Finance Bill

House of Commons

Session 2009 - 10
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 3 — Pensions: high income excess relief charge
63

“prescribed” means prescribed by regulations;
“specified” means specified in a notice published, and not withdrawn,
by the Commissioners.
Commencement etc
13
This Schedule comes into force on 1 October 2010.
5
14
Where an agreement to make a local loop available with a view to its being
used has been entered into before 1 October 2010 any provision of the
agreement requiring the making of any payment in respect of its being so
made available may be adjusted so as to secure that the cost of discharging
any liability to pay landline duty is borne by the person making the
10
payment.
15
Where on 1 October 2010 an owner of local loops is subject to any SMP
condition relating to price controls imposed by virtue of section 87 of the
Communications Act 2003 that condition does not prevent the person from
recovering from any other person the cost of discharging any liability to pay
15
landline duty.
Schedule 3
Section 24

Pensions: high income excess relief charge
1
Part 4 of FA 2004 (pension schemes etc) is amended as follows.
2
After section 213 insert—
20
“High income excess relief charge
213A
High income excess relief charge
(1)
A charge to income tax, to be known as the high income excess relief
charge, arises where—
(a)
an individual who is a member of one or more registered
25
pension schemes has a high income for a tax year, and
(b)
there is a total pension savings amount in the case of the
individual for the tax year.
(2)
The person liable to the high income excess relief charge is the
individual.
30
(3)
The individual is liable to the high income excess relief charge
whether or not—
(a)
the individual, and
(b)
the scheme administrator of the pension scheme or schemes
concerned,
35

are UK resident, ordinarily UK resident or domiciled in the United
Kingdom.
(4)
The high income excess relief charge is a charge at the appropriate
rate in respect of the total pension savings amount.

Finance Bill
Schedule 3 — Pensions: high income excess relief charge
64

(5)
The total pension savings amount is not to be treated as income for
any purpose of the Tax Acts apart from this Part.
(6)
In calculating the individual’s liability to income tax for the tax year
the amount of any income tax to which the individual is liable under
this section is to be added at Step 7 of the calculation in section 23 of
5
ITA 2007 (which applies as if this section were a provision listed in
section 30 of that Act).
(7)
The following sections make further provision about the high
income excess relief charge—
(a)
sections 213B to 213D (high income),
10
(b)
section 213E (the appropriate rate),
(c)
sections 213F to 213N (total pension savings amount),
(d)
section 213O (anti-avoidance), and
(e)
section 213P (power to amend).
213B
High income
15
An individual has a high income for a tax year if—
(a)
the individual’s gross income for the tax year is £150,000 or
more, and
(b)
the individual’s relevant income for the tax year is not less
than £130,000.
20
213C
Gross income
  To find the individual’s gross income for a tax year take the
following steps—
  Step 1
  Identify the individual’s total income for the tax year.
25
  Step 2
  Add the amount of any deductions made from any employment income of the
individual for the tax year under Part 12 of ITEPA 2003 (payroll
giving), under section 193(2) of this Act or under Chapter 2 of Part 5
of ITEPA 2003 (employee’s expenses) in accordance with paragraph
30
51 of Schedule 36 to this Act.
  Step 3
  Deduct the amount of any relief under the provisions listed in section 24 of
ITA 2007, other than Chapter 3 of Part 8 of that Act (gifts of shares,
securities or real property to charity) and sections 193(4) and 194(1)
35
of this Act, to which the individual is entitled for the tax year.
  Step 4
  Add so much of the amount that is the total pension savings amount in the
case of the individual for the tax year as remains after deducting
from it the amount of any relievable pension contributions paid by
40
or on behalf of the individual during the tax year.
  The result is the individual’s gross income for the tax year.
213D
Relevant income
(1)
To find the individual’s relevant income for a tax year take the
following steps—
45

Step 1

Identify the individual’s total income for the tax year.

Finance Bill
Schedule 3 — Pensions: high income excess relief charge
65


Step 2

Add the amount of any deductions made from any employment
income of the individual for the tax year under Part 12 of ITEPA 2003
(payroll giving), under section 193(2) of this Act or under Chapter 2
of Part 5 of ITEPA 2003 (employee’s expenses) in accordance with
5
paragraph 51 of Schedule 36 to this Act.

Step 3

Deduct the amount of any relief under the provisions listed in section
24 of ITA 2007, other than Chapter 3 of Part 8 of that Act (gifts of
shares, securities or real property to charity) and sections 193(4) and
10
194(1) of this Act, to which the individual is entitled for the tax year.

Step 4

Add any amount by which what would otherwise be general
earnings or specific employment income of the individual for the tax
year has been reduced by relevant salary sacrifice arrangements or
15
relevant flexible remuneration arrangements.

