Finance Act 2009

[F1 Calculation of relevant income U.K.

Textual Amendments

F1 Sch. 35 ceased to have effect (10.12.2010) by virtue of The Finance Act 2009, Schedule 35 (Special Annual Allowance Charge) (Cessation of Effect) Order 2010 (S.I. 2010/2939), arts. 1, 2(1) (with art. 2(2))

2 (1) To find the individual's relevant income for the tax year take the following steps— U.K.

Step 1

Identify the individual's total income.

Step 2

Add the amount of any deductions made from any employment income of the individual for the tax year under section 193(2) of FA 2004 or made under Chapter 2 of Part 5 of ITEPA 2003 in accordance with paragraph 51 of Schedule 36 to FA 2004.

Step 3

Deduct the amount of any relief under the provisions listed in section 24 of ITA 2007, other than sections 193(4) and 194(1) of FA 2004, to which the individual is entitled for the tax year.

Step 4

Deduct the aggregate amount of any relevant contributions, but subject to a maximum of £20,000.

Step 5

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 a post-22 April 2009 salary sacrifice scheme.

Step 6

If in the tax year the individual makes, or is treated under section 426 of ITA 2007 as making, a gift that is a qualifying donation for the purposes of Chapter 2 of Part 8 of that Act (gift aid), deduct the grossed up amount of the gift (that is, the amount of the gift grossed up by reference to the basic rate for the tax year).

The result is the individual's relevant income for the tax year unless the result is less than £150,000 and the following provisions provide that the individual's relevant income is to be a different amount.

(2) If the amount arrived at under sub-paragraph (1) is less than £150,000, take the steps in that sub-paragraph in relation to—

(a) the tax year before the tax year concerned, and

(b) the tax year before that.

If the result is £150,000 or more for either or both of those earlier tax years the individual's relevant income for the tax year is to be assumed to be £150,000.

(3) If there is a scheme the main purpose, or one of the main purposes, of which is to secure that the individual's relevant income for the tax year is less than £150,000, it is to be assumed to be £150,000.

(4) In step 4 in sub-paragraph (1) “relevant contributions” are—

(a) contributions which are relievable pension contributions in relation to the individual and are paid in the tax year,

(b) contributions in respect of which the individual is entitled to a tax reduction under section 788 of ICTA and which are paid in the tax year, and

(c) contributions paid by the individual for which a deduction is given under Chapter 2 of Part 5 of ITEPA 2003 for the tax year in accordance with paragraph 51 of Schedule 36 to FA 2004.

(5) In step 5 in sub-paragraph (1) “a post-22 April 2009 salary sacrifice scheme” is a scheme made on or after 22 April 2009 in pursuance of which—

(a) the individual gives up the right to receive general earnings or specific employment income, and

(b) an employer of the individual or any other person agrees to pay contributions (or additional contributions) to a pension scheme in respect of the individual or otherwise 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.

(6) Section 993 of ITA 2007 (meaning of “connected” person) applies for the purposes of sub-paragraph (5).]