Income Tax (Earnings and Pensions) Act 2003

Benefits treated as employment income U.K.

[F1 393 Application of this Chapter U.K.

(1) This Chapter applies to relevant benefits provided under an employer-financed retirement benefits scheme.

(2) Section 393A defines “employer-financed retirement benefits scheme” and section 393B defines “relevant benefits”.]

Textual Amendments

F1 Ss. 393-393B substituted for s. 393 (6.4.2006) by Finance Act 2004 (c. 12), ss. 249(3), 284(1) (with Sch. 36)

[F1 393A Employer-financed retirement benefits scheme U.K.

(1) In this Chapter “employer-financed retirement benefits scheme” means a scheme for the provision of benefits consisting of or including relevant benefits to or in respect of employees or former employees of an employer.

(2) But neither—

(a) a registered pension scheme, nor

(b) a section 615(3) scheme,

is an employer-financed retirement benefits scheme.

(3) “Section 615(3) scheme” means a superannuation fund to which section 615(3) of ICTA applies.

(4) “Scheme” includes a deed, agreement, series of agreements, or other arrangements.

Textual Amendments

F1 Ss. 393-393B substituted for s. 393 (6.4.2006) by Finance Act 2004 (c. 12), ss. 249(3), 284(1) (with Sch. 36)

393B Relevant benefits U.K.

(1) In this Chapter “relevant benefits” means any lump sum, gratuity or other benefit (including a non-cash benefit) provided (or to be provided)—

(a) on or in anticipation of the retirement of an employee or former employee,

(b) on the death of an employee or former employee,

(c) after the retirement or death of an employee or former employee in connection with past service,

(d) on or in anticipation of, or in connection with, any change in the nature of service of an employee, or

(e) to any person by virtue of a pension sharing order or provision relating to an employee or former employee.

(2) But—

(a) benefits charged to tax under Part 9 (pension income),

(b) benefits chargeable to tax by virtue of Schedule 34 to FA 2004 (which applies certain charges under Part 4 of that Act in relation to non-UK schemes), and

(c) excluded benefits,

are not relevant benefits.

(3) The following are “excluded benefits”—

(a) benefits in respect of ill-health or disablement of an employee during service,

(b) benefits in respect of the death by accident of an employee during service,

(c) benefits under a relevant life policy, and

(d) benefits of any description prescribed by regulations made by the Board of Inland Revenue.

(4) In subsection (3)(c) “relevant life policy” means—

[F2 (a) an excepted group life policy as defined in section 480 of ITTOIA 2005,]

(b) a policy of life insurance the terms of which provide for the payment of benefits on the death of a single individual and with respect to which [F3 —

(i) condition A in section 481 of that Act would be met if paragraph (a) in that condition referred to the death, in any circumstances or except in specified circumstances, of that individual (rather than the death in any circumstances of each of the individuals insured under the policy) and if the condition did not include paragraph (b), and

(ii) conditions C and D in that section and conditions A and C in section 482 of that Act are met, or]

(c) a policy of life insurance that would be within paragraph (a) or (b) but for the fact that it provides for a benefit which is an excluded benefit under or by virtue of paragraph (a), (b) or (d) of subsection (3).

[F4 (4A) Regulations under subsection (3)(d) may include provision having effect in relation to times before they are made.]

(5) In subsection (1)(e) “pension sharing order or provision” means any such order or provision as is mentioned in section 28(1) of WRPA 1999 or Article 25(1) of WRP(NI)O 1999.]

Textual Amendments

F1 Ss. 393-393B substituted for s. 393 (6.4.2006) by Finance Act 2004 (c. 12), ss. 249(3), 284(1) (with Sch. 36)

F2 S. 393B(4)(a) substituted by 2004 c. 12, s. 249(3) (as amended (6.4.2006) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 651(2)(a), Sch. 2 para. 161 (with Sch. 2))

F3 Words in s. 393B(4)(b) substituted by 2004 c. 12, s. 249(3) (as amended (6.4.2006) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 651(2)(b), Sch. 2 para. 161 (with Sch. 2))

F4 S. 393B(4A) inserted (19.7.2007) by Finance Act 2007 (c. 11), Sch. 20 paras. 21, 24(3)

394 Charge on benefit to which this Chapter applies U.K.

(1) If a benefit to which this Chapter applies is received by an individual, the amount of the benefit counts as employment income of the individual for the relevant tax year.