The result is the individual’s relevant income for the tax year.
(2)
In subsection (1)—
“relevant salary sacrifice arrangements” means arrangements
under which the individual gives up the right to receive
20
general earnings or specific employment income in return for
the making of relevant pension provision and which are
made on or after 22 April 2009 (whether before or after the
employment in question began);
“relevant flexible remuneration arrangements” means
25
arrangements under which the individual and an employer
of the individual agree that relevant pension provision is to
be made rather than the individual receive some description
of employment income and which are made on or after 22
April 2009 (whether before or after the employment in
30
question began).
(3)
In subsection (2) “relevant pension provision” means the payment of
contributions (or additional contributions) to a pension scheme in
respect of the individual or otherwise (by an employer of the
individual or any other person) to secure an increase in the amount
35
of benefits to which the individual or any person who is a dependant
of, or is connected with, the individual is actually or prospectively
entitled under a pension scheme.
(4)
Section 993 of ITA 2007 (meaning of “connected” persons) applies for
the purposes of subsection (3).
40
213E
The appropriate rate
(1)
“The appropriate rate”, in relation to the total pension savings
amount in the case of the individual for a tax year, is—
(a)
0% in relation to so much (if any) of that amount as, when
added to the individual’s reduced net income for the tax year,
45
does not exceed the basic rate limit,
(b)
20% in relation to so much (if any) of that amount as, when so
added, exceeds the basic rate limit but does not exceed the
higher rate limit, and

Finance Bill
Schedule 3 — Pensions: high income excess relief charge
66

(c)
30% in relation to so much (if any) of that amount as, when so
added, exceeds the higher rate limit.
(2)
But where the individual’s gross income for the tax year is less than
£180,000, the percentages in subsection (1)(b) and (c) are each
reduced (but to no less than 0%) by 1 percentage point for every
5
£1,000 by which it is less than £180,000.
(3)
The individual’s reduced net income for the tax year is the amount
after taking step 3 in section 23 of ITA 2007 in the case of the
individual for the tax year.
(4)
Where the basic rate limit or the higher rate limit for the tax year is
10
(in accordance with section 192 of this Act and section 414 of ITA
2007) increased in the case of the individual, the references to the
limit in subsection (1) are to the limit as so increased.
213F
Total pension savings amount
(1)
The total pension savings amount in the case of an individual for a
15
tax year is arrived at by aggregating the pension savings amounts in
respect of each arrangement relating to the individual under a
registered pension scheme of which the individual is a member.
(2)
The pension savings amount in respect of an arrangement—
(a)
is the amount arrived at under section 213G if it is a money
20
purchase arrangement other than a cash balance
arrangement,
(b)
is the amount arrived at under section 213H if it is a cash
balance arrangement,
(c)
is the amount arrived at under section 213J if it is a defined
25
benefits arrangement, and
(d)
is the amount arrived at under section 213N if it is a hybrid
arrangement.
(3)
Where the pension savings amount in respect of an arrangement
would otherwise be a negative amount it is to be taken to be nil.
30
(4)
Where—
(a)
the total pension input amount in the case of the individual
under section 229 for the tax year, exceeds
(b)
the amount of the annual allowance for the tax year,

the total pension savings amount in the case of the individual for the
35
tax year is reduced by the amount of the excess.
(5)
The Treasury may by regulations make provision—
(a)
for an arrangement relating to the individual to be left out of
account in arriving at the total pension savings amount in the
case of the individual for a tax year if the individual meets the
40
condition in subsection (6) throughout the tax year and such
conditions as are prescribed by the regulations are met, and
(b)
for modifying the operation of any of the provisions relating
to the high income excess relief charge in relation to an
arrangement relating to the individual for a tax year if the
45
individual meets the condition in subsection (6) for only part
of the tax year and such conditions as are prescribed by the
regulations are met.

Finance Bill
Schedule 3 — Pensions: high income excess relief charge
67

(6)
The condition in this subsection, in relation to the individual and an
arrangement under a pension scheme, is that the individual is a
deferred member of the pension scheme (or would be if it were the
only arrangement under the pension scheme relating to the
individual).
5
213G
Money purchase arrangements other than cash balance arrangements
(1)
The pension savings amount in respect of a money purchase
arrangement other than a cash balance arrangement is the total of—
(a)
any relievable pension contributions paid by or on behalf of
the individual under the arrangement, and
10
(b)
contributions paid in respect of the individual under the
arrangement by an employer of the individual,

during the tax year.
(2)
The references to contributions in subsection (1)(a) and (b) do not
include minimum payments under—
15
(a)
section 8 of the Pension Schemes Act 1993, or
(b)
section 4 of the Pension Schemes (Northern Ireland) Act 1993,

or any amount recovered under regulations made under subsection
(3) of either of those sections.
(3)
When at any time contributions paid under a pension scheme by an
20
employer otherwise than in respect of any individual become held
for the purposes of the provision under an arrangement under the
pension scheme of benefits to or in respect of an individual, they are
to be treated as being contributions paid at that time in respect of the
individual under the arrangement.
25
(4)
If during the tax year the individual becomes entitled to a serious ill-
health lump sum under the arrangement or dies, the pension savings
amount in the case of the individual in respect of the arrangement is
nil.
213H
Cash balance arrangements
30
(1)
The pension savings amount in respect of a cash balance
arrangement is the appropriate increase.
(2)
The appropriate increase is—
where—
ACR is the amount of the closing rights (see subsection (3)),
35
adjusted in accordance with section 213I,
CARARF is the factor which is the appropriate age-related
factor (see section 213L) in relation to the closing rights,
UOR is the amount of the opening rights (see subsection (4)),
uprated in accordance with section 213M, and
40
OARARF is the factor which is the appropriate age-related
factor (see section 213L) in relation to the opening rights.
(3)
The amount of the closing rights is the amount which would, on the
relevant assumptions, be available for the provision of benefits to or
in respect of the individual under the arrangement if the individual
45
became entitled to the benefits at the end of the tax year.

