Finance Act 2004

Chapter 5 U.K. Registered pension schemes: tax charges

Modifications etc. (not altering text)

C9 Pt. 4 applied (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 18

C10 Pt. 4 modified (19.7.2011) by Finance Act 2011 (c. 11), Sch. 18 para. 14(3)

Charges on authorised payments U.K.

204 Authorised pensions and lump sums U.K.

(1) Schedule 31 contains provision about the taxation of pensions and lump sums which are authorised to be paid by this Part.

(2) Schedule 36 contains (in Part 4) transitional provision about the taxation of annuities under existing retirement annuity contracts and other relevant transitional provision.

Commencement Information

I1 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

205 Short service refund lump sum charge U.K.

(1) A charge to income tax, to be known as the short service refund lump sum charge, arises where a short service refund lump sum is paid by a registered pension scheme.

(2) The person liable to the short service refund lump sum charge is the scheme administrator.

(3) The scheme administrator is liable to the short service refund lump sum charge whether or not—

(a) the scheme administrator, and

(b) the person to whom the short service refund lump sum is paid,

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

(4) The rate of the charge is—

(a) 20% in respect of so much of the lump sum as does not exceed £10,800, and

(b) 40% in respect of so much (if any) of it as exceeds that limit.

(5) The Treasury may by order amend subsection (4) so as to—

(a) increase or decrease either or both of the rates for the time being specified in that subsection, or

(b) increase the limit for the time being specified in paragraph (a) of that subsection.

(6) Tax under this section is to be charged on the amount of the lump sum paid or, if the rules of the pension scheme permit the scheme administrator to deduct the tax before payment, on the amount of the lump sum before deduction of tax.

(7) A short service refund lump sum is not to be treated as income for any purpose of the Tax Acts.

Modifications etc. (not altering text)

C11 S. 205 modified (6.4.2006) by The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 (S.I. 2006/569), regs. 1(1), 3(1)(2), Sch. 3 Pt. 1

C12 S. 205 applied by 2003 c. 1, s. 636A(3) (as inserted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 31 para. 11 (with Sch. 36))

Commencement Information

I2 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

[F1 205A Serious ill-health lump sum charge U.K.

(1) A charge to income tax, to be known as the serious ill-health lump sum charge, arises where a serious ill-health lump sum is paid by a registered pension scheme to a member who has reached the age of 75.

(2) The person liable to the serious ill-health lump sum charge is the scheme administrator.

(3) The scheme administrator is liable to the serious ill-health lump sum charge whether or not—

(a) the scheme administrator, and

(b) the person to whom the serious ill-health lump sum is paid,

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

(4) The rate of the charge is 55% in respect of the lump sum.

(5) The Treasury may by order increase or decrease the rate for the time being specified in subsection (4).

(6) Tax under this section is to be charged on the amount of the lump sum paid or, if the rules of the pension scheme permit the scheme administrator to deduct the tax before payment, on the amount of the lump sum before deduction of tax.

(7) A serious ill-health lump sum paid to a member who has reached the age of 75 is not to be treated as income for any purpose of the Tax Acts.]

Textual Amendments

F1 S. 205A inserted (with effect in accordance with Sch. 16 paras. 85, 102 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 40

206 Special lump sum death benefits charge U.K.

(1) A charge to income tax, to be known as the special lump sum death benefits charge, arises where—

(a) a pension protection lump sum death benefit,

(b) an annuity protection lump sum death benefit, or

[F2 (c) a drawdown pension fund lump sum death benefit,]

is paid by a registered pension scheme.

[F3 (1A) The special lump sum death benefits charge also arises where—

(a) a defined benefits lump sum death benefit, or

(b) an uncrystallised funds lump sum death benefit,

is paid by a registered pension scheme in respect of a member who had reached the age of 75 at the date of the member's death.]

(2) The person liable to the special lump sum death benefits charge is the scheme administrator.

(3) The scheme administrator is liable to the special lump sum death benefits charge whether or not—

(a) the scheme administrator, and

(b) the person to whom the lump sum death benefit is paid,

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

(4) The rate of the charge is [F4 55%] in respect of the lump sum death benefit.

(5) The Treasury may by order increase or decrease the rate for the time being specified in subsection (4).

(6) Tax under this section is to be charged on the amount of the lump sum paid or, if the rules of the pension scheme permit the scheme administrator to deduct the tax before payment, on the amount of the lump sum before deduction of tax.

[F5 (7) None of the following is to be treated as income for any purpose of the Tax Acts—

(a) any lump sum death benefit mentioned in subsection (1);

(b) a defined benefits lump sum death benefit or uncrystallised funds lump sum death benefit paid in respect of a member who had reached the age of 75 at the date of the member’s death.]

Textual Amendments

F2 S. 206(1)(c) substituted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 41(2)

F3 S. 206(1A) inserted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 41(3)

F4 Word in s. 206(4) substituted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 41(4)

F5 S. 206(7) substituted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 41(5)

Modifications etc. (not altering text)

C13 S. 206 modified (6.4.2006) by The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 (S.I. 2006/569), regs. 1(1), 3(1)(2), Sch. 3 Pt. 1

C14 S. 206 applied by S.R. 1995/95, reg. 89A(10) (as inserted (N.I.) (with effect in accordance with reg. 1(2) of the amending Rule) by The Health and Personal Social Services (Superannuation Scheme, Injury Benefits and Additional Voluntary Contributions) (Amendment) Regulations (Northern Ireland) 2006 (S.R. 2006/410), regs. 1(2), 16)

Commencement Information

I3 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

207 Authorised surplus payments charge U.K.

(1) A charge to income tax, to be known as the authorised surplus payments charge, arises where an authorised surplus payment is made to a sponsoring employer by an occupational pension scheme that is a registered pension scheme.

(2) The person liable to the authorised surplus payments charge is the scheme administrator.

(3) The scheme administrator is liable to the authorised surplus payments charge whether or not—

(a) the scheme administrator, and

(b) the sponsoring employer,

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

(4) The rate of the charge is 35% in respect of the authorised surplus payment.

(5) The Treasury may by order increase or decrease the rate for the time being specified in subsection (4).

(6) Subsection (1) does not apply to any authorised surplus payment—

(a) to the extent that (if this section had not been enacted) the sponsoring employer would have been exempt, or entitled to claim exemption, from income tax or corporation tax in respect of it, or

(b) if the sponsoring employer is a charity.

(7) An authorised surplus payment in respect of which income tax is charged under this section is not to be treated as income for any purpose of the Tax Acts.

(8) Schedule 36 contains (in Part 4) transitional provisions about the authorised surplus payments charge.

Modifications etc. (not altering text)

C15 S. 207 modified (6.4.2006) by The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 (S.I. 2006/569), regs. 1(1), 3(1)(2), Sch. 3 Pt. 1

Commencement Information

I4 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

Unauthorised payments charge U.K.

208 Unauthorised payments charge U.K.

(1) A charge to income tax, to be known as the unauthorised payments charge, arises where an unauthorised payment is made by a registered pension scheme.

(2) The person liable to the charge—

(a) in the case of an unauthorised member payment [F6 made to or in respect of a person before the person's death, is the person,]

(b) in the case of an unauthorised member payment made [F7 in respect of a person after the person's] death, is the recipient, and

(c) in the case of an unauthorised employer payment, is the [F8 person] to or in respect of whom the payment is made.

(3) If more than one person is liable to the unauthorised payments charge in respect of an unauthorised payment, those persons are jointly and severally liable to the charge in respect of the payment.

(4) A person is liable to the unauthorised payments charge whether or not—

(a) that person,

(b) any other person who is liable to the unauthorised payments charge, and

(c) the scheme administrator,

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

(5) The rate of the charge is 40% in respect of the unauthorised payment.

[F9 (6) The Treasury may by order amend subsection (5) so as to vary the rate of the unauthorised payments charge.

(6A) An order under subsection (6) may make provision for there to be different rates in different circumstances.]

(7) An unauthorised payment may also be subject to—

(a) the unauthorised payments surcharge under section 209, and

(b) the scheme sanction charge under section 239.

(8) An unauthorised payment is not to be treated as income for any purpose of the Tax Acts.

Textual Amendments

F6 Words in s. 208(2)(a) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 14(a)

F7 Words in s. 208(2)(b) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 14(b)

F8 Word in s. 208(2)(c) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 14(c)

F9 S. 208(6)(6A) substituted for s. 208(6) (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 12

Modifications etc. (not altering text)

C16 S. 208 modified (1.4.2012) by The Postal Services Act 2011 (Taxation) Regulations 2012 (S.I. 2012/764), regs. 1(1), 24; S.I. 2012/687; S.I. 2012/688; S.I. 2012/966

Commencement Information

I5 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

209 Unauthorised payments surcharge U.K.

(1) A charge to income tax, to be known as the unauthorised payments surcharge, arises where a surchargeable unauthorised payment is made by a registered pension scheme.

(2) “Surchargeable unauthorised payments” means—

(a) surchargeable unauthorised member payments (see section 210), and

(b) surchargeable unauthorised employer payments (see section 213).

(3) The person liable to the charge—

(a) in the case of a surchargeable unauthorised member payment [F10 made to or in respect of a person before the person's death, is the person,]

(b) in the case of a surchargeable unauthorised member payment made [F11 in respect of a person after the person's] death, is the recipient, and

(c) in the case of a surchargeable unauthorised employer payment, is the [F12 person] to or in respect of whom the payment was made.

(4) If more than one person is liable to the unauthorised payments surcharge in respect of a surchargeable unauthorised payment, those persons are jointly and severally liable to the surcharge in respect of the payment.

(5) A person is liable to the unauthorised payments surcharge whether or not—

(a) that person,

(b) any other person who is liable to the unauthorised payments surcharge, F13 ...

(c) the scheme administrator, [F14 and]

[F15 (d) the sub-scheme administrator,]

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

(6) The rate of the charge is 15% in respect of the surchargeable unauthorised payment.

[F16 (7) The Treasury may by order amend subsection (6) so as to vary the rate of the unauthorised payments surcharge.

(8) An order under subsection (7) may make provision for there to be different rates in different circumstances.]

Textual Amendments

F10 Words in s. 209(3)(a) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 15(a)

F11 Words in s. 209(3)(b) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 15(b)

F12 Word in s. 209(3)(c) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 15(c)

F13 Word in s. 209(5)(b) deleted (6.4.2006) by The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 (S.I. 2006/569), regs. 1(1), 4(1)(a)

F14 Word in s. 209(5)(c) added (6.4.2006) by The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 (S.I. 2006/569), regs. 1(1), 4(1)(b)

F15 S. 209(5)(d) added (6.4.2006) by The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 (S.I. 2006/569), regs. 1(1), 4(1)(c)

F16 S. 209(7)(8) substituted for s. 209(7) (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 13

Modifications etc. (not altering text)

C17 S. 209 modified (1.4.2012) by The Postal Services Act 2011 (Taxation) Regulations 2012 (S.I. 2012/764), regs. 1(1), 24; S.I. 2012/687; S.I. 2012/688; S.I. 2012/966

Commencement Information

I6 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

210 Surchargeable unauthorised member payments U.K.

(1) This section identifies which unauthorised member payments made by a registered pension scheme [F17 to or in respect of a person who is or has been a member of] the pension scheme are surchargeable.

(2) If the surcharge threshold is reached before the end of the period of 12 months beginning with a reference date, each unauthorised member payment made [F18 to or in respect of the person] in the surcharge period is surchargeable.

(3) The surcharge period is the period—

(a) beginning with the reference date, and

(b) ending with the day on which the surcharge threshold is reached.

(4) The first reference date is the date on which the pension scheme first makes an unauthorised member payment [F19 to or in respect of the person].

(5) Each subsequent reference date is the date, after the end of the previous reference period, on which the pension scheme next makes an unauthorised member payment [F20 to or in respect of the person].

(6) The previous reference period is the period of 12 months beginning with the previous reference date or, if the surcharge threshold is reached in that period, is the surcharge period ending with the date on which it was reached.

