Finance Act 1989

Part I U.K. Amendments of Taxes Act

Preliminary U.K.

1 U.K. The Taxes Act 1988 shall be amended as mentioned in the followingprovisions of this Part of this Schedule.

Amendments U.K.

F1 2 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 Sch. 6 para. 2 repealed (1.5.1995 with effect in accordance with Sch. 8 para. 57 of the amending Act) by 1995 c. 4, s. 162, Sch. 29 Pt. VIII(5), note 2

3 (1) Section 590 (conditions for approval of schemes) shall be amended asfollows. U.K.

(2) In subsection (3)(d) (condition to be satisfied as to lump sum) the words “(disregarding any excess of that remuneration over the permittedmaximum)” shall be omitted.

(3) In subsection (3) for the words from “In paragraph (d) above” to theend there shall be substituted—

“(e) that, in the case of any employee who is a member of the scheme by virtueof two or more relevant associated employments, the amount payable by way ofpension in respect of service in any one of them may not, when aggregated withany amount payable by way of pension in respect of service in the other orothers, exceed the relevant amount;

(f) that, in the case of any employee who is a member of the scheme by virtueof two or more relevant associated employments, the amount payable by way ofcommuted pension in respect of service in any one of them may not, whenaggregated with any amount payable by way of commuted pension in respect ofservice in the other or others, exceed the relevant amount;

(g) that, in the case of any employee in relation to whom the scheme isconnected with another scheme which is (or other schemes each of which is) anapproved scheme, the amount payable by way of pension under the scheme maynot, when aggregated with any amount payable by way of pension under the otherscheme or schemes, exceed the relevant amount;

(h) that, in the case of any employee in relation to whom the scheme isconnected with another scheme which is (or other schemes each of which is) anapproved scheme, the amount payable by way of commuted pension may not, whenaggregated with any amount payable by way of commuted pension under the otherscheme or schemes, exceed the relevant amount.”

(4) For subsection (7) there shall be substituted—

“(7) Subsections (8) to (10) below apply where the Board are consideringwhether a retirement benefits scheme satisfies or continues to satisfy theprescribed conditions.

(8) For the purpose of determining whether the scheme, so far as it relatesto a particular class or description of employees, satisfies or continues tosatisfy the prescribed conditions, that scheme shall be considered inconjunction with—

(a) any other retirement benefits scheme (or schemes) which relates (orrelate) to employees of that class or description and which is (or are)approved for the purposes of this Chapter,

(b) any other retirement benefits scheme (or schemes) which relates (orrelate) to employees of that class or description and which is (or are) at thesame time before the Board in order for them to decide whether to giveapproval for the purposes of this Chapter,

(c) any section 608 scheme or schemes relating to employees of that class ordescription, and

(d) any relevant statutory scheme or schemes relating to employees of thatclass or description.

(9) If those conditions are satisfied in the case of both or all of thoseschemes taken together, they shall be taken to be satisfied in the case of thescheme mentioned in subsection (7) above (as well as the other or others).

(10) If those conditions are not satisfied in the case of both or all of thoseschemes taken together, they shall not be taken to be satisfied in the caseof the scheme mentioned in subsection (7) above.

(11) The reference in subsection (8)(c) above to a section 608 scheme is areference to a fund to which section 608 applies.”

4 U.K. The following sections shall be inserted after section 590—

“590A Section 590: supplementary provisions.

(1) For the purposes of section 590(3)(e) and (f) two or more employments arerelevant associated employments if they are employments in the case ofwhich—

(a) there is a period during which the employee has held both or all of them,

(b) the period counts under the scheme in the case of both or all of them asa period in respect of which benefits are payable, and

(c) the period is one during which both or all of the employers in questionare associated.

(2) For the purposes of section 590(3)(g) and (h) the scheme is connected withanother scheme in relation to an employee if—

(a) there is a period during which he has been the employee of two persons whoare associated employers,

(b) the period counts under both schemes as a period in respect of whichbenefits are payable, and

(c) the period counts under one scheme by virtue of service with one employerand under the other scheme by virtue of service with the other employer.

