Income and Corporation Taxes Act 1988

Tax reliefs U.K.

639 Member’s contributions. U.K.

[F1 (1) An individual who pays a contribution under approved personal pension arrangements made by him shall be entitled to relief under this section in respect of the contribution.

(1A) Subsection (1) above is subject to the other provisions of this Chapter.

(1B) The total amount of contributions in respect of which relief may be given to an individual under this section for any year of assessment must not exceed—

(a) the permitted maximum for the year, as defined in section 638(4), or

(b) the earnings threshold for the year,

whichever is the greater.

(2) Any relief under this section shall be given in accordance with—

(a) subsections (3) and (4) below, and

(b) where applicable, subsection (5A) below.

(2A) Relief in accordance with subsections (3) and (4) below shall be subject to such conditions as the Board may prescribe in regulations.]

[F2 (3) An individual who is entitled to relief under this section in respect of a contribution shall be entitled, on making the payment, to deduct and retain out of it a sum equal to income tax on the contribution at the basic rate for the year of assessment in which the payment is made.]

[F3 (4) Where a sum is deducted under subsection (3) above from a contribution—

(a) the scheme administrator shall allow the deduction on receipt of the residue;

(b) the individual paying the contribution shall be acquitted and discharged of so much money as is represented by the deduction as if the sum had been actually paid; and

(c) the sum deducted shall be treated as income tax paid by the scheme administrator.]

[F4 (4A) Where payment of a contribution under approved personal pension arrangements is received—

(a) the scheme administrator shall be entitled to recover from the Board, in accordance with regulations, an amount which by virtue of subsection (4)(c) above is treated as income tax paid by him; and

(b) any amount so recovered shall be treated for the purposes of the Tax Acts in like manner as the payment of the contribution to which it relates.]

(5) Regulations under this section may make provision for carrying subsections [F5 (3) to (4A)] above into effect and, without prejudice to the generality of that, may provide—

(a) for the manner in which claims for the recovery of a sum under subsection [F6 (4A)(a)] may be made;

(b) for the giving of such information, in such form, as may be prescribed by or under the regulations;

(c) for the inspection by persons authorised by the Board of books, documents and other records.

[F7 (5A) Where—

(a) an individual is entitled to relief under this section in respect of contributions paid in any year of assessment, and

(b) apart from this subsection, income tax at the higher rate is chargeable in respect of any part of his total income for the year,

the basic rate limit for that year shall in his case be increased by the addition of the amount of the contributions in respect of which he is entitled to relief under this section.

(5B) Relief in accordance with subsection (5A) above shall be given only on a claim made for the purpose.]

(6) M1 Where relief under this section for any year of assessment is claimed and allowed (whether or not it then falls to be given for that year), and afterwards an assessment, alteration of an assessment, or other adjustment of the claimant’s liability to tax is made, there shall also be made such consequential adjustments in the relief allowed or given under this section for that or any subsequent year as are appropriate.

(7) M2 Where relief [F8 is given under this section] for any year of assessment in respect of a contribution, relief shall not be given in respect of it under any other provision of the Income Tax Acts for the same or any subsequent year, nor (in the case of a contribution under an annuity contract) in respect of any other premium or consideration for an annuity under the same contract.

(8) References in the Income Tax Acts to relief in respect of life assurance premiums shall not be taken to include relief under this section.