(7) The surcharge threshold is reached if the unauthorised payments percentage reaches 25%.

(8) The unauthorised payments percentage is the aggregate of the percentages of the pension fund used up by each unauthorised member payment made by the pension scheme [F21 to or in respect of the person] on or after the reference date.

(9) The percentage of the pension fund used up on the occasion of an unauthorised member payment is—

where—

UMP is the amount of the unauthorised member payment, and

VR is an amount equal to the [F22 aggregate of the value of the member's rights under arrangements relating to the member under the pension scheme when the unauthorised payment is made (or, if the unauthorised member payment is made after the member has died or has otherwise ceased to be a member of the pension scheme, at the date when the member died or otherwise ceased to be a member).]

(10) The value of the member’s rights under [F23 an arrangement on any] date is the aggregate of—

(a) the value of the member’s crystallised rights under the arrangement on that date, calculated in accordance with section 211, and

(b) the value of the member’s uncrystallised rights under the arrangement on that date, calculated in accordance with section 212.

Textual Amendments

F17 Words in s. 210(1) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 16(2)

F18 Words in s. 210(2) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 16(3)

F19 Words in s. 210(4) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 16(3)

F20 Words in s. 210(5) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 16(3)

F21 Words in s. 210(8) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 16(3)

F22 Words in s. 210(9) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 16(4)

F23 Words in s. 210(10) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 16(5)

Commencement Information

I7 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

211 Valuation of crystallised rights for purposes of section 210 U.K.

(1) The value of the member’s crystallised rights under [F24 an arrangement] on any date is the aggregate of—

(a) the value of each scheme pension or lifetime annuity to which the member has an actual (rather than a prospective) entitlement under the arrangement on that date, and

(b) the aggregate of the amount of the sums, and the market value of the assets, representing the [F25 member's drawdown pension fund] in respect of the arrangement on that date (if any).

(2) The value of a scheme pension or lifetime annuity is—

where—

RVF is the relevant valuation factor (see section 276), and

ARP is an amount equal to the annual rate of the pension or annuity on the date.

Textual Amendments

F24 Words in s. 211(1) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 17

F25 Words in s. 211(1)(b) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 71

Commencement Information

I8 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

212 Valuation of uncrystallised rights for purposes of section 210 U.K.

(1) Rights are uncrystallised if the member is not entitled to the present payment of benefits in respect of the rights.

(2) The member is to be treated as entitled to the present payment of benefits in respect of the sums and assets representing the [F26 member's drawdown pension fund].

(3) The value of the member’s uncrystallised rights under [F27 an arrangement] on any date is to be calculated—

(a) in accordance with subsection (4) if the arrangement is a cash balance arrangement,

(b) in accordance with subsection (5) if the arrangement is a money purchase arrangement other than a cash balance arrangement,

(c) in accordance with subsection (6) if the arrangement is a defined benefits arrangement, and

(d) in accordance with subsection (7) if the arrangement is a hybrid arrangement.

(4) If this subsection applies, the value of the member’s uncrystallised rights under the arrangement on the date is the amount which would, on the valuation assumptions (see section 277), be available for the provision of benefits in respect of those rights if the member became entitled to benefits in respect of those rights on the date.

(5) If this subsection applies, the value of the member’s uncrystallised rights under the arrangement on the date is the aggregate of—

(a) the amount of such of the sums held for the purposes of the arrangement on the date as represent those rights, and

(b) the market value of such of the assets held for the purposes of the arrangement on the date as represent those rights.

(6) If this subsection applies, the value of the member’s uncrystallised rights under the arrangement on the date is—

where—

RVF is the relevant valuation factor (see section 276),

ARP is the annual rate of pension to which the member would, on the valuation assumptions, be entitled under the arrangement on the date if, on the date, the member acquired an actual (rather than a prospective) right to receive a pension in respect of the rights, and

LS is the amount of any lump sum to which the member would, on the valuation assumptions, be entitled under the arrangement on the date (otherwise than by way of commutation of pension) if, on the date, the member acquired an actual (rather than a prospective) right to payment of a lump sum in respect of the rights.

(7) If this subsection applies, the value of the member’s uncrystallised rights under the arrangement on the date is—

(a) if each of subsections (4), (5) and (6) is relevant, the greatest of the values of the rights calculated in accordance with each of those subsections, or

(b) if only two of those subsections are relevant, the greater of the values of the rights calculated in accordance with each of the two subsections.

(8) Subsection (4) is relevant if, in any circumstances, cash balance benefits may be provided to or in respect of the member under the arrangement.

(9) Subsection (5) is relevant if, in any circumstances, money purchase benefits other than cash balance benefits may be provided to or in respect of the member under the arrangement.

(10) Subsection (6) is relevant if, in any circumstances, defined benefits may be provided to or in respect of the member under the arrangement.

Textual Amendments

F26 Words in s. 212(2) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 72

F27 Words in s. 212(3) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 18

Modifications etc. (not altering text)

C18 S. 212 modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 9, 10

Commencement Information

I9 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

213 Surchargeable unauthorised employer payments U.K.

(1) This section identifies which unauthorised employer payments made by a registered pension scheme to or in respect of a [F28 person who is or has been a] sponsoring employer are surchargeable.

(2) If the surcharge threshold is reached before the end of the period of 12 months beginning with a reference date, each unauthorised employer payment made to or in respect of the [F29 person] in the surcharge period is surchargeable.

(3) The surcharge period is the period—

(a) beginning with the reference date, and

(b) ending with the day on which the surcharge threshold is reached.

(4) The first reference date is the date on which the pension scheme first makes an unauthorised employer payment to or in respect of the [F30 person].

(5) Each subsequent reference date is the date, after the end of the previous reference period, on which the pension scheme next makes an unauthorised employer payment to or in respect of the [F31 person].

(6) The previous reference period is the period of 12 months beginning with the previous reference date or, if the surcharge threshold is reached in that period, is the surcharge period ending with the date on which it was reached.

(7) The surcharge threshold is reached if the unauthorised payments percentage reaches 25%.

(8) The unauthorised payments percentage is the aggregate of the percentages of the pension fund used up by each unauthorised employer payment made by the pension scheme to or in respect of the [F32 person] on or after the reference date.

(9) The percentage of the pension fund used up on the occasion of an unauthorised employer payment is—

where—

UEP is the amount of the unauthorised employer payment, and

AA is an amount equal to the aggregate of the amount of the sums and the market value of the assets held for the purposes of the pension scheme at the time when the unauthorised employer payment is made.

Textual Amendments

F28 Words in s. 213(1) inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 19(2)

F29 Word in s. 213(2) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 19(3)

F30 Word in s. 213(4) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 19(3)

F31 Word in s. 213(5) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 19(3)

F32 Word in s. 213(8) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 19(3)

Modifications etc. (not altering text)

C19 S. 213 excluded (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 22

Commencement Information

I10 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

[F33 High income excess relief charge U.K.

Textual Amendments

F33 Ss. 213A-213P and cross-heading inserted (with effect for tax year 2011-12 and subsequent tax years in accordance with Sch. 2 para. 5 of the amending Act) by Finance Act 2010 (c. 13), Sch. 2 para. 2; which insertion fell without ever having effect as a result of the repeal (10.12.2010) of the affecting provision by The Finance Act 2010, Section 23 and Schedule 2 (High Income Excess Relief Charge) (Repeal) Order 2010 (S.I. 2010/2938), arts. 1, 2

213A High income excess relief charge U.K.

(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 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.

(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,

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.

(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 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),

(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 U.K.

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.

213C Gross income U.K.

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.

• 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 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) 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 or on behalf of the individual during the tax year.

213D Relevant income U.K.

(1) To find the individual's relevant income for a tax year take the following steps—

• Step 1 Identify the individual's total income for the tax year.

• 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 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) 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 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 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 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 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 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).

213E The appropriate rate U.K.

(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, 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

(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 £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 (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 U.K.

(1) The total pension savings amount in the case of an individual for a 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 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 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.

(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 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 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 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.

(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).

213G Money purchase arrangements other than cash balance arrangements U.K.

(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

(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—

(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 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.

(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 U.K.

(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)), 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

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 became entitled to the benefits at the end of the tax year.

(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—

(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 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.

(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.

213I Adjustment of closing rights U.K.

(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.

(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.

(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 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 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 ACR.

(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—

(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

(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.

213J Defined benefits arrangements U.K.

(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)).

(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 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.

(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 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—

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,

UOLS is the amount of the opening lump sum (see subsection (7)), uprated in accordance with section 213M, and

OALSARF is the factor which is the appropriate age-related factor (see section 213L) in relation to the opening lump sum.

(6) The amount of the closing lump sum is the amount of the lump sum 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.

(7) The amount of the opening lump sum is the amount of the lump sum 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.

(8) If, during the tax year, minimum payments are made under—

(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 defined benefits arrangement, the amount is to be subtracted from what would otherwise be the pension savings amount in the case of the individual in respect of the arrangement.

(9) 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.

213K Adjustment of closing pension and lump sum U.K.

(1) This section applies for adjusting ACP and ACLS under section 213J.

(2) If, during the tax year, the annual rate of the pension, or the amount of the lump sum, to which the individual would be entitled under the arrangement has been reduced by having become subject to a pension debit, the amount of the reduction is to be added to ACP or ACLS.

(3) If, during the tax year, the annual rate of the pension, or the amount of the lump sum, to which the individual would be entitled under the arrangement has 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 ACP or ACLS.

(4) If, during the tax year, the annual rate of the pension, or the amount of the lump sum, to which the individual would be entitled under the arrangement has 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 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 ACP or ACLS.

(5) If, during the tax year, the annual rate of the pension, or the amount of the lump sum, to which the individual would be entitled under the arrangement has 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 ACP or ACLS.

(6) If, during the tax year, the annual rate of the pension, or the amount of the lump sum, to which the individual would be entitled under the arrangement has been reduced by any commutation, allocation or 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 ACP or ACLS.

(7) If, during the tax year—

(a) benefit crystallisation event 2 or 3 occurs in relation to the individual and the arrangement, or

(b) benefit crystallisation event 6 occurs in relation to the individual and the arrangement by virtue of the individual becoming entitled to a pension commencement lump sum or a lifetime allowance excess lump sum,

the annual rate of the pension, or the amount of the lump sum, to which the individual became entitled (otherwise than by commutation of lump sum or of pension) is to be added to ACP or ACLS.

213L Age-related factors U.K.

(1) The Treasury must make regulations about age-related factors.

(2) Different provision may be made in relation to rights age-related factors and lump sum age-related factors, on the one hand, and pension age-related factors on the other.

(3) For the purposes of sections 213H and 213J the “appropriate” age-related factor is the age-related factor which applies in the case of the individual, and the amount of the rights or lump sum, or rate of the pension, in accordance with the regulations.

(4) Regulations under subsection (1) must make provision for the age-related factor or factors applying in the case of the individual to be arrived at by reference to—

(a) the age of the individual, and

(b) the relevant normal pension age,

at the relevant time.

(5) The relevant time, in relation to factors for a tax year, is the end of the tax year unless the case is one in which there is a change in the relevant normal pension age during the tax year.

(6) In that case, the relevant time, in relation to the relevant normal pension age and the opening rights, opening pension or opening lump sum for the tax year, is the end of the previous tax year.

(7) Regulations under subsection (1) may make provision for the age-related factor or factors applying in the case of an individual and an arrangement to vary according to the nature and extent of the benefits which may be provided to or in respect of the individual under the arrangement.

(8) Before making the first regulations under subsection (1) the Treasury must seek advice from the Government Actuary or the Deputy Government Actuary.

(9) Before making any other regulations under subsection (1) the Treasury must carry out a review of the provision made by the regulations for the time being in force under this section; and when conducting such a review the Treasury must seek advice from the Government Actuary or the Deputy Government Actuary.

(10) The Treasury must carry out a review of the provision made by the regulations for the time being in force under subsection (1)—

(a) no later than the end of the period of 5 years beginning with the day on which the first regulations are made under this section, and

(b) no later than the end of the period of 5 years beginning with the last review of the provision made by the regulations for the time being in force under this section.