(3) For the purposes of subsections (1) and (2) above, employers areassociated if (directly or indirectly) one is controlled by the other or ifboth are controlled by a third person.

(4) In subsection (3) above the reference to control, in relation to a bodycorporate, shall be construed—

(a) where the body corporate is a close company, in accordance with section416, and

(b) where it is not, in accordance with section 840.

590B Section 590: further supplementary provisions.

(1) For the purposes of section 590(3)(e) the relevant amount, in relation toan employee, shall be found by applying the following formula—

(2) For the purposes of section 590(3)(f) the relevant amount, in relation toan employee, shall be found by applying the following formula—

(3) For the purposes of section 590(3)(g) the relevant amount, in relation toan employee, shall be found by applying the following formula—

(4) For the purposes of section 590(3)(h) the relevant amount, in relation toan employee, shall be found by applying the following formula—

(5) For the purposes of this section A is the aggregate number of yearsservice (expressing parts of a year as a fraction), subject to a maximum of40, which, in the case of the employee, count for the purposes of the schemeat the time the benefits in respect of service in the employment becomepayable.

(6) But where the same year (or part of a year) counts for the purposes of thescheme by virtue of more than one of the relevant associated employments itshall be counted only once in calculating the aggregate number of yearsservice for the purposes of subsection (5) above.

(7) For the purposes of this section B is the aggregate number of yearsservice (expressing parts of a year as a fraction), subject to a maximum of40, which, in the case of the employee, count for the purposes of any of thefollowing—

(a) the scheme, and

(b) the other scheme or schemes with which the scheme is connected in relationto him,

at the time the benefits become payable.

(8) But where the same year (or part of a year) counts for the purposes ofmore than one scheme it shall be counted only once in calculating theaggregate number of years service for the purpose of subsection (7) above.

(9) For the purposes of this section C is the permitted maximum in relationto the year of assessment in which the benefits in question become payable,that is, the figure found for that year by virtue of subsections (10) and (11)below.

(10) For the years 1988-89 and 1989-90 the figure is £60,000.

(11) For any subsequent year of assessment the figure is the figure found forthat year, for the purposes of section 590C, by virtue of section 590C(4) and(5).

590C Earnings cap.

(1) In arriving at an employee’s final remuneration for the purposes ofsection 590(3)(a) or (d), any excess of what would be his final remuneration(apart from this section) over the permitted maximum for the year ofassessment in which his participation in the scheme ceases shall bedisregarded.

(2) In subsection (1) above “the permitted maximum”, in relation to a year of assessment,means the figure found for that year by virtue of subsections (3) and (4)below.

(3) For the years 1988-89 and 1989-90 the figure is £60,000.

(4) For any subsequent year of assessment the figure is also £60,000,subject to subsection (5) below.

(5) If the retail prices index for the month of December preceding a year ofassessment falling within subsection (4) above is higher than it was for theprevious December, the figure for that year shall be an amount arrived atby—

(a) increasing the figure for the previous year of assessment by the samepercentage as the percentage increase in the retail prices index, and

(b) if the result is not a multiple of £600, rounding it up to thenearest amount which is such a multiple.

(6) The Treasury shall in the year of assessment 1989-90, and in eachsubsequent year of assessment, make an order specifying the figure which isby virtue of this section the figure for the following year of assessment.”

5 (1) Section 592 (exempt approved schemes) shall be amended as follows. U.K.

(2) In subsection (8) there shall be inserted at the beginning the words “Subject to subsection (8A) below,”.

(3) After subsection (8) there shall be inserted—

“(8A) Where an employee’s remuneration for a year of assessment includesremuneration in respect of more than one employment, the amount allowed to bededucted by virtue of subsection (7) above in respect of contributions paidby the employee in that year by virtue of any employment (whether under asingle scheme or under two or more schemes) shall not exceed 15 per cent, orsuch higher percentage as the Board may in a particular case prescribe, of hisremuneration for the year in respect of that employment.”