Textual Amendments

F1 S. 639(1)-(1B)(2)(2A) substituted for s. 639(1)(2) (with effect in accordance with Sch. 13 para. 15(9) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 15(2) (with Sch. 13 Pt. 2)

F2 S. 639(3) substituted (with effect in accordance with Sch. 13 para. 15(9) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 15(3) (with Sch. 13 Pt. 2)

F3 S. 639(4) substituted (with effect in accordance with Sch. 13 para. 15(9) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 15(4) (with Sch. 13 Pt. 2)

F4 S. 639(4A) inserted (with effect in accordance with Sch. 13 para. 15(9) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 15(5) (with Sch. 13 Pt. 2)

F5 Words in s. 639(5) substituted (with effect in accordance with Sch. 13 para. 15(9) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 15(6)(a) (with Sch. 13 Pt. 2)

F6 Words in s. 639(5) substituted (with effect in accordance with Sch. 13 para. 15(9) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 15(6)(b) (with Sch. 13 Pt. 2)

F7 S. 639(5A)(5B) inserted (with effect in accordance with Sch. 13 para. 15(9) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 15(7) (with Sch. 13 Pt. 2)

F8 Words in s. 639(7) substituted (with effect in accordance with Sch. 13 para. 15(9) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 15(8) (with Sch. 13 Pt. 2)

Modifications etc. (not altering text)

C1 For regulations see Part III Vol.5 (under

“Personal pension schemes”).

Marginal Citations

M1 Source-1987 (No.2) s.48

M2 Source-1987 (No.2) s.49

640 Maximum amount of deductions. U.K.

M3 (1) The maximum amount [F9 of contributions in respect of which relief may be given] in any year of assessment by virtue of section 639(1) shall be—

[F10 (a) an amount equal to the earnings threshold for that year; or

(b) if greater,] 17.5 per cent. of the individual’s net relevant earnings for that year.

(2) In the case of an individual whose age at the beginning of the year of assessment is within a range specified in the first column of the following table, subsection (1) above shall have effect with the substitution for 17.5 per cent. of the relevant percentage specified in the second column.

[ F11 36 to 45	20 per cent.
46 to 50	25 per cent.
51 to 55	30 per cent.
56 to 60	35 per cent.
61 or more	40 per cent.]

(3) [F12 Without prejudice to subsection (1) above, where any contributions are paid in a year of assessment by an individual to secure benefits satisfying the conditions in section 637, the maximum amount of those contributions in respect of which relief may be given by virtue of section 639(1)][F13 shall be an amount equal to 10 per cent. of the aggregate amount of the relevant pension contributions made in that year by the individual and an employer of his].

[F14 (3A) In subsection (3) above “relevant pension contribution” means a contribution paid towards securing benefits falling within paragraph (a), (b) or (c) of section 633(1) under arrangements made under a personal pension scheme on or after 6th April 2001.]

(4) Where personal pension arrangements are made by an employee whose employer makes contributions under the arrangements, the maximum amount [F15 of contributions in respect of which relief may be given by virtue of section 639(1)] in any year of assessment shall be reduced by the amount of the employer’s contributions in the year.

(5) Any minimum contributions treated by virtue of section 649(3) as paid by the individual in respect of whom they are paid shall be disregarded for the purposes of this section.

Textual Amendments

F9 Words in s. 640(1) substituted (with effect in accordance with Sch. 13 para. 16(8) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 16(2)(a) (with Sch. 13 Pt. 2)

F10 Words in s. 640(1) inserted (with effect in accordance with Sch. 13 para. 16(8) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 16(2)(b) (with Sch. 13 Pt. 2)

F11 1989 s.77and Sch.7 para.3for 1989-90and subsequent years. Previously

“51 to 55—20 per cent., 56 to 60—22.5 per cent., 61 or more—27.5 per cent.”.

F12 Words in s. 640(3) substituted (with effect in accordance with Sch. 13 para. 16(8) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 16(4) (with Sch. 13 Pt. 2)

F13 Words in s. 640(3) substituted (with effect in accordance with Sch. 13 para. 16(9) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 16(5) (with Sch. 13 Pt. 2)

F14 S. 640(3A) inserted (with effect in accordance with Sch. 13 para. 16(9) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 16(6) (with Sch. 13 Pt. 2)

F15 Words in s. 640(4) substituted (with effect in accordance with Sch. 13 para. 16(8) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 16(7) (with Sch. 13 Pt. 2)

Marginal Citations

M3 Source-1987 (No.2) s.32

[F16 640A Earnings cap. U.K.