(11) In this section “the relevant normal pension age”, in relation to an individual and an arrangement, means the age at which the individual would be unconditionally entitled to benefits under the arrangement without any reduction on account of age (assuming that the individual were a deferred member of the pension scheme under which it is an arrangement and it were the only arrangement under the pension scheme relating to the individual).

(12) But the Treasury may by regulations make provision for the relevant normal pension age to be the age specified in, or determined in accordance with, the regulations in cases of such descriptions as are specified in the regulations.

(13) The Treasury may by regulations make provision modifying the operation of sections 213H to 213K in relation to cases where the relevant normal pension age in relation to an individual and an arrangement is not the same in relation to all the rights or benefits under the arrangement.

213M Uprating of opening rights, pension and lump sum U.K.

(1) This section applies for uprating UOR under section 213H and UOP and UOLS under section 213J.

(2) Each is to be increased by the appropriate percentage.

(3) The appropriate percentage for a tax year is the percentage arrived at for the tax year in accordance with provision made by order made by the Treasury.

(4) An order under subsection (3)—

(a) must make provision for securing that the appropriate percentage for a tax year reflects any decrease in the value of money over a specified period, and

(b) may do so by reference to any movement in a specified index, or an average of any movements in specified indices, over a specified period.

(5) If an order is made under subsection (3) which amends any provision included in an order by virtue of subsection (4)(b), the Treasury must as soon as reasonably practicable after the making of the order carry out a review of the provision made by the regulations for the time being in force under section 213L(1).

213N Hybrid arrangements U.K.

(1) The pension savings amount in respect of a hybrid arrangement is the greater or greatest of such of amounts A, B and C as are relevant amounts.

(2) An amount is a relevant amount in the case of 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 of the variety mentioned in the definition of that amount.

(3) Amount A is what would be the pension savings amount under section 213G if the benefits provided to or in respect of the individual under the arrangement were money purchase benefits other than cash balance benefits.

(4) Amount B is what would be the pension savings amount under section 213H if the benefits provided to or in respect of the individual under the arrangement were cash balance benefits.

(5) Amount C is what would be the pension savings amount under section 213J if the benefits provided to or in respect of the individual under the arrangement were defined benefits.

213O Anti-avoidance U.K.

(1) This section applies if a high income excess relief charge scheme applies in the case of the individual for the tax year.

(2) A scheme is a high income excess relief charge scheme if in the case of the individual for the tax year conditions A to C are met.

(3) Condition A is that it is reasonable to assume that the main purpose, or one of the main purposes, of the scheme is to avoid the whole or any part of the liability of the individual to the high income excess relief charge for the tax year.

(4) Condition B is that the scheme involves either or both of the following—

(a) reducing the individual's gross income or relevant income for the tax year, and

(b) reducing the total pension savings amount in the case of the individual for the tax year.

(5) Condition C is that the scheme involves the reduction, or any of the reductions, being redressed by—

(a) an increase in the individual's gross income or relevant income, or the total pension savings amount in the case of the individual, for a different tax year, or

(b) the provision at any time of some other benefit to or for the benefit of the individual or any person who is a dependant of, or is connected with, the individual.

(6) The individual is to be treated for the purposes of the high income excess relief charge as if—

(a) the individual's gross income and relevant income for the tax year, and

(b) the total pension savings amount in the case of the individual for the tax year,

were what they would be apart from the scheme.

(7) In this section “scheme” includes any arrangement, agreement, understanding, transaction or series of transactions (whether or not legally enforceable).

(8) Section 993 of ITA 2007 (meaning of “connected” persons) applies for the purposes of subsection (5).

213P Power to make regulations about charge U.K.

(1) The Treasury may by regulations make provision about the high income excess relief charge.

(2) The provision may include modifications of any provision made in sections 213A to 213O.

(3) The provision may include provision consequential on, or supplementary or incidental to, the provision made by those sections and transitional provisions (including provision making modifications of enactments).

(4) The provision may not include provision increasing any person's liability to tax.

(5) “Modifications” includes amendments.]

Lifetime allowance charge U.K.

214 Lifetime allowance charge U.K.

(1) A charge to income tax, to be known as the lifetime allowance charge, arises where—

(a) a benefit crystallisation event occurs in relation to an individual who is a member of one or more registered pension schemes, and

(b) either the first lifetime allowance charge condition or the second lifetime allowance charge condition is met.

(2) The first lifetime allowance charge condition is that—

(a) the whole or any part of the individual’s lifetime allowance is available on the benefit crystallisation event, but

(b) the amount crystallised by the benefit crystallisation event exceeds the amount of the individual’s lifetime allowance which is available on the benefit crystallisation event.

(3) The second lifetime allowance charge condition is that none of the individual’s lifetime allowance is available on the benefit crystallisation event.

(4) The following sections make further provision about the lifetime allowance charge—

• section 215 (amount of charge),

• section 216 and Schedule 32 (benefit crystallisation events and amounts crystallised),

• section 217 (persons liable to charge),

• section 218 (individual’s lifetime allowance and standard lifetime allowance),

• section 219 (availability of individual’s lifetime allowance), and

• sections 220 to 226 (lifetime allowance enhancement factors).

(5) In sections 215 to 219—

(a) references to “the individual”, in relation to the lifetime allowance charge, are to the individual in relation to whom the benefit crystallisation event giving rise to the charge occurs, and

(b) references to “the pension scheme”, in relation to the lifetime allowance charge, are to the pension scheme to which the benefit crystallisation event giving rise to the charge, or the amount crystallised by it, relates.

(6) Schedule 36 contains (in Part 2) transitional provision about the lifetime allowance charge.

Modifications etc. (not altering text)

C20 Ss. 214-226 applied by 2003 c. 1, s. 636A(5) (as inserted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 31 para. 11 (with Sch. 36))

C21 Ss. 214-226 applied (with modifications) (1.5.2010) by The Financial Assistance Scheme (Tax) Regulations 2010 (S.I. 2010/1187), regs. 1(1), 5-11

C22 S. 214 modified (1.4.2012) by The Postal Services Act 2011 (Taxation) Regulations 2012 (S.I. 2012/764), regs. 1(1), 24; S.I. 2012/687; S.I. 2012/688; S.I. 2012/966

Commencement Information

I11 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

215 Amount of charge U.K.

(1) The lifetime allowance charge is a charge in respect of the chargeable amount.

(2) The lifetime allowance charge is a charge—

(a) at the rate of 55% in respect of so much (if any) of the chargeable amount as constitutes the lump-sum amount, and

(b) at the rate of 25% in respect of so much (if any) of the chargeable amount as constitutes the retained amount.

[F34 (2A) The Treasury may by order amend subsection (2) so as to vary the rates of the lifetime allowance charge.

(2B) An order under subsection (2A) may make provision for there to be different rates in different circumstances.]

(3) The “chargeable amount” is the aggregate of—

(a) the basic amount, and

(b) any amount which is treated as forming part of the lump-sum amount under subsection (6) or of the retained amount under subsection (8).

(4) The “basic amount”—

(a) if the first lifetime allowance [F35 charge] condition is met, is the amount by which the amount crystallised by the benefit crystallisation event exceeds the amount of the individual’s lifetime allowance available on it, and

(b) if the second lifetime allowance charge condition is met, is the amount crystallised by the benefit crystallisation event.

(5) The “lump-sum amount” is the aggregate of—

(a) so much of the basic amount as is paid as a lump sum to the individual or a lump sum death benefit in respect of the individual, and

(b) any amount which is treated as forming part of the lump-sum amount under subsection (6).

(6) If and to the extent that the tax payable under this section on any of the lump-sum amount is covered by a scheme-funded tax payment, it is to be treated as itself forming part of the lump-sum amount.

(7) The “retained amount” is the aggregate of—

(a) so much of the basic amount as is not paid as a lump sum to the individual or a lump sum death benefit in respect of the individual, and

(b) any amount which is treated as forming part of the retained amount under subsection (8).

(8) If and to the extent that the tax payable under this section on any of the retained amount is covered by a scheme-funded tax payment, it is to be treated as itself forming part of the retained amount.

(9) An amount of tax payable under this section is “covered by a scheme-funded tax payment” if—

(a) the tax is paid by the scheme administrator, F36 ...

F36 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F37 (10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11) The chargeable amount is not to be treated as income for any purpose of the Tax Acts.

Textual Amendments

F34 S. 215(2A)(2B) inserted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 14

F35 Word in s. 215(4)(a) inserted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 29 para. 15

F36 S. 215(9)(b) and word repealed (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 41(a), 64(1), Sch. 11 Pt. 4

F37 S. 215(10) repealed (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 41(b), 64(1), Sch. 11 Pt. 4

Modifications etc. (not altering text)

C20 Ss. 214-226 applied by 2003 c. 1, s. 636A(5) (as inserted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 31 para. 11 (with Sch. 36))

C21 Ss. 214-226 applied (with modifications) (1.5.2010) by The Financial Assistance Scheme (Tax) Regulations 2010 (S.I. 2010/1187), regs. 1(1), 5-11

C23 S. 215(9) modified (6.4.2006) by The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 (S.I. 2006/569), regs. 1(1), 3(1)(2), Sch. 3 Pt. 1

Commencement Information

I12 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

216 Benefit crystallisation events and amounts crystallised U.K.

(1) This table sets out—

(a) the events which are benefit crystallisation events in relation to the individual, and

(b) the amount which is crystallised by each of those events.

BENEFIT CRYSTALLISATION EVENTS	AMOUNT CRYSTALLISED
1. The designation of sums or assets held for the purposes of a money purchase arrangement under any of the relevant pension schemes as available for the payment of [F38 drawdown pension] to the individual	The aggregate of the amount of the sums and the market value of the assets designated
2. The individual becoming entitled to a scheme pension under any of the relevant pension schemes	RVF × P
3. The individual, having become so entitled, becoming entitled to payment of the scheme pension, otherwise than in excepted circumstances, at an increased annual rate which[F39 — (a) exceeds the threshold annual rate, and (b)] exceeds by more than the permitted margin the rate at which it was payable on the day on which the individual became entitled to it	RVF × XP
4. The individual becoming entitled to a lifetime annuity purchased under a money purchase arrangement under any of the relevant pension schemes	The aggregate of the amount of such of the sums, and the market value of such of the assets, representing the individual’s rights under the arrangement as are applied to purchase the lifetime annuity [F40 and any related dependants' annuity]
5. The individual reaching the age of 75 when prospectively entitled to a scheme pension or a lump sum (or both) under a defined benefits arrangement under any of the relevant pension schemes	(RVF × DP) + DSLS
[F41 5A. The individual reaching the age of 75 having designated sums or assets held for the purposes of a money purchase arrangement under any of the relevant pension schemes as available for the payment of [F42 drawdown pension] to the individual	The aggregate of the amount of the sums and the market value of the assets representing the [F43 individual's drawdown pension fund] under the arrangement less the aggregate of amounts crystallised by benefit crystallisation event 1 in relation to the arrangement and the individual]
[F44 5B. The individual reaching the age of 75 when there is a money purchase arrangement relating to the individual under any of the relevant pension schemes	The amount of any remaining unused funds]
6. The individual becoming entitled to a relevant lump sum under any of the relevant pension schemes	The amount of the lump sum [F45 paid to the individual]
7. A person being paid a relevant lump sum death benefit in respect of the individual under any of the relevant pension schemes	The amount of the lump sum death benefit
8. The transfer of sums or assets held for the purposes of, or representing accrued rights under, any of the relevant pension schemes so as to become held for the purposes of or to represent rights under a qualifying recognised overseas pension scheme in connection with the individual’s membership of that pension scheme	The aggregate of the amount of any sums transferred and the market value of any assets transferred
[F46 9. If regulations under section 164(1)(f) so provide, the happening of an event prescribed in the regulations in relation to a payment prescribed in the regulations	An amount determined in accordance with the regulations]

(2) Schedule 32 gives the meaning of expressions used in the table in subsection (1).