[F5 (1A) Subsection (1) does not apply in relation to the benefit if the total amount of the benefits to which this Chapter applies received by the individual in the relevant tax year does not exceed £100.]

(2) If a benefit to which this Chapter applies is received by a person who is not an individual, the [F6 person who is (or persons who are) the responsible person in relation to] the scheme under which the benefit is provided is chargeable [F7 to income tax] on the amount of the benefit for the relevant tax year.

(3) In [F8 this section] the “relevant tax year” is the tax year in which the benefit is received.

(4) For the purposes of subsection (2), the rate of tax is [F9 45%] or such other rate as may for the time being be specified by the Treasury by order.

[F10 (4A) Subsection (4B) applies if the receipt of a benefit to which this Chapter applies gives rise to other relevant income of the employee, or the former employee, to or in respect of whom the benefit is provided.

(4B) Subsection (1) or (2) (as the case may be) applies to the amount of the benefit only so far as that amount exceeds the other relevant income.

(4C) In subsections (4A) and (4B) “other relevant income” means—

(a) general earnings of the employee or former employee which are chargeable to income tax,

(b) an amount which counts as employment income of the employee or former employee under Chapter 2 of Part 7A, F11 ...

[F12 (ba) an amount which would count as employment income of the employee or former employee under that Chapter but for the application of section 554Z5 (overlap with earlier relevant step), or]

[F13 (c) an amount which would be within paragraph (a), (b) or (ba) apart from—

(i) the employee or former employee having been non-UK resident for any tax year, or

(ii) any tax year having been a split year as respects the employee or former employee.]]

(5) No liability to income tax arises by virtue of any other provision of this Act in respect of a benefit to which this Chapter applies.

[F14 (6) Subsection (5) does not affect—

(a) any liability to income tax on general earnings, or

(b) any liability to income tax on an amount which counts as employment income under Chapter 2 of Part 7A.]

Textual Amendments

F5 S. 394(1A) inserted (6.4.2006) by Finance Act 2004 (c. 12), ss. 249(5), 284(1) (with Sch. 36)

F6 Words in s. 394(2) substituted (6.4.2006) by Finance Act 2004 (c. 12), ss. 249(6), 284(1) (with Sch. 36)

F7 Words in s. 394(2) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 595 (with Sch. 2)

F8 Words in s. 394(3) substituted (6.4.2006) by Finance Act 2004 (c. 12), ss. 249(7), 284(1) (with Sch. 36)

F9 Word in s. 394(4) substituted (with effect in accordance with s. 1(6) of the amending Act) by Finance Act 2012 (c. 14), s. 1(4)

F10 S. 394(4A)-(4C) inserted (with effect in accordance with Sch. 2 paras. 52-59, 60 of the amending Act) by Finance Act 2011 (c. 11), Sch. 2 para. 14(2)

F11 Word in s. 394(4C)(b) omitted (with effect in accordance with Sch. 45 para. 153(2) of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 45 para. 65(2)

F12 S. 394(4C)(ba) inserted (with effect in accordance with Sch. 45 para. 153(2) of the amending Act) by Finance Act 2013 (c. 29), Sch. 45 para. 65(2)

F13 S. 394(4C)(c) substituted (with effect in accordance with Sch. 45 para. 153(2) of the amending Act) by Finance Act 2013 (c. 29), Sch. 45 para. 65(3)

F14 S. 394(6) inserted (with effect in accordance with Sch. 2 paras. 52-59, 60 of the amending Act) by Finance Act 2011 (c. 11), Sch. 2 para. 14(3)

Modifications etc. (not altering text)

C1 S. 394 restricted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 36 paras. 54(2)(3)(a), 55(2) (with s. 283(5), Sch. 36)

[F15 394A Temporary non-residents U.K.