(1) In arriving at an individual’s net relevant earnings for a year of assessment [F17 for the purposes of section 638 or 640 above], any excess of what would be his net relevant earnings for the year (apart from this subsection) over the allowable maximum for the year shall be disregarded.

(2) In subsection (1) above “the allowable maximum” means, as regards a particular year of assessment, the figure found for that year by virtue of subsections (3) and (4) below.

(3) For the year of assessment 1989-90 the figure is £60,000.

(4) For the year of assessment 1990-91 and any subsequent year of assessment the figure is the figure found for that year, for the purposes of section 590C, by virtue of section 590C(4) [F18 to (5A)].]

Textual Amendments

F16 S. 640A inserted (with effect in accordance with Sch. 7 para. 4(2) of the amending Act) by Finance Act 1989 (c. 26), Sch. 7 para. 4(1)

F17 Words in s. 640A(1) substituted (with effect in accordance with s. 174(4) of the amending Act) by Finance Act 2003 (c. 14), s. 174(1)

F18 Words in s. 640A(4) substituted (27.7.1993 with effect for 1994-95 and subsequent years of assessment) by 1993 c. 34, s. 107(6)(8)

641 Carry-back of contributions. U.K.

F19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F19 S. 641 repealed (with effect in accordance with Sch. 13 para. 17 of the repealing Act) by Finance Act 2000 (c. 17), Sch. 40 Pt, 2(4), Note 3 (with Sch. 13 Pt. 2)

[F20 641A Election for contributions to be treated as paid in previous year. U.K.

(1) [F21 An individual who under approved personal pension arrangements made by him pays a contribution] on or before the 31st January in any year of assessment may, at or before the time when he pays the contribution, irrevocably elect that the contribution, or part of it, shall be treated as paid in the preceding year of assessment.

(2) Where an election is made under this section in respect of a contribution or part of a contribution, the other provisions of this Chapter shall have effect as if the contribution or part had been paid in the year specified in the election and not in the year in which it was actually paid.]

Textual Amendments

F20 S. 641A inserted (with effect in accordance with Sch. 13 para. 18(2) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 18(1) (with Sch. 13 Pt. 2)

F21 Words in s. 641A(1) substituted (with effect in accordance with s. 174(4) of the amending Act) by Finance Act 2003 (c. 14), s. 174(3)

642 Carry-forward of relief. U.K.

F22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F22 S. 642 repealed (with effect in accordance with Sch. 13 para. 19 of the repealing Act) by Finance Act 2000 (c. 17), Sch. 40 Pt, 2(4), Note 4 (with Sch. 13 Pt. 2)

643 Employer’s contributions and personal pension income etc. U.K.

(1) F23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) M4 Income derived by a person from investments or deposits held by him for the purposes of an approved personal pension scheme shall be exempt from income tax.

(3) M5 An annuity payable under approved personal pension arrangements shall be treated as earned income of the annuitant.

(4) Subsection (3) above applies only in relation to the annuitant to whom the annuity is made payable by the terms of the arrangements.

[F24 (5) Income withdrawals under approved personal pension arrangements F25 . . . shall be treated as earned income of the recipient.]

Textual Amendments

F23 S. 643(1) repealed (6.4.2003 with effect in accordance with s. 723(1) of the repealing Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 91(2), Sch. 8 Pt. 1 (with Sch. 7)

F24 S. 643(5) inserted (1.5.1995) by Finance Act 1995 (c. 4), Sch. 11 para. 11

F25 Words in s. 643(5) repealed (6.4.2003 with effect in accordance with s. 723(1) of the repealing Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 91(3), Sch. 8 Pt. 1 (with Sch. 7)

Marginal Citations

M4 Source-1987 (No.2) s.39(1)

M5 Source-1987 (No.2) s.41(1), (2)

644 Meaning of “relevant earnings”. U.K.

M6 (1) In this Chapter, “relevant earnings”, in relation to an individual, means any income of his which is chargeable to tax for the year of assessment in question and is within subsection (2) below.