Textual Amendments

F38 Words in s. 216(1) substituted (with effect in accordance with Sch. 16 paras. 85, 104(1) of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 73(2)

F39 Words in s. 216(1) inserted (retrospective to 6.4.2006) by Finance Act 2008 (c. 9), Sch. 29 paras. 5, 12(3)

F40 Words in s. 216(1) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 31, 64(1)

F41 Words in s. 216(1) inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 30

F42 Words in s. 216(1) substituted (with effect in accordance with Sch. 16 paras. 85, 104(1) of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 73(3)(a)

F43 Words in s. 216(1) substituted (with effect in accordance with Sch. 16 paras. 85, 104(1) of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 73(3)(b)

F44 Words in s. 216(1) inserted (with effect in accordance with Sch. 16 paras. 85, 104(1) of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 43

F45 Words in s. 216(1) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 42, 64(1)

F46 Words in s. 216 inserted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 29 para. 1(3)

Modifications etc. (not altering text)

C20 Ss. 214-226 applied by 2003 c. 1, s. 636A(5) (as inserted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 31 para. 11 (with Sch. 36))

C21 Ss. 214-226 applied (with modifications) (1.5.2010) by The Financial Assistance Scheme (Tax) Regulations 2010 (S.I. 2010/1187), regs. 1(1), 5-11

C24 S. 216 applied (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 23(4)

C25 S. 216 modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 29(1)(2)(5)

C26 S. 216 modified by S.I. 2006/572, art. 29A (as inserted (with effect in accordance with art. 1 of the amending S.I.) by The Taxation of Pension Schemes (Transitional Provisions) (Amendment) Order 2006 (S.I. 2006/1962), arts. 1, 3(3))

C27 S. 216 modified (27.7.2010) by Finance (No. 2) Act 2010 (c. 31), Sch. 3 para. 6(1)

Commencement Information

I13 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

217 Persons liable to charge U.K.

(1) The persons liable to the lifetime allowance charge are—

(a) the individual, and

(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.

(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 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,

(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.

Modifications etc. (not altering text)

C20 Ss. 214-226 applied by 2003 c. 1, s. 636A(5) (as inserted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 31 para. 11 (with Sch. 36))

C21 Ss. 214-226 applied (with modifications) (1.5.2010) by The Financial Assistance Scheme (Tax) Regulations 2010 (S.I. 2010/1187), regs. 1(1), 5-11

C28 S. 217 modified (6.4.2006) by The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 (S.I. 2006/569), regs. 1(1), 3(1)(2), Sch. 3 Pt. 1

Commencement Information

I14 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

218 Individual’s lifetime allowance and standard lifetime allowance U.K.

(1) Subject as follows, the individual’s lifetime allowance is the standard lifetime allowance.

[F47 (2) The standard lifetime allowance for the tax year 2012-13 and, subject to subsection (3), subsequent tax years is £1,500,000.

(3) The Treasury may by order provide that the standard lifetime allowance for any tax year subsequent to the tax year 2012-13 is such amount, not being less than the standard lifetime allowance for the immediately preceding tax year, as is specified in the order.]

(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—

where—

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.

(5) The following make provision for the operation of lifetime allowance enhancement factors—

• section 220 (pension credits from previously crystallised rights),

• sections 221 to 223 (individuals who are not always relevant UK individuals),

• sections 224 to 226 (transfers from recognised overseas pension schemes),

• paragraphs 7 to 11 of Schedule 36 (primary protection), and

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

[F48 (5A) Where the operation of a lifetime allowance enhancement factor is provided for by any of sections 220, 222, 223 and 224 and the time mentioned in the definition of SLA in the section concerned was before 6 April 2012, subsection (4) has effect as if the amount to be multiplied by LAEF were £1,800,000 (the standard lifetime allowance for the tax year 2011-12) if that is greater than SLA.

(5B) Where the operation of a lifetime allowance enhancement factor is provided for by paragraph 7 of Schedule 36, subsection (4) has effect as if SLA were £1,800,000 (the standard lifetime allowance for the tax year 2011-12) if that is greater than SLA.

(5C) Where benefit crystallisation event 7 occurs on or after 6 April 2012 by reason of the payment of a relevant lump sum death benefit in respect of the death of the individual before that date, the standard lifetime allowance at the time of the benefit crystallisation event is £1,800,000 (the standard lifetime allowance for the tax year 2011-12).]

(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 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.

Textual Amendments

F47 S. 218(2)(3) substituted (with effect in accordance with Sch. 18 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 18 para. 2(2)

F48 S. 218(5A)-(5C) inserted (with effect in accordance with Sch. 18 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 18 para. 2(3)

Modifications etc. (not altering text)

C20 Ss. 214-226 applied by 2003 c. 1, s. 636A(5) (as inserted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 31 para. 11 (with Sch. 36))

C21 Ss. 214-226 applied (with modifications) (1.5.2010) by The Financial Assistance Scheme (Tax) Regulations 2010 (S.I. 2010/1187), regs. 1(1), 5-11

Commencement Information

I15 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

219 Availability of individual’s lifetime allowance U.K.

(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 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 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 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 [F49 which is the relevant untaxed amount in relation to] the previous benefit crystallisation event as adjusted 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 [F50 which are the relevant untaxed amounts in relation to] each previous benefit crystallisation event as adjusted under subsection (5).

[F51 (4A) “The relevant untaxed amount”, in relation to a previous benefit crystallisation event, is—

(a) where no tax was charged in relation to the benefit crystallisation event, the amount in respect of which tax would have been so charged if none of the individual's lifetime allowance had been available, and

(b) where tax was charged in relation to the benefit crystallisation event, so much of the amount in respect of which tax would have been so charged if none of the individual's lifetime allowance had been available as exceeds the amount in respect of which tax was so charged.]

(5) The adjustment of the [F52 relevant untaxed amount in relation to] a previous benefit crystallisation event referred to in subsection (4)(a) and (b) is the multiplication of that amount by—

where—

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 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 166(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 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 [F53 but immediately after any benefit crystallisation event occurring immediately before the individual's death by virtue of section 166(2)].

(8) Paragraph 20 of Schedule 36 makes provision affecting this section in relation to pre-commencement pensions.

(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.

Textual Amendments

F49 Words in s. 219(4)(a) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 31(2)(a)

F50 Words in s. 219(4)(b) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 31(2)(b)

F51 S. 219(4A) inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 31(3)

F52 Words in s. 219(5) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 31(4)

F53 Words in s. 219(7) inserted (retrospective to 6.4.2006) by Finance Act 2007 (c. 11), Sch. 20 paras. 10, 24(3)

Modifications etc. (not altering text)

C20 Ss. 214-226 applied by 2003 c. 1, s. 636A(5) (as inserted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 31 para. 11 (with Sch. 36))

C21 Ss. 214-226 applied (with modifications) (1.5.2010) by The Financial Assistance Scheme (Tax) Regulations 2010 (S.I. 2010/1187), regs. 1(1), 5-11

Commencement Information

I16 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

220 Pension credits from previously crystallised rights U.K.

(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 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 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—

where—

APC is [F54 the post-commencement pension in payment portion of] 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 acquired.

[F55 (4A) The post-commencement pension in payment portion of the appropriate amount referred to in the definition of APC—

(a) in a case where the appropriate amount is arrived at under section 29(2) or (3)(b) of WRPA 1999 or Article 26(2) or (3)(b) of WRP(NI)O 1999, is so much of that amount as is attributable to rights to a post-commencement pension in payment, and

(b) in a case where the appropriate amount is arrived at under section 29(3)(a) of WRPA 1999 or Article 26(3)(a) of WRP(NI)O 1999, is so much of that amount as is just and reasonable.]

(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.

Textual Amendments

F54 Words in s. 220(4) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 45(2), 64(1)

F55 S. 220(4A) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 45(3), 64(1)

Modifications etc. (not altering text)

C20 Ss. 214-226 applied by 2003 c. 1, s. 636A(5) (as inserted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 31 para. 11 (with Sch. 36))

C21 Ss. 214-226 applied (with modifications) (1.5.2010) by The Financial Assistance Scheme (Tax) Regulations 2010 (S.I. 2010/1187), regs. 1(1), 5-11

Commencement Information

I17 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

221 Non-residence: general U.K.

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

(2) Section 222 provides the lifetime allowance enhancement factor in the case of an arrangement that is a money purchase arrangement; and section 223 provides the lifetime allowance enhancement factor in the case of any other 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 189(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 222 and 223 “the active membership period”, in relation to a benefit crystallisation event occurring in relation to an 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.

(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.

Modifications etc. (not altering text)

C20 Ss. 214-226 applied by 2003 c. 1, s. 636A(5) (as inserted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 31 para. 11 (with Sch. 36))

C21 Ss. 214-226 applied (with modifications) (1.5.2010) by The Financial Assistance Scheme (Tax) Regulations 2010 (S.I. 2010/1187), regs. 1(1), 5-11

Commencement Information

I18 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

222 Non-residence: money purchase arrangements U.K.

(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 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—

(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 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—

where—

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.

(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 277), 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 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 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

(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 of the active membership period is—

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, and

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

Modifications etc. (not altering text)

C20 Ss. 214-226 applied by 2003 c. 1, s. 636A(5) (as inserted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 31 para. 11 (with Sch. 36))

C21 Ss. 214-226 applied (with modifications) (1.5.2010) by The Financial Assistance Scheme (Tax) Regulations 2010 (S.I. 2010/1187), regs. 1(1), 5-11

C29 S. 222 modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 12, 13

Commencement Information

I19 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

223 Non-residence: other arrangements U.K.

(1) This section applies in the case of an arrangement that is not a money purchase arrangement.

(2) The lifetime allowance enhancement factor is—

(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)).

(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 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—

where—

RVF is the relevant valuation factor (see section 276),

PE is the amount of the annual rate of the pension which would, on the valuation assumptions (see section 277), be payable to the individual under the arrangement if the individual became entitled to payment of 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,

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 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.

(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 222) if the arrangement were a cash balance arrangement,

(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 benefits arrangement,

as are relevant factors in relation to the arrangement.

(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-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.

Modifications etc. (not altering text)

C20 Ss. 214-226 applied by 2003 c. 1, s. 636A(5) (as inserted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 31 para. 11 (with Sch. 36))

C21 Ss. 214-226 applied (with modifications) (1.5.2010) by The Financial Assistance Scheme (Tax) Regulations 2010 (S.I. 2010/1187), regs. 1(1), 5-11

C30 S. 223 modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 12, 14

Commencement Information

I20 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

224 Transfers from recognised overseas pension scheme: general U.K.

(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 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, or

(b) representing accrued rights under such an arrangement,

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 225 and 226 as the “recognised overseas scheme arrangement”.

(4) The lifetime allowance enhancement factor is the recognised overseas scheme transfer factor.

(5) The recognised overseas scheme transfer factor is—

where—

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 overseas scheme transfer took place.

(6) Section 225 specifies the relevant relievable amount in the case of a recognised overseas scheme arrangement that was a money purchase arrangement; and section 226 specifies the relevant relievable amount in the case of an recognised overseas scheme arrangement that was any other sort of arrangement.

(7) In this section and sections 225 and 226 “overseas arrangement active membership period” 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 recognised overseas scheme arrangement or, if later, 6th April 2006, and

(b) ending immediately before the recognised overseas scheme transfer.

(8) But if benefits ceased to accrue to or in respect of the individual under the recognised overseas scheme arrangement before the recognised overseas scheme transfer, the overseas arrangement active membership period is to be treated as having ended then.

(9) 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.

Modifications etc. (not altering text)

C20 Ss. 214-226 applied by 2003 c. 1, s. 636A(5) (as inserted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 31 para. 11 (with Sch. 36))

C21 Ss. 214-226 applied (with modifications) (1.5.2010) by The Financial Assistance Scheme (Tax) Regulations 2010 (S.I. 2010/1187), regs. 1(1), 5-11

Commencement Information

I21 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

225 Overseas scheme transfers: money purchase arrangements U.K.

(1) This section applies in the case of a recognised overseas scheme arrangement that was a money purchase arrangement.