(1) This section applies if an individual is temporarily non-resident.

(2) Any benefits within subsection (3) are to be treated for the purposes of section 394(1) as if they were received by the individual in the period of return.

(3) A benefit is within this subsection if—

(a) this Chapter applies to it,

(b) it is in the form of a lump sum,

(c) it is received by the individual in the temporary period of non-residence, and

(d) ignoring this section—

(i) no charge to tax arises by virtue of section 394(1) in respect of it, but

(ii) such a charge would arise if the existence of any double taxation relief arrangements were disregarded.

(4) Subsection (3)(d)(i) includes a case where the charge could be prevented by making a DTR claim, even if no claim is in fact made.

(5) Subsection (2) does not affect the operation of section 394(1A) (and, accordingly, “the relevant tax year” for the purposes of section 394(1A) remains the tax year in which the benefit is actually received).

(6) Nothing in any double taxation relief arrangements is to be read as preventing the individual from being chargeable to income tax in respect of any benefit treated by virtue of this section as received in the period of return (or as preventing a charge to that tax from arising as a result).

(7) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains—

(a) when an individual is to be regarded as “temporarily non-resident”, and

(b) what “the temporary period of non-residence” and “the period of return” mean.

(8) In this section—

• “double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010;

• “DTR claim” means a claim for relief under section 6 of that Act.]

Textual Amendments

F15 S. 394A inserted (with effect in accordance with Sch. 45 para. 153(3) of the amending Act) by Finance Act 2013 (c. 29), Sch. 45 para. 125

[F16 395 Reduction where employee has contributed U.K.

(1) This section applies in relation to a relevant benefit under an employer-financed retirement benefits scheme in the form of a lump sum where, under the scheme, an employee has paid any sum or sums by way of contribution to the provision of the lump sum.

(2) The amount which, by virtue of section 394, counts as employment income, or is chargeable to tax under [F17 subsection (2) of that section], is the amount of the lump sum reduced by the sum, or the aggregate of the sums, paid by the employee by way of contribution to the provision of the lump sum.

(3) A reduction under this section may not be claimed in respect of the same contribution in relation to more than one lump sum.

(4) It is to be assumed, unless the contrary is shown, that no reduction is applicable under this section.]

Textual Amendments

F16 S. 395 substituted for ss. 395-397 (6.4.2006) by Finance Act 2004 (c. 12), ss. 249(8), 284(1) (with Sch. 36)

F17 Words in s. 395 substituted by 2004 c. 12, s. 249(8) (as amended (6.4.2006) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 651(3), Sch. 2 para. 161 (with Sch. 2))

Modifications etc. (not altering text)

C2 S. 395 modified (22.7.2004) by Finance Act 2004 (c. 12), Sch. 36 paras. 54(3)(b), 55(3) (with s. 283(5), Sch. 36)

[F18 395A Benefits under old section 222 schemes not taxed by virtue of section 394 U.K.

Section 394 does not apply to a benefit provided under an employer–financed retirement benefits scheme if—

(a) immediately before 6th April 1980 the scheme was approved under section 222 of ICTA 1970,

(b) the scheme was not approved under Chapter II of Part II of FA 1970,

(c) no material changes have been made to the terms on which benefits are provided under the scheme after 5th April 1980, and

(d) no contributions have been paid under the scheme after that date.]

Textual Amendments

F18 S. 395A inserted (with effect in accordance with art. 2(2) of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2009 (S.I. 2009/730), arts. 1(1), 2

F16 396 Certain lump sums not taxed by virtue of section 394 U.K.

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Textual Amendments

F16 S. 395 substituted for ss. 395-397 (6.4.2006) by Finance Act 2004 (c. 12), ss. 249(8), 284(1) (with Sch. 36)

F16 397 Certain lump sums: calculation of amount taxed by virtue of section 394 U.K.

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Textual Amendments

F16 S. 395 substituted for ss. 395-397 (6.4.2006) by Finance Act 2004 (c. 12), ss. 249(8), 284(1) (with Sch. 36)