(2) Subject to subsections (3) to [F26 (6F)] below, income is within this subsection if it is—

(a) [F27 general earnings] from an office or employment held by the individual;

(b) income from any property which is attached to or forms part of the [F28 earnings from] an office or employment held by him;

(c) income which is chargeable under [F29 Part 2 of ITTOIA 2005] and is immediately derived by him from the carrying on or exercise by him of his trade, profession or vocation (either as an individual or as a partner acting personally in a partnership);

[F30 (d) income to which section 833(5B) (patent income) applies.]

(3) Where section 645 applies to an office or employment held by the individual, neither [F31 general earnings] from the office or employment nor income from any property which is attached to it or forms part of its [F31 general earnings] are within subsection (2) above.

(4) The following are not income within subsection (2) above—

(a) anything in respect of which tax is chargeable under [F32 ITEPA 2003] and which arises from the acquisition or disposal of shares or an interest in shares or from a right to acquire shares;

(b) anything in respect of which tax is chargeable by virtue of [F33 Chapter 3 of Part 6 of ITEPA 2003 (payments and benefits on termination of employment etc.)].

(5) [F34 general earnings] of an individual as director of a company are not income within subsection (2) above if—

(a) the income of the company consists wholly or mainly of investment income; and

(b) the individual, either alone or together with any other persons who are or have been at any time directors of the company, controls the company;

and section 840 shall apply for the purposes of this subsection.

(6) For the purposes of subsection (5) above—

• “director” includes any person occupying the position of director by whatever name called; and

• [F35 “investment income” means income which if the company were an individual, would not be earned income.]

[F36 (6A) [F37 general earnings] of an individual as an employee of a company are not income within subsection (2) above if—

(a) he is a controlling director of the company at any time in the year of assessment in question or has been a controlling director of the company at any time in the ten years immediately preceding that year of assessment, and

(b) any of subsections (6B) to (6E) below applies in his case.

(6B) This subsection applies in the case of the individual if—

(a) at any time in the year of assessment in question he is in receipt of benefits under a relevant superannuation scheme, and

(b) the benefits are payable in respect of past service with the company.

(6C) This subsection applies in the case of the individual if—

(a) at any time in the year of assessment in question he is in receipt of benefits under a personal pension scheme.

(b) the scheme has received a transfer payment relating to him from a relevant superannuation scheme, and

(c) the transfer payment is in respect of past service with the company.

(6D) This subsection applies in the case of the individual if—

(a) at any time in the year of assessment in question he is in receipt of benefits under a relevant superannuation scheme,

(b) the benefits are payable in respect of past service with another company,

(c) the [F38 general earnings] are for a period during which the company mentioned in subsection (6A) above has carried on a trade or business previously carried on by the other company, and

(d) the other company carried on the trade or business at anytime during the period of service in respect of which the benefits are payable.

(6E) This subsection applies in the case of the individual if—

(a) at any time in the year of assessment in question he is in receipt of benefits under a personal pension scheme,

(b) the scheme has received a transfer payment relating to him from a relevant superannuation scheme,

(c) the transfer payment is in respect of past service with another company,

(d) the [F39 general earnings] are for a period during which the company mentioned in subsection (6A) above has carried on a trade or business previously carried on by the other company, and

(e) the other company carried on the trade or business at any time during the period of service in respect of which the transfer payment was made.

[F40 (6EA) Where—

(a) there is a time at which a person would be in receipt of any benefits under a scheme but for any debit to which any of his rights under that scheme became subject by virtue of any pension sharing order or provision, and

(b) the benefits he would be in receipt of are benefits payable in respect of past service with a company,

that person shall be deemed for the purposes of subsections (6A) to (6E) above to be in receipt at that time of benefits under that scheme and the benefits which he is deemed to be in receipt of shall be deemed to be benefits in respect of past service with that company.]