(2) The relevant relievable amount is—

(a) if the recognised overseas scheme arrangement was a cash balance arrangement, the cash balance relevant relievable amount (see subsections (3) to (5)), and

(b) if the recognised overseas scheme arrangement was any other sort of money purchase arrangement, the other money purchase relevant relievable amount (see subsections (6) and (7)).

(3) The cash balance relevant relievable amount is—

(a) the amount arrived at by the application of subsection (4) in relation to the part of the overseas arrangement active membership period during which the individual was not a relevant overseas individual, or

(b) if there have been two or more parts of that period during which the individual was not a relevant overseas individual, the aggregate of the amounts arrived at by the application of subsection (4) in relation to each of those parts of that period.

(4) The amount arrived at by the application of this subsection in relation to any part of the overseas arrangement active membership period is—

where—

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

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

(5) For the purposes of subsection (4)—

(a) the closing value of the individual’s rights under the recognised overseas scheme arrangement is the amount which would, on the valuation assumptions (see section 277), 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 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 beginning of that part of that period.

(6) The other money purchase relevant relievable amount is—

(a) the amount arrived at by the application of subsection (7) in relation to the part of the overseas arrangement active membership period during which the individual was not a relevant overseas individual, or

(b) if there have been two or more parts of that period during which the individual was not a relevant overseas individual, the aggregate of the amounts arrived at by the application of subsection (7) in relation to each of those parts of that period.

(7) The amount arrived at by the application of this subsection in relation to any part of the overseas arrangement active membership period is the amount of the contributions made under the arrangement by or in respect of the individual in any part of the overseas arrangement active membership period during which the individual was not a relevant overseas individual.

Modifications etc. (not altering text)

C20 Ss. 214-226 applied by 2003 c. 1, s. 636A(5) (as inserted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 31 para. 11 (with Sch. 36))

C21 Ss. 214-226 applied (with modifications) (1.5.2010) by The Financial Assistance Scheme (Tax) Regulations 2010 (S.I. 2010/1187), regs. 1(1), 5-11

Commencement Information

I22 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

226 Overseas scheme transfers: other arrangements U.K.

(1) This section applies in the case of a recognised overseas scheme arrangement that was not a money purchase arrangement.

(2) The relevant relievable amount is—

(a) if the recognised overseas scheme arrangement was a defined benefits arrangement, the defined benefits relevant relievable amount (see subsections (3) and (4)), and

(b) if the recognised overseas scheme arrangement was a hybrid arrangement, the hybrid relevant relievable amount (see subsections (5) to (7)).

(3) The defined benefits relevant relievable amount is—

(a) the amount arrived at by the application of subsection (4) in relation to the part of the overseas arrangement active membership period during which the individual was not a relevant overseas individual, or

(b) if there have been two or more parts of that period during which the individual was not a relevant overseas individual, the aggregate of the amounts arrived at by the application of subsection (4) in relation to each of those parts of that period.

(4) The amount arrived at by the application of this subsection in relation to any part of the overseas arrangement active membership period is—

where—

RVF is the relevant valuation factor (see section 276),

PE is the annual rate of the pension which would, on the valuation assumptions (see section 277), be payable to the individual under the recognised overseas scheme arrangement if the individual became entitled to payment of 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,

PB is 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, and

LSB 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 beginning of that part of that period.

(5) The hybrid relevant relievable amount is the greater or greatest of such of—

(a) what would be the cash balance relevant relievable amount (under section 225) if the recognised overseas scheme arrangement had been a cash balance arrangement,

(b) what would be the other money purchase relevant relievable amount (under that section) if that arrangement had been any other sort of money purchase arrangement, and

(c) what would be the defined benefits relevant relievable amount (under subsections (3) and (4)) if that arrangement had been a defined benefits arrangement,

as are relevant to that arrangement.

(6) An amount is relevant 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 amount.

(7) For that purpose—

(a) cash balance benefits are linked to the cash balance relevant relievable amount,

(b) other money purchase benefits are linked to the other money purchase relevant relievable amount, and

(c) defined benefits are linked to the defined benefits relevant relievable amount.

Modifications etc. (not altering text)

C20 Ss. 214-226 applied by 2003 c. 1, s. 636A(5) (as inserted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 31 para. 11 (with Sch. 36))

C21 Ss. 214-226 applied (with modifications) (1.5.2010) by The Financial Assistance Scheme (Tax) Regulations 2010 (S.I. 2010/1187), regs. 1(1), 5-11

Commencement Information

I23 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

Annual allowance charge U.K.

227 Annual allowance charge U.K.

(1) A charge to income tax, to be known as the annual allowance charge, arises where—

(a) the total pension input amount for a tax year in the case of an individual who is a member of one or more registered pension schemes, exceeds

(b) the amount of the annual allowance for the tax year.

F56 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F56 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) The annual allowance charge is a charge at the [F57 appropriate rate] in respect of the amount by which the total pension input amount exceeds the amount of the annual allowance.

[F58 But see section 227A (individuals who meet flexible drawdown conditions).]

[F59 (4A) The appropriate rate is—

(a) the basic rate in relation to so much (if any) of the excess as, when added to the individual's reduced net income for the tax year, does not exceed the basic rate limit for the tax year,

(b) the higher rate in relation to so much (if any) of the excess as, when so added, exceeds the basic rate limit for the tax year but does not exceed the higher rate limit for the tax year, and

(c) the additional rate in relation to so much (if any) of the excess as, when so added, exceeds the higher rate limit for the tax year.

(4B) 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.

(4C) Where the basic rate limit or the higher rate limit for the tax year is (in accordance with section 192 of this Act or section 414 of ITA 2007) increased in the case of the individual, the references to the limit in subsection (4A) are to the limit as so increased.]

(5) That excess is not to be treated as income for any purpose of the Tax Acts.

F60 (5A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F60 (5B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) The following sections make further provision about the annual allowance charge—

• section 228 (annual allowance),

• section 229 (total pension input amount to be aggregate of pension input amounts for pension input periods ending in tax year),

• sections 230 to 237 (pension input amounts),

• [F61 sections 237A to 237F (persons liable to charge),] and

• section 238 (pension input period).

(7) Schedule 36 contains (in Part 4) transitional provision about the annual allowance charge.

Textual Amendments

F56 S. 227(2)(3) omitted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 17 para. 3(2)

F57 Words in s. 227(4) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 3(3)

F58 Words in s. 227(4) inserted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 45(1)

F59 S. 227(4A)-(4C) inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 3(4)

F60 S. 227(5A)(5B) omitted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 17 para. 3(5)

F61 S. 227(6) entry inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 3(6)

Modifications etc. (not altering text)

C31 S. 227 modified (6.4.2006) by The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006 (S.I. 2006/207), regs. 1(1), 8

C32 S. 227 revocation of earlier affecting provision S.I. 2006/207, reg. 8 (with effect in accordance with reg. 1(2) of the amending S.I.) by The Registered Pension Schemes (Miscellaneous Amendments) Regulations 2011 (S.I. 2011/1751), regs. 1(1), 12(2)

C33 S. 227 modified (1.4.2012) by The Postal Services Act 2011 (Taxation) Regulations 2012 (S.I. 2012/764), regs. 1(1), 24; S.I. 2012/687; S.I. 2012/688; S.I. 2012/966

Commencement Information

I24 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

[F62 227A Individuals who meet flexible drawdown conditions U.K.

(1) This section applies in the case of an individual in relation to whom there is or has been a flexible drawdown arrangement under a pension scheme.

In this section “flexible drawdown arrangement” means an arrangement to which section 165(3A) or 167(2A) applies.

(2) For each tax year following the first tax year in which there was a flexible drawdown arrangement in relation to the individual, section 227 applies to the individual as if the reference in subsection (4) of that section to the amount by which the total pension input amount exceeds the amount of the annual allowance were a reference to the amount in subsection (3) of this section.

(3) The amount referred to in subsection (2) is—

where—

• TPIA is the total pension input amount for the tax year, and

• RPIA is so much of the aggregate of the pension input amounts in respect of each defined benefits or cash balance arrangement relating to the individual under any registered pension scheme of which the individual is not an active member as does not exceed the annual allowance.

(4) For the tax year following the first tax year in which there was a flexible drawdown arrangement in relation to the individual, the reference in subsection (3) to a registered pension scheme of which the individual is not an active member includes, in a case where the individual was an active member of a registered pension scheme at any time during that first tax year but has not been such a member since the relevant time, a reference to that registered pension scheme.

(5) In subsection (4) the “relevant time” is the time at which there first began to be a flexible drawdown arrangement in relation to the individual.]

Textual Amendments

F62 S. 227A inserted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 45(2)

[F63 228 Annual allowance U.K.

(1) The annual allowance for the tax year 2011-12 and, subject to subsection (2), each subsequent tax year is £50,000.

(2) The Treasury may by order provide that the annual allowance for any tax year subsequent to the tax year 2011-12 is such amount as is specified in the order.]

Textual Amendments

F63 S. 228 substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 4

Commencement Information

I25 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

[F64 228A Carry forward of unused annual allowance U.K.

(1) This section applies if the individual has unused annual allowance available for the tax year (“the current tax year”).

(2) The annual allowance for the current tax year in the case of the individual is to be treated as increased by the amount of the unused annual allowance available for the current tax year.

(3) The individual has unused annual allowance available for the current tax year if—

(a) the amount of the annual allowance (before any increase under this section) for the immediately preceding tax year exceeded the total pension input amount in the case of the individual for that tax year, or

(b) the amount of the annual allowance (before any such increase) for either or both of the two tax years immediately preceding that immediately preceding tax year exceeded the total pension input amount in the case of the individual for the tax year concerned and the excess (or, where there is an excess for both of those tax years, the excess for both tax years) has not been used up,

or both.

(4) Subsection (3)—

(a) does not apply in relation to a tax year preceding the current tax year unless the individual was a member of a registered pension scheme at some time during that tax year, but

(b) subject to that, applies in relation to such a tax year even if the total pension input amount in the case of the individual for that tax year was nil (in which case the excess within paragraph (a) or (b) of that subsection is the whole amount of the annual allowance before any increase under this section).

(5) The amount of the unused annual allowance available for the current tax year is the aggregate of—

(a) any excess within subsection (3)(a), and

(b) so much of any excess within subsection (3)(b) as has not been used up.

(6) An amount of an excess within subsection (3)(b) for a tax year has been “used up” if—

(a) for a tax year falling between that tax year and the current tax year (an “intervening tax year”), the total pension input amount in the case of the individual exceeded the annual allowance (apart from any increase under this section), and

(b) the amount of the excess had effect by virtue of this section to reduce (or eliminate) the annual allowance charge for the intervening tax year in the case of the individual.

(7) In calculating for the purposes of subsection (6) the amount of which of the excesses for different tax years had effect to reduce or eliminate the annual allowance charge for an intervening tax year, an amount of the excess for an earlier tax year is to be taken to have done so before that for a later tax year.]

Textual Amendments

F64 S. 228A inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 5

Modifications etc. (not altering text)

C34 S. 228A applied (with modifications) (19.7.2011) by Finance Act 2011 (c. 11), Sch. 17 paras. 29, 30

229 Total pension input amount U.K.

(1) The total pension input amount is arrived at by aggregating the pension input 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 input amount in respect of an arrangement—

(a) is the amount arrived at under sections 230 to 232 if it is a cash balance arrangement,

(b) is the amount arrived at under section 233 if it is any other sort of money purchase arrangement,

(c) is the amount arrived at under sections 234 to [F65 236A] if it is a defined benefits arrangement, and

(d) is the amount arrived at under section 237 if it is a hybrid arrangement.

(3) But there is no pension input amount in respect of an arrangement if, before the end of the tax year, the individual—

[F66 (a) satisfies the severe ill-health condition, or]

(b) has died.

