Finance Act 1971

20 Annuities for the self-employed and others

(1) In section 226(1)(b) of the Taxes Act (relief in respect of annuity contracts having for their main object the provision of a life annuity in old age) after the words “in old age ” insert “or under a contract for the time being approved under section 226A of this Act ”.

(2) For subsection (1) of section 227 of the Taxes Act substitute—

“227 (1) Relief shall be given under this section in respect of a qualifying premium paid by an individual only on a claim made for the purpose, and where relief is to be so given, the amount of that premium shall, subject to the provisions of this section, be deducted from or set off against his relevant earnings for the year of assessment in which the premium is paid.

(1A) Subject to the provisions of this section and of section 228 below, the amount which may be deducted or set off in any year of assessment (whether in respect of one or more qualifying premiums, and whether or not including premiums in respect of a contract approved under section 226A of this Act)—

(a) shall not be more than the sum of £1,500, and

(b) shall not be more than 15 per cent. of the individual's net relevant earnings for that year.

(1B) Subject to the provisions of this section, the amount which may be deducted or set off in any year of assessment in respect of qualifying premiums paid under a contract approved under section 226A of this Act (whether in respect of one or more such premiums)—

(a) shall not be more than the sum of £500, and

(b) shall not be more than 5 per cent. of the individual's net relevant earnings for that year.

(1C) Where the condition in section 226(1)(a) above is satisfied as respects part only of the year, then for the said sums of £1,500 and £500 mentioned above there shall be substituted sums which respectively bear to £1,500 and £500 the same proportion as that part bears to the whole year.”

(3) At the end of section 226(2) of the Taxes Act (which precludes approval of an annuity contract if any annuity is capable of commutation) add—

“Provided that the contract may give the individual the right to receive, by way of commutation of part of the annuity payable to him, a lump sum not exceeding three times the annual amount of the remaining part of the annuity, taking, where the annual amount is or may be different in different years, the initial annual amount, and shall make any such right depend on the exercise by the individual of an election at or before the time when the annuity first becomes payable to him.”

(4) Schedule 2 to this Act shall have effect for supplementing this section which in that Schedule is referred to as “the principal section ”.