(6F) For the purposes of subsections (6A) to [F41 (6EA)] above—

(a) a person is a controlling director of a company if he is a director (as defined by section 612(1)), and he is within paragraph (b) of section 417(5), in relation to the company;

(b) “relevant superannuation scheme” has the same meaning as in section 645(1);

(c) references to benefits payable in respect of past service with a company include references to benefits payable partly in respect of past service with the company [F42 but do not include references to benefits which (within the meaning of section 590) are provided for him as an ex-spouse]; and

(d) references to a transfer payment in respect of past service with a company include references to a transfer payment partly in respect of past service with the company [F43 but do not include references to any transfer payment made for the purpose of giving effect to a pension sharing order or provision.]]

(7) For the purposes of this Chapter, a married woman’s relevant earnings shall not be treated as her husband’s relevant earnings, notwithstanding that her income chargeable to tax is treated as his income F44 .

Textual Amendments

F26 1989 s.77and Sch.7 para.5(2)from 6April 1989.Previously

“(5)”.

F27 Words in s. 644(2)(a) substituted (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 92(2) (with Sch. 7)

F28 Words in s. 644(2)(b) substituted (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 92(3) (with Sch. 7)

F29 Words in s. 644(2)(c) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 264(a) (with Sch. 2)

F30 S. 644(2)(d) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 264(b) (with Sch. 2)

F31 Words in s. 644(3) substituted (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 92(4) (with Sch. 7)

F32 Words in s. 644(4)(a) substituted (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 92(5) (with Sch. 7)

F33 Words in s. 644(4)(b) substituted (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 92(6) (with Sch. 7)

F34 Words in s. 644(5) substituted (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 92(7)(a) (with Sch. 7)

F35 1989 s.107and Sch. 12 para.16in relation to accounting periods beginning after 31March 1989.Previously

“ “investment income” shall be construed in accordance with paragraph 7 of Schedule 19.”.

F36 1989 s.77and Sch.7 para.5(3)from 6April 1989.

F37 Words in s. 644(6A) substituted (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 92(7)(b) (with Sch. 7)

F38 Words in s. 644(6D)(c) substituted (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 92(7)(c) (with Sch. 7)

F39 Words in s. 644(6E)(d) substituted (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 92(7)(d) (with Sch. 7)

F40 S. 644(6EA) inserted (27.7.1999) by Finance Act 1999 (c. 16), Sch. 10 para. 15(1)

F41 Words in s. 644(6F) substituted (27.7.1999) by Finance Act 1999 (c. 16), Sch. 10 para. 15(2)(a)

F42 Words in s. 644(6F)(c) inserted (27.7.1999) by Finance Act 1999 (c. 16), Sch. 10 para. 15(2)b)

F43 Words in s. 644(6F)(d) inserted (27.7.1999) by Finance Act 1999 (c. 16), Sch. 10 para. 15(2)(c)

F44 Repealed by 1988(F) s.148and Sch.14 Part VIIIfor 1990-91and subsequent years.

Modifications etc. (not altering text)

C2 S. 644 modified (6.4.2003 with effect in accordance with s. 723(1) of the modifying Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 56(8) (with s. 48(2))

C3 S. 644(2)(c) extended (with effect in accordance with s. 44 of the extending Act) by Finance Act 1998 (c. 36), Sch. 6 paras. 1, 2

C4 S. 644(2)(c) extended (with effect in accordance with Sch. 22 paras. 16-18 of the extending Act) by Finance Act 2002 (c. 23), Sch. 22 para. 4

Marginal Citations

M6 Source-1987 (No.2) s.35

645 Earnings from pensionable employment. U.K.

M7 (1) This section applies to an office or employment held by an individual if—

(a) service in it is service to which a relevant superannuation scheme relates; and

(b) the individual is a participant in the scheme; and

(c) [F45 subsection (4) below does not apply] to his participation in the scheme.