[F67 (4) For the purposes of subsection (3)(a) the individual satisfies the severe ill-health condition if the individual—

(a) becomes entitled to all the benefits to which the individual is entitled under the arrangement in consequence of the scheme administrator having received evidence from a registered medical practitioner that the individual is suffering from ill-health which makes the individual unlikely to be able (otherwise than to an insignificant extent) to undertake gainful work (in any capacity) before reaching pensionable age,

(b) becomes entitled to a serious ill-health lump sum under the arrangement, or

(c) is a member of the armed forces of the Crown who becomes entitled under the arrangement to a benefit on which no liability to income tax arises by virtue of section 641(1) of ITEPA 2003.]

Textual Amendments

F65 Word in s. 229(2)(c) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 6(2)

F66 S. 229(3)(a) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 6(3)

F67 S. 229(4) inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 6(4)

Modifications etc. (not altering text)

C35 S. 229(3) modified (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 4(1)

Commencement Information

I26 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

230 Cash balance arrangements U.K.

(1) The pension input amount in respect of a cash balance arrangement is the amount of any increase in the value of the individual’s rights under the arrangement during the pension input period of the arrangement that ends in the tax year.

(2) There is an increase in the value of the individual’s rights under the arrangement during the pension input period if—

(a) the opening value of the individual’s rights under the arrangement, is exceeded by

(b) the closing value of the individual’s rights under the arrangement.

(3) The amount of the increase in the value of the individual’s rights under the arrangement during the pension input period is the amount of that excess.

(4) The opening value of the individual’s rights under the arrangement is the amount which would, on the valuation assumptions (see section 277), 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 [F68 end of the immediately preceding pension input period (or is nil if the pension input period is the first pension input period of the arrangement)].

(5) The closing 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 end of the pension input period.

[F69 (5A) If, during the pension input period, minimum payments are made under—

(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 the arrangement, their amount is to be subtracted from what would otherwise be the pension input amount in the case of the individual in respect of the arrangement.

(5B) The pension input amount in respect of the arrangement is nil if—

(a) the individual is a deferred member of the pension scheme under which it is an arrangement (or would be if it were the only arrangement under the pension scheme relating to the individual) throughout the pension input period or is (or would be) such a deferred member for part of the pension input period and a pensioner member for the rest of it, and

(b) the value of the relevant rights of the individual does not increase during the pension input period by more than the relevant percentage.

(5C) In this section—

• “guaranteed minimum pension” has the meaning given by—

  (a)

  section 8(2) of the Pension Schemes Act 1993, or

  (b)

  section 4(2) of the Pension Schemes (Northern Ireland) Act 1993;

• “predecessor arrangement”, in relation to an arrangement, means another arrangement (under the same or another registered pension scheme) from which some or all of the sums or assets held for the purposes of the arrangement directly or indirectly derive;

• “predecessor registered pension scheme”, in relation to a pension scheme, means another registered pension scheme from which some or all of the sums or assets held for the purposes of the arrangement under the pension scheme directly or indirectly derive;

• “the relevant percentage”—

  (a)

  where throughout the pension input period the arrangement (or a predecessor arrangement) includes provision for the value of the relevant rights of the individual to increase at an annual rate specified in the rules of the pension scheme (or a predecessor registered pension scheme) on 14 October 2010, that percentage, and

  (b)

  otherwise, the percentage by which the consumer prices index for a month falling within the pension input period and nominated by the scheme administrator is higher than it was for the same month in the previous period of 12 months (or nil per cent if it is not higher);

• “the relevant rights of the individual” means rights of the individual under the arrangement, other than any rights to a guaranteed minimum pension;

• “specified”, in relation to an annual rate, means specified as a percentage figure or as a percentage produced by movement in an index (or a combination of the two) but does not include a percentage produced by the exercise of a discretion by any person.]

(6) Section 231 (uprating of opening value) and section 232 (adjustments of closing value) supplement this section.

Textual Amendments

F68 Words in s. 230(4) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 7(2)

F69 S. 230(5A)-(5C) inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 7(3)

Modifications etc. (not altering text)

C36 S. 230 applied (with modifications) (6.4.2006) by The Registered Pension Schemes (Restriction of Employers Relief) Regulations 2005 (S.I. 2005/3458), regs. 1(1), 5 (with regs. 2-4)

C37 Ss. 230-237 modified (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 5(2)

C38 S. 230(1) modified (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 5(1)

Commencement Information

I27 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

231 Cash balance arrangements: uprating of opening value U.K.

(1) This section applies for adjusting the opening value of the individual’s rights as calculated under section 230(4).

(2) The opening value is to be increased by the appropriate percentage.

[F70 (3) The appropriate percentage is the percentage (if any) by which the consumer prices index for the September before the start of the tax year is higher than it was for the previous September.]

Textual Amendments

F70 S. 231(3) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 8

Modifications etc. (not altering text)

C37 Ss. 230-237 modified (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 5(2)

C39 S. 231 modified (6.4.2006) by The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006 (S.I. 2006/207), regs. 1(1), 9 (as amended (with effect in accordance with reg. 1(7) of the amending S.I.) by S.I. 2011/1751, regs. 1(1), 12(3))

Commencement Information

I28 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

232 Cash balance arrangements: adjustments of closing value U.K.

(1) This section applies for adjusting the closing value of the individual’s rights under the arrangement as calculated under section 230(5).

(2) If, during the pension input period, the rights of the individual under the arrangement have been reduced by having become subject to a pension debit, the amount of [F71 the reduction] is to be added.

(3) If, during the pension input period, 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 [F72 the increase] is to be subtracted.

(4) [F73 If], during the pension input period, the rights of the individual under the arrangement have been reduced by [F74 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 F75 ... pension scheme that is—

(a) a registered pension scheme, or

(b) a qualifying recognised overseas pension scheme.

[F76 the amount of the reduction is to be added.]

F77 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) [F78 If], during the pension input period, the rights of the individual under the arrangement have been increased by [F79 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[F80 , the amount of the increase is to be subtracted.]

F81 (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F82 (8) If, during the pension input period, 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.

(8A) If, during the pension input period—

(a) benefit crystallisation event 1, 2 or 4 occurs in relation to the individual and the arrangement,

(b) benefit crystallisation event 3 occurs in relation to the individual and the arrangement otherwise than by reason of a provision contained in, or made under, any enactment,

(c) benefit crystallisation event 6 occurs or, but for paragraph 15A of Schedule 32, would occur in relation to the individual and the arrangement by virtue of the individual becoming entitled to a pension commencement lump sum or a lifetime allowance excess lump sum, or

(d) there is an allocation of rights of the individual under the arrangement (not falling within paragraph (a)),

the relevant amount is to be added.

(8B) In subsection (8A) “the relevant amount” is—

(a) in the case of benefit crystallisation event 2, what the annual rate of the pension would be on the valuation assumptions,

(b) in the case of benefit crystallisation event 3, the increase in the annual rate of the pension,

(c) in the case of benefit crystallisation event 6, the amount of the lump sum, and

(d) in any other case, 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 benefit crystallisation event or allocation.

(8C) If, during the pension input period, an adjustment to the individual's rights under the arrangement is made in consequence of the scheme administrator satisfying a liability under section 237B in respect of the individual, if and to the extent that the adjustment is reflected in the closing amount the amount of the adjustment is to be added to the closing amount.

(8D) But no amount is to be added under subsection (8C) by reason of an adjustment made in consequence of the scheme administrator satisfying a liability under section 237B in a case where subsection (6) of that section applied.]

F83 (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F71 Words in s. 232(2) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 9(2)

F72 Words in s. 232(3) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 9(3)

F73 Word in s. 232(4) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 9(4)(a)

F74 Words in s. 232(4) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 9(4)(b)

F75 Word in s. 232(4) omitted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 17 para. 9(4)(c)

F76 Words in s. 232(4) inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 9(4)(d)

F77 S. 232(5) omitted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 17 para. 9(5)

F78 Word in s. 232(6) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 9(6)(a)

F79 Words in s. 232(6) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 9(6)(b)

F80 Words in s. 232(6) inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 9(6)(c)

F81 S. 232(7) omitted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 17 para. 9(7)

F82 S. 232(8)-(8D) substituted for s. 232(8) (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 9(8)

F83 S. 232(9) omitted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 17 para. 9(9)

Modifications etc. (not altering text)

C37 Ss. 230-237 modified (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 5(2)

C40 S. 232 applied (with modifications) (6.4.2006) by The Registered Pension Schemes (Restriction of Employers Relief) Regulations 2005 (S.I. 2005/3458), regs. 1(1), 5 (with regs. 2-4)

Commencement Information

I29 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

233 Other money purchase arrangements U.K.

(1) The pension input 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

(b) contributions paid in respect of the individual under the arrangement by an employer of the individual,

during the pension input period of the arrangement that ends in the tax year.

(2) The references to contributions in subsection (1)(a) and (b) do not include minimum payments under—

(a) section 8 of the Pension Schemes Act 1993, or

(b) section 4 of the Pension Schemes (Northern Ireland) Act 1993 (c. 49),

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 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.

Modifications etc. (not altering text)

C37 Ss. 230-237 modified (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 5(2)

C41 S. 233 applied (with modifications) (6.4.2006) by The Registered Pension Schemes (Restriction of Employers Relief) Regulations 2005 (S.I. 2005/3458), regs. 1(1), 6 (with regs. 2-4)

C42 S. 233(1) modified (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 5(1)

Commencement Information

I30 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

234 Defined benefits arrangements U.K.

(1) The pension input amount in respect of a defined benefits arrangement is the amount of any increase in the value of the individual’s rights under the arrangement during the pension input period of the arrangement that ends in the tax year.

(2) There is an increase in the value of the individual’s rights under the arrangement during the pension input period if—

(a) the opening value of the individual’s rights under the arrangement, is exceeded by

(b) the closing value of the individual’s rights under the arrangement.

(3) The amount of the increase in the value of the individual’s rights under the arrangement during the pension input period is the amount of that excess.

[F84 (4) The opening value of the individual’s rights under the arrangement is—

where—

PB is the annual rate of the pension which would, on the valuation assumptions (see section 277), be payable to the individual under the arrangement if the individual became entitled to payment of it at the [F85 end of the immediately preceding pension input period (or is nil if the pension input period is the first pension input period of the arrangement)], and

LSB 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 the payment of it at [F86 the end of the immediately preceding pension input period (or is nil if the pension input period is the first pension input period of the arrangement)]].

[F87 (5) The closing value of the individual’s rights under the arrangement is—

where—

PE is 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 end of the pension input period, and

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 the payment of it at that time.]

[F88 (5A) If, during the pension input period, minimum payments are made under—

(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 the arrangement, their amount is to be subtracted from what would otherwise be the pension input amount in the case of the individual in respect of the arrangement.

(5B) The pension input amount in respect of the arrangement is nil if—

(a) the individual is a deferred member of the pension scheme under which it is an arrangement (or would be if it were the only arrangement under the pension scheme relating to the individual) throughout the pension input period or is (or would be) such a deferred member for part of the pension input period and a pensioner member for the rest of it, and

(b) the value of the relevant rights of the individual does not increase during the pension input period by more than the relevant percentage.

(5C) In this section—

• “guaranteed minimum pension” has the meaning given by—

  (a)

  section 8(2) of the Pension Schemes Act 1993, or

  (b)

  section 4(2) of the Pension Schemes (Northern Ireland) Act 1993;

• “predecessor arrangement”, in relation to an arrangement, means another arrangement (under the same or another registered pension scheme) from which some or all of the sums or assets held for the purposes of the arrangement directly or indirectly derive;

• “predecessor registered pension scheme”, in relation to a pension scheme, means another registered pension scheme from which some or all of the sums or assets held for the purposes of the arrangement under the pension scheme directly or indirectly derive;

• “the relevant percentage”—

  (a)

  where throughout the pension input period the arrangement (or a predecessor arrangement) includes provision for the value of the relevant rights of the individual to increase at an annual rate specified in the rules of the pension scheme (or a predecessor registered pension scheme) on 14 October 2010, that percentage, and

  (b)

  otherwise, the percentage by which the consumer prices index for a month falling within the pension input period and nominated by the scheme administrator is higher than it was for the same month in the previous period of 12 months (or nil per cent if it is not higher);

• “the relevant rights of the individual” means rights of the individual under the arrangement, other than any rights to a guaranteed minimum pension;

• “specified”, in relation to an annual rate, means specified as a percentage figure or as a percentage produced by movement in an index (or a combination of the two) but does not include a percentage produced by the exercise of a discretion by any person.]