Finance Bill
Schedule 3 — Pensions: high income excess relief charge
68

(4)
The amount of the opening rights is the amount which would, on the
relevant 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 end of the preceding tax year.
(5)
If, during the tax year, minimum payments are made under—
5
(a)
section 8 of the Pension Schemes Act 1993, or
(b)
section 4 of the Pension Schemes (Northern Ireland) Act 1993,

in relation to the individual in connection with a cash balance
arrangement, the amount is to be subtracted from what would
otherwise be the pension savings amount in the case of the
10
individual in respect of the arrangement.
(6)
If during the tax year the individual becomes entitled to a serious ill-
health lump sum under the arrangement or dies, the pension savings
amount in the case of the individual in respect of the arrangement is
nil.
15
(7)
In this section and section 213J “the relevant assumptions” means—
(a)
the valuation assumptions (see section 277) as modified by
regulations made by the Treasury, and
(b)
such other assumptions as the Treasury may by regulations
prescribe.
20
213I
Adjustment of closing rights
(1)
This section applies for adjusting ACR under section 213H.
(2)
If, during the tax year, the rights of the individual under the
arrangement have been reduced by having become subject to a
pension debit, the amount of the reduction is to be added to ACR.
25
(3)
If, during the tax year, the rights of the individual under the
arrangement have been increased by the individual having become
entitled to a pension credit deriving from the same or another
registered pension scheme, the amount of the increase is to be
subtracted from ACR.
30
(4)
If, during the tax year, the rights of the individual under the
arrangement have been reduced by reason of a transfer relating to
the individual of any sums or assets held for the purposes of, or
representing accrued rights under, the arrangement so as to become
held for the purposes of, or to represent rights under, any other
35
pension scheme that is—
(a)
a registered pension scheme, or
(b)
a qualifying recognised overseas pension scheme,

the amount of the reduction is to be added to ACR.
(5)
If, during the tax year, the rights of the individual under the
40
arrangement have been increased by reason of a transfer relating to
the individual of any sums or assets held for the purposes of, or
representing accrued rights under, any pension scheme so as to
become held for the purposes of, or to represent rights under, the
arrangement, the amount of the increase is to be subtracted from
45
ACR.

Finance Bill
Schedule 3 — Pensions: high income excess relief charge
69

(6)
If, during the tax year, the rights of the individual under the
arrangement have been reduced by any surrender made, or similar
action taken, pursuant to an option available to the individual under
the arrangement, the amount of the reduction is to be added to ACR.
(7)
If, during the tax year—
5
(a)
benefit crystallisation event 1, 2, 3, or 4 occurs in relation to
the individual and the arrangement,
(b)
benefit crystallisation event 6 so occurs by virtue of the
individual becoming entitled to a pension commencement
lump sum or a lifetime allowance excess lump sum, or
10
(c)
there is an allocation of rights of the individual under the
arrangement (not falling within paragraph (a)),

the amount of the reduction in the amount of the rights available for
the provision of benefits to or in respect of the individual occurring
by reason of the event or allocation is to be added to ACR.
15
213J
Defined benefits arrangements
(1)
The pension savings amount in respect of a defined benefits
arrangement is the aggregate of—
(a)
the appropriate pension increase (see subsection (2)), and
(b)
the appropriate lump sum increase (see subsection (5)).
20
(2)
The appropriate pension increase is—

where—
ACP is the amount of the closing pension (see subsection (3)),
adjusted in accordance with section 213K,
CAPARF is the factor which is the appropriate age-related
25
factor (see section 213L) in relation to the closing pension,
UOP is the amount of the opening pension (see subsection (4)),
uprated in accordance with section 213M, and
OAPARF is the factor which is the appropriate age-related
factor (see section 213L) in relation to the opening pension.
30
(3)
The amount of the closing pension is the annual rate of the pension
to which the individual would, on the relevant assumptions, be
entitled under the arrangement if the individual became entitled to
it at the end of the tax year.
(4)
The amount of the opening pension is the annual rate of the pension
35
to which the individual would, on the relevant assumptions, be
entitled under the arrangement if the individual became entitled to
it at the end of the preceding tax year.
(5)
The appropriate lump sum increase is—

where—
40
ACLS is the amount of the closing lump sum (see subsection
(6)), adjusted in accordance with section 213K,
CALSARF is the factor which is the appropriate age-related
factor (see section 213L) in relation to the closing lump sum,