(2) This section applies whether or not the duties of the office or employment are performed wholly or partly in the United Kingdom or the individual is chargeable to tax in respect of it.

(3) In subsection (1) above “a relevant superannuation scheme” means a scheme or arrangement—

(a) the object or one of the objects of which is the provision, in respect of persons serving in particular offices or employments, of relevant benefits within the meaning of section 612; F46 . . .

(b) which is established by a person other than the individual [F45 ; F47 . . .

(c) which is of a description mentioned in [F48 section 387(2) of ITEPA 2003 (meaning of non-approved retirement benefits scheme)]][F49 ; and

(d) which is not an approved converted scheme].

(4) This subsection applies to an individual’s participation in a scheme if the scheme provides no benefits in relation to him other than—

(a) an annuity payable to his surviving spouse or a dependant of his;

(b) a lump sum payable on his death in service.

[F50 (4A) Where the [F51 earnings] from an office or employment held by an individual are [F52 earnings and amounts treated as earnings to which subsection (4B) applies], this section shall have effect with the substitution of the following for paragraph (c) of subsection (3) above—

“(c) which corresponds to a scheme of a description mentioned in [F53 section 387(2) of ITEPA 2003 (meaning of non-approved retirement benefits scheme)].”.]

[F54 (4B) This subsection applies to earnings and amounts treated as earnings for a year of assessment if—

(a) the employee or office-holder is not domiciled in the United Kingdom in that year, and

(b) the employment is with a foreign employer.

(4C) If there is a dispute as to whether the employee or office-holder is not domiciled in the United Kingdom, sections 42 and 43 of ITEPA 2003 (Board to determine dispute as to domicile) apply to the dispute as they apply to a dispute mentioned in section 42(1) of that Act.

(4D) In this section—

• “earnings and amounts treated as earnings” means earnings and amounts treated as earnings which constitute employment income (see section 7(2)(a) or (b) of ITEPA 2003);

• “foreign employer” has the meaning given by section 721 of ITEPA 2003.]

(5) This subsection applies to an individual’s participation in a scheme if any sums paid pursuant to the scheme with a view to the provision of relevant benefits for him are treated as his income for the purposes of the Income Tax Acts F55 .

Textual Amendments

F45 1989 s.77and Sch.7 para.6(2), (3)from 6April 1989.Previously

“neither subsection (4) nor subsection (5) below applies”

in subs.(1).

F46 Repealed by 1989 ss.77and 187, Schs.7 para.6(3)and 17 Part IVfrom 6April 1989.

F47 Word preceding s. 645(3)(c) repealed (28.7.2000) by Finance Act 2000 (c, 17), Sch. 13 para. 20(2), Sch. 40 Pt. 2(4) (with Sch. 13 Pt. 2)

F48 Words in s. 645(3)(c) substituted (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 93(2) (with Sch. 7)

F49 S. 645(3)(d) and preceding word inserted (28.7.2000) by Finance Act 2000 (c. 17), Sch. 13 para. 20(2) (with Sch. 13 Pt. 2)

F50 1989 s.77and Sch.7 para.6(4)from 6April 1989.

F51 Words in s. 645(4A) substituted (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 93(3)(a) (with Sch. 7)

F52 Words in s. 645(4A) substituted (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 93(3)(b) (with Sch. 7)

F53 Words in s. 645(4A) substituted (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 93(3)(c) (with Sch. 7)

F54 S. 645(4B)-(4D) inserted (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 93(4) (with Sch. 7)

F55 Repealed by 1989 ss.77and 187, Schs.7 para.6(5)and 17 Part IVfrom 6April 1989.