(6) Section 235 (uprating of opening value)[F89 , section 236 (adjustments of closing value) and section 236A (post-entitlement enhancements)] supplement this section.

Textual Amendments

F84 Word in s. 234(4) formula substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 10(2)(a)

F85 Words in s. 234(4) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 10(2)(b)

F86 Words in s. 234(4) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 10(2)(c)

F87 Word in s. 234(5) formula substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 10(3)

F88 S. 234(5A)-(5C) inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 10(4)

F89 Words in s. 234(6) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 10(5)

Modifications etc. (not altering text)

C37 Ss. 230-237 modified (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 5(2)

C43 S. 234 applied (with modifications) (6.4.2006) by The Registered Pension Schemes (Restriction of Employers Relief) Regulations 2005 (S.I. 2005/3458), regs. 1(1), 7 (with regs. 2-4)

C44 S. 234(1) modified (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 5(1)

C45 S. 234(4)(5) applied (with modifications) (19.7.2011) by Finance Act 2011 (c. 11), Sch. 17 para. 28(6)

Commencement Information

I31 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

235 Defined benefits arrangements: uprating of opening value U.K.

(1) This section applies for adjusting the opening value of the individual’s rights as calculated under section 234(4) F90 ....

(2) The opening value is to be increased by the appropriate percentage.

[F91 (3) The appropriate percentage is the percentage (if any) by which the consumer prices index for the September before the start of the tax year is higher than it was for the previous September.]

Textual Amendments

F90 Words in s. 235(1) omitted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 17 para. 11(2)

F91 S. 235(3) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 11(3)

Modifications etc. (not altering text)

C37 Ss. 230-237 modified (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 5(2)

C46 S. 235 modified (6.4.2006) by The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006 (S.I. 2006/207), regs. 1(1), 10 (as amended (with effect in accordance with reg. 1(7) of the amending S.I.) by S.I. 2011/1751, regs. 1(1), 12(4))

Commencement Information

I32 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

236 Defined benefits arrangements: adjustments of closing value U.K.

(1) This section applies for adjusting [F92 PE and LSE] under section 234(5).

(2) If, during the pension input period, the [F93 annual rate of the pension, or the amount of the lump sum, to which the individual would be entitled under the arrangement has] been reduced by having become subject to a pension debit, the amount of [F94 the reduction] is to be added [F95 to PE or LSE].

(3) If, during the pension input period, the [F96 annual rate of the pension, or the amount of the lump sum, to which the individual would be entitled under the arrangement has] been increased by the individual having become entitled to a pension credit deriving from the same or another registered pension scheme, the amount of [F97 the increase] is to be subtracted [F98 from PE or LSE].

[F99 (4) If, during the pension input period, the annual rate of the pension, or the amount of the lump sum, to which the individual would be entitled under the arrangement has 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 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 PE or LSE.

(5) If, during the pension input period, the annual rate of the pension, or the amount of the lump sum, to which the individual would be entitled under the arrangement has 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 PE or LSE.]

[F100 (8) If, during the pension input period, the annual rate of the pension, or the amount of the lump sum, to which the individual would be entitled under the arrangement has been reduced by any surrender made in return for any other entitlement, any allocation made, or any similar action taken, pursuant to an option available to the individual under the arrangement, the amount of the reduction (to the extent that it is not reflected in an amount added under subsection (8A)) is to be added to PE or LSE.

(8A) If, during the pension input period—

(a) benefit crystallisation event 2 occurs in relation to the individual and the arrangement,

(b) benefit crystallisation event 3 occurs in relation to the individual and the arrangement otherwise than by reason of a provision contained in, or made under, any enactment, or

(c) benefit crystallisation event 6 occurs in relation to the individual and the arrangement by virtue of the individual becoming entitled to a pension commencement lump sum or a lifetime allowance excess lump sum,

the relevant amount is to be added to PE or LSE.

(8B) In subsection (8A) “the relevant amount” is—

(a) in the case of benefit crystallisation event 2, the annual rate of the pension to which the individual became entitled,

(b) in the case of benefit crystallisation event 3, the increase in the annual rate of the pension, and

(c) in the case of benefit crystallisation event 6, the amount of the lump sum.

(8C) If, during the pension input period, an adjustment to the annual rate of the pension, or the amount of the lump sum, to which the individual would be entitled under the arrangement has been made in consequence of the scheme administrator satisfying a liability under section 237B in respect of the individual, if and to the extent that the adjustment is reflected in PE or LSE the amount of the adjustment is to be added to PE or LSE.

(8D) But no amount is to be added under subsection (8C) by reason of an adjustment made in consequence of the scheme administrator satisfying a liability under section 237B in a case where subsection (6) of that section applied.]

F101 (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F92 Words in s. 236(1) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 12(2)

F93 Words in s. 236(2) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 12(3)(a)

F94 Words in s. 236(2) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 12(3)(b)

F95 Words in s. 236(2) inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 12(3)(c)

F96 Words in s. 236(3) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 12(4)(a)

F97 Words in s. 236(3) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 12(4)(b)

F98 Words in s. 236(3) inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 12(4)(c)

F99 S. 236(4)(5) substituted for s. 236(4)-(7) (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 12(5)

F100 S. 236(8)-(8D) substituted for s. 236(8) (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 12(6)

F101 S. 236(9) omitted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 17 para. 12(7)

Modifications etc. (not altering text)

C37 Ss. 230-237 modified (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 5(2)

C47 S. 236 applied (with modifications) (6.4.2006) by The Registered Pension Schemes (Restriction of Employers Relief) Regulations 2005 (S.I. 2005/3458), regs. 1(1), 7 (with regs. 2-4)

C48 S. 236 applied (with modifications) (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 6(6)

Commencement Information

I33 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

[F102 236A Post-entitlement enhancements U.K.

(1) This section applies in relation to the arrangement if, during the pension input period (“the affected pension input period”), the individual enters into a scheme for the making of an avoidance-inspired post-entitlement enhancement.

(2) A “post-entitlement enhancement” is an increase in the annual rate of a scheme pension under the arrangement, at a time after the member has become entitled to the scheme pension.

(3) A post-entitlement enhancement is “avoidance-inspired” if the main purpose, or one of the main purposes, of the individual in entering into the scheme was to avoid or reduce a liability to the annual allowance charge.

(4) This Part has effect in relation to the arrangement and the individual, as respects the affected pension input period and all subsequent pension input periods, as if—

(a) section 234 were modified in accordance with subsection (5), and

(b) sections 235 and 236 were omitted.

(5) The modifications of section 234 are that—

(a) in subsection (4), for the words after “the arrangement is” there are substituted “ such amount as, applying normal actuarial practice, is the expected cost of giving effect to the individual's rights under the arrangement at the end of the immediately preceding pension input period (or is nil if the pension input period is the first pension input period of the arrangement). ”,

(b) in subsection (5), for the words after “the arrangement is” there are substituted “ such amount as, applying normal actuarial practice, is the expected cost of giving effect to the individual's rights under the arrangement at the end of the pension input period. ”, and

(c) subsection (6) is omitted.

(6) In this section “scheme” includes any arrangements, agreement, understanding, transaction or series of transactions (whether or not legally enforceable).]

Textual Amendments

F102 S. 236A inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 13

237 Hybrid arrangements U.K.

(1) The pension input amount in respect of a hybrid arrangement is the greater or greatest of such of input amounts A, B and C as are relevant input amounts.

(2) An input amount is a relevant input amount in the case of 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 of the variety mentioned in the definition of that input amount.

(3) Input amount A is what would be the pension input amount under sections 230 to 232 if the benefits provided to or in respect of the individual under the arrangement were cash balance benefits.

(4) Input amount B is what would be the pension input amount under section 233 if the benefits provided to or in respect of the individual under the arrangement were other money purchase benefits.

(5) Input amount C is what would be the pension input amount under sections 234 to [F103 236A] if the benefits provided to or in respect of the individual under the arrangement were defined benefits.

Textual Amendments

F103 Word in s. 237(5) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 14

Modifications etc. (not altering text)

C37 Ss. 230-237 modified (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 5(2)

C49 S. 237 applied (with modifications) (6.4.2006) by The Registered Pension Schemes (Restriction of Employers Relief) Regulations 2005 (S.I. 2005/3458), regs. 1(1), 8 (with regs. 2-4)

Commencement Information

I34 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

[F104 237A Liability of individual U.K.

(1) The individual is liable to the annual allowance charge.

(2) The individual is liable to the annual allowance charge whether or not—

(a) the individual, and

(b) the scheme administrator of the pension scheme or pension schemes concerned,

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

Textual Amendments

F104 Ss. 237A-237F inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 15

237B Liability of scheme administrator U.K.

(1) This section applies if—

(a) the amount of the individual's liability to the annual allowance charge for a tax year exceeds £2,000, and

(b) the pension scheme input amount in the case of the individual in relation to a registered pension scheme for the tax year exceeds the amount of the annual allowance specified in section 228(1) for the tax year.

(2) The pension scheme input amount in the case of the individual in relation to a pension scheme for a tax year is the aggregate of the pension input amounts for the tax year in respect of arrangements relating to the individual under the pension scheme.

(3) The individual may give a notice to the scheme administrator of the pension scheme specifying that the individual and the scheme administrator are to be jointly and severally liable in respect of so much of the annual allowance charge arising in the case of the individual as—

(a) does not exceed the amount of the annual allowance charge which would be chargeable on the excess mentioned in subsection (1)(b) if it were charged at the relevant rate, and

(b) is specified in the notice,

(“the joint liability amount”).

(4) In subsection (3)(a) “the relevant rate” means—

(a) in relation to so much of the excess as does not exceed the amount (if any) on which tax is chargeable in the case of the individual for the tax year at the additional rate by virtue of paragraph (c) of subsection (4A) of section 227, the additional rate,

(b) in relation to so much of the excess as is not within paragraph (a) and does not exceed the amount (if any) on which tax is so chargeable at the higher rate by virtue of paragraph (b) of that subsection, the higher rate, and

(c) in relation to any remaining part of the excess, the basic rate.

(5) The notice—

(a) must be given not later than 31 July in the year following that in which the tax year ends (but subject to subsection (6)),

(b) must be made in such manner and form, and contain such particulars, as may be prescribed by regulations made by the Commissioners for Her Majesty's Revenue and Customs, and

(c) may be amended by giving the scheme administrator notice in accordance with provision made by regulations made by the Commissioners for Her Majesty's Revenue and Customs but may not be revoked.

(6) In a case in which the individual becomes actually entitled to all of the individual's benefits under the pension scheme in the tax year or benefit crystallisation event 5, 5A or 5B occurs in the tax year in relation to the individual and the pension scheme, the notice must be given before the date on which the individual becomes so entitled or the benefit crystallisation event occurs.

(7) On receipt by the scheme administrator of the notice the scheme administrator and the individual become jointly and severally liable to pay the joint liability amount, but subject to sections 237C and 237D and to any amendment made to the notice in accordance with regulations under subsection (5)(c).

(8) The scheme administrator is liable under subsection (7) whether or not—

(a) the individual, and

(b) the scheme administrator,

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

(9) Where (but for this subsection) a notice could be given to a scheme administrator of a pension scheme but, before it is given, there is a transfer of all of the sums or assets—

(a) held for the purposes of, or

(b) representing accrued rights under,

the pension scheme so as to become held for the purposes of, or to represent rights under, another registered pension scheme, the notice may not be given to that scheme administrator but may instead be given to the scheme administrator of that other pension scheme.

