The other money purchase arrangement non-residence factor is—

(a)   

the factor arrived at by the application of subsection (7) in relation to

the part of the active membership period during which the individual

was a relevant overseas individual, or

25

(b)   

if there have been two or more parts of that period during which the

individual was a relevant overseas individual, the aggregate of the

factors arrived at by the application of subsection (7) in relation to each

of those parts of that period.

(7)   

The factor arrived at by the application of this subsection in relation to any part

30

of the active membership period is—equation: over[times[char[R],char[O],char[I],char[C]],times[char[S],char[L],char[A]]]

where—

ROIC is the amount of the contributions made under the arrangement by

or in respect of the individual in any part of the active membership

period during which the individual is a relevant overseas individual,

35

and

SLA is the standard lifetime allowance at the time when that part of that

period ended.

219     

Non-residence: other arrangements

(1)   

This section applies in the case of an arrangement that is not a money purchase

40

arrangement.

(2)   

The lifetime allowance enhancement factor is—

 

 

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(a)   

if the arrangement is a defined benefits arrangement, the defined

benefits arrangement non-residence factor (see subsections (3) and (4)),

and

(b)   

if the arrangement is a hybrid arrangement, the hybrid arrangement

non-residence factor (see subsections (5) to (7)).

5

(3)   

The defined benefits arrangement non-residence factor is—

(a)   

the factor arrived at by the application of subsection (4) in relation to

the part of the active membership period during which the individual

was a relevant overseas individual, or

(b)   

if there have been two or more parts of that period during which the

10

individual was a relevant overseas individual, the aggregate of the

factors arrived at by the application of subsection (4) in relation to each

of those parts of that period.

(4)   

The factor arrived at by the application of this subsection in relation to any part

of the active membership period is—equation: over[plus[id[plus[times[char[R],char[V],cross[char[F],times[char[P],char[E]]]],times[

char[L],char[S],char[E]]]],minus[id[plus[cross[times[char[R],char[V],char[F]],times[

char[P],char[B]]],times[char[L],char[S],char[B]]]]]],times[char[S],char[L],char[

A]]]

15

where—

RVF is the relevant valuation factor (see section 270),

PE is the amount of the annual rate of the pension which would, on the

valuation assumptions (see section 271), be payable to the individual

under the arrangement if the individual became entitled to payment of

20

it at the end of that part of that period,

LSE is the amount of the lump sum to which the individual would, on the

valuation assumptions, be entitled under the arrangement (otherwise

than by commutation of pension) if the individual became entitled to

payment of it at the end of that part of that period,

25

PB is the amount of the annual rate of the pension which would, on the

valuation assumptions, be payable to the individual under the

arrangement if the individual became entitled to payment of it at the

beginning of that part of that period,

LSB is the amount of the lump sum to which the individual would, on the

30

valuation assumptions, be entitled under the arrangement (otherwise

than by commutation of pension) if the individual became entitled to

payment of it at the beginning of that part of that period, and

SLA is the standard lifetime allowance at the time when that part of that

period ended.

35

(5)   

The hybrid arrangement non-residence factor is the greater or greatest of such

of—

(a)   

what would be the cash balance arrangement non-residence factor

(under section 218) if the arrangement were a cash balance

arrangement,

40

(b)   

what would be the other money purchase arrangement non-residence

factor (under that section) if the arrangement were any other sort of

money purchase arrangement, and

(c)   

what would be the defined benefits arrangement non-residence factor

(under subsections (3) and (4)) if the arrangement were a defined

45

benefits arrangement,

   

as are relevant factors in relation to the arrangement.

 

 

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(6)   

A factor is a relevant factor in relation to a hybrid arrangement if, in any

circumstances, the benefits that may be provided to or in respect of the

individual under the arrangement may be benefits linked to that factor.

(7)   

For that purpose—

(a)   

cash balance benefits are linked to the cash balance arrangement non-

5

residence factor,

(b)   

other money purchase benefits are linked to the other money purchase

arrangement non-residence factor, and

(c)   

defined benefits are linked to the defined benefits arrangement non-

residence factor.

10

220     

Transfers from recognised overseas pension scheme: general

(1)   

This section makes provision for the operation of a lifetime allowance

enhancement factor with respect to a benefit crystallisation event occurring in

relation to an individual where (at any time after 5th April 2006 but before the

benefit crystallisation event) there has been a recognised overseas scheme

15

transfer.

(2)   

There is a “recognised overseas scheme transfer” if any sums or assets—

(a)   

held for the purposes of an arrangement under a recognised overseas

pension scheme that is not a registered pension scheme, or

(b)   

representing accrued rights under such an arrangement,

20

   

are transferred so as to become held for the purposes of, or to represent rights

under, an arrangement under a registered pension scheme relating to the

individual.

(3)   

The arrangement specified in subsection (2)(a) or (b) is referred to in this

section and sections 221 and 222 as the “recognised overseas scheme

25

arrangement”.

(4)   

The lifetime allowance enhancement factor is the recognised overseas scheme

transfer factor.

(5)   

The recognised overseas scheme transfer factor is—equation: over[plus[times[char[A],char[A],char[T]],minus[times[char[R],char[R],char[A]]]],

times[char[S],char[L],char[A]]]

where—

30

AAT is the aggregate of the amount of any sums transferred, and the

market value of any assets transferred, on the recognised overseas

scheme transfer,

RRA is the relevant relievable amount, and

SLA is the standard lifetime allowance at the time when the recognised

35

overseas scheme transfer took place.

(6)   

Section 221 specifies the relevant relievable amount in the case of a recognised

overseas scheme arrangement that was a money purchase arrangement; and

section 222 specifies the relevant relievable amount in the case of an recognised

overseas scheme arrangement that was any other sort of arrangement.

40

(7)   

In this section and sections 221 and 222 “overseas arrangement active

membership period” is the period—

 

 

 
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