(4) After subsection (8A) there shall be inserted—

“(8B) In arriving at an employee’s remuneration for a year of assessment for thepurposes of subsection (8) or (8A) above, any excess of what would be hisremuneration (apart from this subsection) over the permitted maximum for thatyear shall be disregarded.

(8C) In subsection (8B) above “permitted maximum”, in relation to a year of assessment,means the figure found for that year by virtue of subsections (8D) and (8E)below.

(8D) For the year 1989-90 the figure is £60,000.

(8E) For any subsequent year of assessment the figure is the figure found forthat year, for the purposes of section 590C, by virtue of section 590C(4) and(5).”

6 (1) Section 594 (exempt statutory schemes) shall be amended as follows. U.K.

(2) In subsection (1) the word “relevant” shall be inserted before the words “statutoryscheme”.

(3) In subsection (2) there shall be inserted at the beginning the words “Subject to subsection (3) below,”.

(4) After subsection (2) there shall be inserted—

“(3) Where a person’s remuneration for a year of assessment includesremuneration in respect of more than one office or employment, the amountallowed to be deducted by virtue of subsection (1) above in respect ofcontributions paid by the person in that year by virtue of any office oremployment (whether under a single scheme or under two or more schemes) shallnot exceed 15 per cent, or such higher percentage as the Board may in aparticular case prescribe, of his remuneration for the year in respect of thatoffice or employment.”

(5) After subsection (3) there shall be inserted—

“(4) In arriving at a person’s remuneration for a year of assessment for thepurposes of subsection (2) or (3) above, any excess of what would be hisremuneration (apart from this subsection) over the permitted maximum for thatyear shall be disregarded.

(5) In subsection (4) above “permitted maximum”, in relation to a year of assessment,means the figure found for that year by virtue of subsections (6) and (7)below.

(6) For the year 1989-90 the figure is £60,000.

(7) For any subsequent year of assessment the figure is the figure found forthat year, for the purposes of section 590C, by virtue of section 590C(4) and(5).”

F2 7 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F2 Sch. 6 paras. 7-9 repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

F2 8 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F2 Sch. 6 paras. 7-9 repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

F2 9 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F2 Sch. 6 paras. 7-9 repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

10 U.K. In section 598(1)(b) (charge to tax: repayment of employee’scontributions) the word “relevant” shall be inserted before the words “statutoryscheme”.

11 (1) Section 599 (charge to tax: commutation of entire pension in specialcircumstances) shall be amended as follows. U.K.

(2) In subsection (2)(b) the word “relevant” shall be inserted before thewords “statutory scheme”.

(3) After subsection (9) there shall be inserted—

“(10) In subsection (1)(a) above “the permitted maximum” means, as regards a charge to taxarising under this section in a particular year of assessment, the figurefound for that year by virtue of subsections (11) and (12) below.

(11) For the years 1988-89 and l989-90 the figure is £60,000.

(12) For any subsequent year of assessment the figure is the figure found forthat year, for the purposes of section 590C, by virtue of section 590C(4) and(5).”

12 (1) The following section shall be inserted after section 599— U.K.

“599A Charge to tax: payments out of surplus funds.

(1) This subsection applies to any payment which is made to or for the benefitof an employee or to his personal representatives out of funds which are orhave been held for the purposes of—

(a) a scheme which is or has at any time been an exempt approved scheme, or

(b) a relevant statutory scheme established under a public general Act,

and which is made in pursuance of a duty to return surplus funds.

(2) On the making of a payment to which subsection (1) above applies, theadministrator of the scheme shall be charged to income tax under Case VI ofSchedule D at the relevant rate on such amount as, after deduction of tax atthat rate, would equal the amount of the payment.

(3) Subject to subsection (4) below, the relevant rate shall be 35 per cent.

(4) The Treasury may by order from time to time increase or decrease therelevant rate.

(5) Where a payment made to or for the benefit of an employee is one to whichsubsection (1) above applies, it shall be treated in computing the totalincome of the employee for the year in which it is made as income for thatyear which is—

(a) received by him after deduction of income tax at the basic rate from acorresponding gross amount, and

(b) chargeable to income tax under Case VI of Schedule D.