(10) The Treasury may by regulations make provision modifying the operation of this section in other cases in which there is a transfer of any of the sums or assets—

(a) held for the purposes of, or

(b) representing accrued rights under,

the pension scheme so as to become held for the purposes of, or to represent rights under, another registered pension scheme.

(11) The Treasury may by order amend paragraph (a) of subsection (1) so as to increase the sum for the time being specified in that paragraph.

Textual Amendments

F104 Ss. 237A-237F inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 15

Modifications etc. (not altering text)

C50 S. 237B(5)(a) applied (with modifications) (19.7.2011) by Finance Act 2011 (c. 11), Sch. 17 para. 32

237C Exceptions U.K.

(1) The scheme administrator of a pension scheme does not become liable under section 237B if the time when the scheme administrator would become liable is during an assessment period in relation to the pension scheme; and if an assessment period in relation to a pension scheme begins at a time when the scheme administrator is already so liable (but has not satisfied the liability), the liability ceases when the assessment period begins.

References to an assessment period are to be construed in accordance with sections 132 and 159 of the Pensions Act 2004 and articles 116 and 143 of the Pensions (Northern Ireland) Order 2005 (S.I. 2005/255 (N.I. 1)).

(2) The scheme administrator of a pension scheme is not liable under section 237B in respect of any amount if there is no power to make a consequential adjustment to the entitlement of the individual concerned to benefits under the pension scheme in respect of the amount because of section 237E(2) (inalienability of guaranteed minimum pension etc).

(3) The Treasury may by regulations prescribe other circumstances in which a scheme administrator of a pension scheme does not become, or ceases to be, liable under section 237B.

Textual Amendments

F104 Ss. 237A-237F inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 15

237D Discharge of scheme administrator's liability U.K.

(1) If the scheme administrator of a pension scheme is liable under section 237B, the scheme administrator may apply to an officer of Revenue and Customs for the discharge of the scheme administrator's liability on either of the following grounds.

(2) The grounds are—

(a) that paying the amount to which the scheme administrator is liable would be to the substantial detriment of the interests of the members of the pension scheme, and

(b) that in all the circumstances of the case it would not be just and reasonable for the scheme administrator to be liable to that amount.

(3) On receiving an application under subsection (1), an officer of Revenue and Customs must decide whether to discharge the scheme administrator's liability.

(4) An officer of Revenue and Customs must notify the scheme administrator of the decision on the application.

(5) The discharge of the scheme administrator's liability does not affect the liability of any other person in respect of the same amount.

(6) The Treasury may by regulations amend this section so as to alter the grounds on which an application under subsection (1) may be made.

(7) Regulations made by the Commissioners for Her Majesty's Revenue and Customs may make provision supplementing this section; and the regulations may in particular make provision as to the time limits for the making of an application.

Textual Amendments

F104 Ss. 237A-237F inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 15

237E Consequential benefit adjustments to be reasonable etc U.K.

(1) Where the scheme administrator of a pension scheme satisfies a liability under section 237B in respect of the individual, consequential adjustment must be made to the entitlement of the individual to benefits under the pension scheme on a basis that is just and reasonable having regard to normal actuarial practice.

(2) Any power to make such consequential adjustment is subject to section 159 of the Pension Schemes Act 1993 or section 155 of the Pension Schemes (Northern Ireland) Act 1993 (inalienability of guaranteed minimum pension etc).

Textual Amendments

F104 Ss. 237A-237F inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 15

237F Power to modify rules U.K.

The Commissioners for Her Majesty's Revenue and Customs may by regulations make any modification of the rules of registered pension schemes that appear appropriate to facilitate the operation of sections 237A to 237E.]

Textual Amendments

F104 Ss. 237A-237F inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 15

238 Pension input period U.K.

(1) In the case of an arrangement under a registered pension scheme the following are pension input periods—

(a) the period beginning with the relevant commencement date and ending with [F105 —

(i) a nominated date falling before the anniversary of the relevant commencement date, or

(ii) if there is not such a nominated date, the first 5 April after the relevant commencement date (or, if the relevant commencement date is itself 5 April, that date), and]

(b) each subsequent period beginning immediately after the end of a period which is a pension input period (under paragraph (a) or this paragraph) and ending with the appropriate date.

(2) “The relevant commencement date” means—

(a) in the case of a cash balance arrangement or a defined benefits arrangement, or a hybrid arrangement the only benefits under which may be cash balance benefits or defined benefits, the date on which rights under the arrangement begin to accrue to or in respect of the individual,

(b) in the case of a money purchase arrangement other than a cash balance arrangement, the first date on which a contribution within section 233(1) is made, and

(c) in the case of a hybrid arrangement not within paragraph (a), whichever is the earlier of the date mentioned in that paragraph and the date mentioned in paragraph (b).

(3) “Nominated date” means—

(a) in the case of a money purchase arrangement other than a cash balance arrangement, such date as the individual or scheme administrator nominates, and

(b) in the case of any other arrangement, such date as the scheme administrator nominates.

(4) A nomination for the purposes of subsection (3)—

(a) if by the individual, is to be made by notice to the scheme administrator, and

(b) if by the scheme administrator, is to be made by notice to the individual.

[F106 (4A) A date nominated for the purposes of subsection (3) must not be a date before that on which the nomination is made.]

(5) If more than one date is nominated for the purposes of subsection (3)—

(a) in relation to the period beginning with the relevant commencement date, or

(b) in relation to a tax year following that in which the pension input period beginning with that date ends,

the date nominated first is the nominated date.

(6) “The appropriate date” means F107 ...—

(a) a nominated date falling in the tax year immediately after that in which the last pension input period ended, [F108 or]

(b) [F109 if there is not such a nominated date,] the anniversary of the date on which that period ended.

(7) Once the individual has become entitled to all the benefits which may be provided to the individual under an arrangement, the last pension input period in the case of the arrangement is [F110 that in which] that was first so.

Textual Amendments

F105 S. 238(1)(a)(i)(ii) substituted for words (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 16(2)

F106 S. 238(4A) inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 16(3)

F107 Words in s. 238(6) omitted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 17 para. 16(4)(a)

F108 Word in s. 238(6) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 16(4)(b)

F109 Words in s. 238(6)(b) inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 16(4)(c)

F110 Words in s. 238(7) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 16(5)

Modifications etc. (not altering text)

C51 S. 238(3) modified (6.4.2006) by The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 (S.I. 2006/569), regs. 1(1), 3(1)(2), Sch. 3 Pt. 1

C52 S. 238(4) modified (6.4.2006) by The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 (S.I. 2006/569), regs. 1(1), 3(1)(2), Sch. 3 Pt. 1

Commencement Information

I35 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

[F111 238A Power to make orders about charge U.K.

(1) The Treasury may by order make provision about the annual allowance charge.

(2) The provision may include modifications of any of sections 227 to 238.

(3) The provision may include provision consequential on, or supplementary or incidental to, the provision made by those sections and transitional provisions (including provision making modifications of enactments).

(4) “Modifications” includes amendments.]

Textual Amendments

F111 S. 238A inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 17

Scheme sanction charge U.K.

239 Scheme sanction charge U.K.

(1) A charge to income tax, to be known as the scheme sanction charge, arises where in any tax year one or more scheme chargeable payments are made by a registered pension scheme.

(2) The person liable to the scheme sanction charge is the scheme administrator.

(3) But in the case of a payment treated by virtue of section 161(3) and (4) (payments under investments acquired with scheme assets) as having been made by a pension scheme which has been wound up, the person liable to the scheme sanction charge is the person who was, or each of the persons who were, the scheme administrator immediately before the pension scheme was wound up.

(4) A person liable to the scheme sanction charge is liable whether or not—

(a) that person, and

(b) any other person who is liable to the scheme sanction charge,

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

(5) The following sections make further provision about the scheme sanction charge—

• section 240 (amount of charge), and

• section 241 (scheme chargeable payment).

[F112 (6) This section is subject to provision made by regulations under section 273ZA (income and gains from taxable property).]

Textual Amendments

F112 S. 239(6) inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 158(2), Sch. 21 para. 8

Modifications etc. (not altering text)

C53 S. 239 modified (6.4.2006) by The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 (S.I. 2006/569), regs. 1(1), 3(1)(2), Sch. 3 Pt. 1

Commencement Information

I36 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

240 Amount of charge U.K.

(1) The scheme sanction charge for any tax year is a charge at the rate of 40% in respect of the scheme chargeable payment, or the aggregate of the scheme chargeable payments, made by the pension scheme in the tax year.

(2) But if—

(a) the scheme chargeable payment is an unauthorised payment, or any of the scheme chargeable payments are unauthorised payments, and

(b) tax charged in relation to that payment, or any of those payments, under section 208 (unauthorised payments charge) has been paid,

a deduction is to be made from the amount of tax that would otherwise be chargeable for the tax year by virtue of subsection (1).

(3) The amount of the deduction is the lesser of—

(a) 25% of the amount of the scheme chargeable payment, or of the aggregate amount of such of the scheme chargeable payments as are tax-paid, and

(b) the amount of the tax which has been paid under section 208 in relation to the scheme chargeable payment, or in relation to such of the scheme chargeable payments as are tax-paid.

[F113 (3A) The Treasury—

(a) may by order amend subsection (1) so as to vary the rate of the scheme sanction charge, and

(b) may by order amend subsection (3)(a) so as to vary the percentage mentioned there.

(3B) An order under subsection (3A) may make provision for there to be different rates or percentages in different circumstances.]

(4) A scheme chargeable payment is “tax-paid” if the whole or any part of the tax chargeable in relation to it under section 208 has been paid.

Textual Amendments

F113 S. 240(3A)(3B) inserted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 16

Commencement Information

I37 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

241 Scheme chargeable payment U.K.

(1) In this Part “scheme chargeable payment”, in relation to a registered pension scheme, means—

(a) an unauthorised payment by the pension scheme, other than one which is exempt from being scheme chargeable, and

F114 (aa) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) a scheme chargeable payment which the pension scheme is to be treated as having made by section 183 or 185 (unauthorised borrowing)[F115 , and

(c) a scheme chargeable payment which the pension scheme is to be treated as having made by section 185A (income from taxable property) or 185F (gains from taxable property)].

(2) An unauthorised payment is exempt from being scheme chargeable if—

(a) it is treated as having been made by section 173 (use of scheme assets to provide benefits) and the asset used to provide the benefit in question is not a wasting asset,

(b) it is a compensation payment (see section 178),

(c) it is made to comply with an order of a court or of a person or body with power to order the making of the payment,

(d) it is made on the ground that a court or any such person or body is likely to order the making of the payment (or would be were it asked to do so), or

(e) it is of a description prescribed by regulations made by the Board of Inland Revenue.

(3) “Wasting asset” has the same meaning as in section 44 of TCGA 1992.

(4) Schedule 36 contains (in Part 3) transitional provision about scheme chargeable payments.

Textual Amendments

F114 S. 241(1)(aa) omitted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 16 para. 74

F115 S. 241(1)(c) and word inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 158(2), Sch. 21 para. 9

Commencement Information

I38 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

De-registration charge U.K.

242 De-registration charge U.K.

(1) A charge to income tax, to be known as the de-registration charge, arises where the registration of a registered pension scheme is withdrawn.

(2) The liability to the de-registration charge is a liability of the person who was, or each of the persons who were, the scheme administrator immediately before the registration was withdrawn.

(3) That person, or each of those persons, is liable to the de-registration charge whether or not—

(a) that person, and

(b) any other person who is liable to the de-registration charge,

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

(4) The de-registration charge is a charge at the rate of 40% in respect of the aggregate of—

(a) the amount of any sums held for the purposes of the pension scheme immediately before it ceased to be a registered pension scheme, and

(b) the market value at that time of any assets held for the purposes of the pension scheme.

[F116 (5) The Treasury may by order amend subsection (4) so as to vary the rate of the de-registration charge.

(6) An order under subsection (5) may make provision for there to be different rates in different circumstances.]

Textual Amendments

F116 S. 242(5)(6) inserted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 17

Modifications etc. (not altering text)

C54 S. 242 excluded (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 24

Commencement Information

I39 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284