Marginal Citations

M7 Source-1987 (No.2) s.36

646 Meaning of “net relevant earnings”. U.K.

M8 (1) Subject to subsections (3) to (7) below [F56 and section 646(A)], in this Chapter “net relevant earnings”, in relation to an individual, means the amount of his relevant earnings for the year of assessment in question, less the amount of any deductions within subsection (2) below which fall to be made from the relevant earnings in computing for the purposes of income tax his total income for that year.

(2) Deductions are within this subsection if they are—

(a) deductions which but for [F57 section 51 of ITTOIA 2005] could be made in computing the profits or gains of the individual;

[F58 (aa) deductions in respect of any annuity or other annual payment (other than interest) payable out of his profits;]

[F59 (b) deductions made by virtue of section 232, 336, 343, 344 or 351 of ITEPA 2003 (mileage allowance, expenses, professional membership fees, annual subscriptions, ministers of religion);

(ba) travelling or subsistence expenses deducted by virtue of Part 5 of that Act;

(bb) deductions made by virtue of [F60 section 159 of ITTOIA 2005];]

(c) deductions in respect of relief under Schedule 9 to the Finance Act 1981 (stock relief);

(d) deductions in respect of losses or capital allowances, being losses or capital allowances arising from activities profits or gains of which would be included in computing relevant earnings of the individualor the individual’s wife or husbandF61 .

(3) For the purposes of this section, an individual’s relevant earnings shall be taken to be those earnings before giving effect to any capital allowances, other than deductions allowable in computing profits or gains, but after taking into account the amounts on which charges fall to be made [F62 under [F63 the Capital Allowances Act (including enactments which under this Act are to be treated as contained in that Act)]]; and in subsections (4) and (5) below, references to income (other than references to total income) shall be construed similarly.

(4) In the case of an individual’s partnership profits, the amount to be included in arriving at his net relevant earnings shall be his share of the partnership income (estimated in accordance with the Income Tax Acts) after making from it any such deductions in respect of—

(a) payments made by the partnership;

(b) relief given to the partnership under Schedule 9 to the Finance Act 1981; or

(c) capital allowances falling to be made to the partnership,

as would be made in computing the tax payable in respect of that income.

(5) Where, in a year of assessment for which [F64 the basic rate limit is increased in accordance with section 639(5A) in the case] of an individual—

(a) a deduction in respect of such a loss or allowance of the individual as is mentioned in subsection (2)(d) above falls to be made in computing the total income of the individualor the individual’s wife or husbandF65 ; and

(b) the deduction or part of it falls to be so made from income other than relevant earnings;

the amount of the deduction made from that other income shall be treated as reducing the individual’s net relevant earnings for subsequent years of assessment in accordance with subsection (6) below.

(6) The deduction shall be made so far as possible from the individual’s net relevant earnings for the first of the subsequent years of assessment (whether or not he is entitled to relief [F66 in accordance with section 639(5A)] for that year), and then, so far as it cannot be so made, from those of the next year, and so on.

(7) F67 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F56 1989 s.77and Sch.7 para.7for the year 1989-90and subsequent years.

F57 Words in s. 646(2)(a) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 265(a) (with Sch. 2)

F58 S. 646(2)(aa) inserted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 265(b) (with Sch. 2)

F59 S. 646(2)(b)-(bb) substituted for s. 646(2)(b) (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 94 (with Sch. 7)

F60 Words in s. 646(2)(bb) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 265(c) (with Sch. 2)

F61 Words repealed by 1988(F) s.148and Sch.14 Part VIIIfor 1990-91and subsequent years.

F62 1990(C) s.164and Sch.1 para.8(29).Previously

“under the 1968 Act (including the enactments which under this Act or the 1970 Act are to be treated as contained in Part I of the 1968 Act)”.

F63 Words in s. 646(3) substituted (with effect in accordance with s. 579 of the amending Act) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 54

F64 Words in s. 646(5) substituted (with effect in accordance with Sch. 13 para. 21(5) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 21(2) (with Sch. 13 Pt. 2)

F65 Words repealed by 1988(F) s.148and Sch.14 Part VIIIfor 1990-91and subsequent years.