(6) But, subject to subsection (7) below, no assessment to income tax shallbe made on, and no repayment of income tax shall be made to, the employee.

(7) Subsection (6) above shall not prevent an assessment in respect of incometax at a rate other than the basic rate.

(8) Subsection (5) above applies whether or not the employee is the recipientof the payment.

(9) Any payment chargeable to tax under this section shall not be chargeableto tax under section 598, 599 or 600 or under the Regulations mentioned inparagraph 8 of Schedule 3 to the Finance Act 1971.

(10) In this section—

• “employee”, in relation to a relevant statutory scheme,includes any officer;

• references to any payment include references to any transfer of assets orother transfer of money’s worth.”

F3 13 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F3 Sch. 6 para. 13 repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

14 U.K. In section 605 (information) the word “relevant” shall be inserted before the words “statutory scheme” in subsections (2), (3)(a) and (b)(i) and(4).

15 U.K. The following section shall be inserted after section 611—

“611A Definition of relevant statutory scheme.

(1) In this Chapter any reference to a relevant statutory scheme is areference to a statutory scheme—

(a) established before 14th March 1989, or

(b) established on or after that date and entered in the register maintainedby the Board for the purposes of this section.

(2) The Board shall maintain a register for the purposes of this section andshall enter in it the relevant particulars of any statutory scheme establishedon or after 14th March 1989 which is reported to the Board by the authorityresponsible for establishing it as a scheme the provisions of which correspondwith those of an approved scheme.

(3) The reference in subsection (2) above to the relevant particulars, inrelation to a scheme, is a reference to—

(a) the identity of the scheme,

(b) the date on which it was established,

(c) the authority responsible for establishing it, and

(d) the date on which that authority reported the scheme to the Board.

(4) Where the Board enter the relevant particulars of a scheme in the registermaintained by them for the purposes of this section, they shall inform theauthority responsible for establishing the scheme of the date of the entry.”

16 U.K. In section 828(4) (orders) after “377(8)” there shall be inserted “590C(6)”.

17 U.K. Paragraph 8 of Schedule 23 (benefits under scheme for additional voluntarycontributions causing benefits under main scheme to abate if aggregatebenefits exceed limits) shall be omitted.

Effect of amendments U.K.

18 (1) Paragraphs 2, 6(2), F4 ... 10, 11(2), 14 and 15 above shall be deemedto have come into force on 14th March 1989. U.K.

(2) Paragraphs 3(2) and (3) and 4 above shall have effect in relation to ascheme not approved by the Board before the day on which this Act is passed;but if the scheme came into existence before 14th March 1989 those provisionsshall not have effect as regards an employee who became a member of the schemebefore 1st June 1989.

(3) Paragraph 3(4) above shall have effect where a determination is made onor after the day on which this Act is passed.

(4) Paragraphs 5 and 6(3), (4) and (5) above shall have effect for the year1989-90 and subsequent years of assessment, but paragraphs 5(4) and 6(5) aboveshall not have effect as regards a person’s remuneration in respect of anoffice or employment in such circumstances as the Board may by regulationsprescribe for the purposes of this sub-paragraph.

F5 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5 (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) Paragraph 11(3) above shall have effect where the charge to tax undersection 599 arises on or after 14th March 1989, but not where the scheme cameinto existence before that date and the employee became a member of it before1st June 1989.

(9) Paragraphs 12 and 13 above shall have effect in relation to payments madeon or after the day on which this Act is passed.

(10) Paragraph 17 above shall have effect in relation to benefits provided onor after the day on which this Act is passed.

Textual Amendments

F4 Words in Sch. 6 para. 18(1) repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

F5 Sch. 6 para. 18(5)-(7) repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 8 Pt. 1 (with Sch. 7)

Modifications etc. (not altering text)

C1 For regulations see Part III Vol. 5 (under “Retirement benefit schemes: tax relief on contributions”)