F66 Words in s. 646(6) substituted (with effect in accordance with Sch. 13 para. 21(5) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 21(3) (with Sch. 13 Pt. 2)

F67 S. 646(7) repealed (with effect in accordance with Sch. 13 para. 21(5), Sch. 40 Pt. 2(4) Note 5 of the repealing Act) by Finance Act 2000 (c. 17), Sch. 13 para. 21(4), Sch. 40 Pt. 2(4)

Marginal Citations

M8 Source-1987 (No.2) s.37

[F68 646A Earnings from associated employments. U.K.

(1) This section applies where in the year of assessment in question—

(a) an individual holds two or more offices or employments which are associated in that year,

(b) one or more of them is an office or employment to which section 645 applies (“pensionable job”), and

(c) one or more of them is an office or employment to which that section does not apply (“non-pensionable job”).

(2) Where the [F69 general earnings] for that year from the pensionable job (or jobs) are equal to or exceed the allowable maximum for that year, section 646(1) shall have effect in the case of the individual as if the references to relevant earnings were references to relevant earnings not attributable to the non-pensionable job (or jobs).

(3) Where the allowable maximum for that year exceeds the [F70 general earnings] for that year from the pensionable job (or jobs), the individual’s net relevant earnings, so far as attributable to the non-pensionable job (or jobs), shall not be greater than the amount of the excess.

(4) For the purposes of this section two or more offices or employments held by an individual in a year of assessment are associated in that year if the employers in question are associated at any time during it.

(5) For the purposes of subsection (4) above, employers are associated if (directly or indirectly) one is controlled by the other or if both are controlled by a third person.

(6) In subsection (5) above the reference to control, in relation to a body corporate, shall be construed—

(a) where the body corporate is a close company, in accordance with section 416, and

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

(7) In this section “the allowable maximum” has the same meaning as in section 640A(1).]

Textual Amendments

F68 S. 646A inserted (with effect in accordance with Sch. 7 para. 8(2) of the amending Act) by Finance Act 1989 (c. 26), Sch. 7 para. 8(1)

F69 Words in s. 646A(2) substituted (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 95(2) (with Sch. 7)

F70 Words in s. 646A(3) substituted (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 95(3) (with Sch. 7)

[F71 646B Presumption of same level of relevant earnings etc for 5 years. U.K.

(1) This section applies where an individual (the “relevant member”) who is or becomes a member of a personal pension scheme provides to the scheme administrator the requisite evidence of the relevant amounts for any year of assessment (the “basis year”).

(2) For the purposes of this section, the “relevant amounts” for any year of assessment are the amounts which need to be known in order to calculate the relevant member’s net relevant earnings for that year.

(3) The basis year need not be a year of assessment in which the relevant member is a member of the personal pension scheme concerned.

(4) Where this section applies, it shall be presumed for the purposes of this Chapter in the case of the relevant member and the personal pension scheme concerned that, for each of the five years of assessment following the basis year, the relevant amounts (and, accordingly, the relevant member’s net relevant earnings) are the same as for the basis year.

(5) Subsection (4) above is subject to—

(a) subsections (6) to (9) below; and

(b) such conditions or exceptions as may be prescribed.

(6) For the purposes of this section, the requisite evidence provided for a later basis year (the “later basis year”) supersedes the requisite evidence provided for an earlier basis year (the “earlier basis year”).

(7) Subsection (6) above has effect subject to, and in accordance with, subsections (8) and (9) below.

(8) If—

(a) the actual net relevant earnings for the later basis year,

exceed

(b) the actual net relevant earnings for the earlier basis year,

the supersession effected by subsection (6) above has effect as respects the later basis year and subsequent years of assessment (and subsection (4) above applies accordingly).

(9) Where the condition in subsection (8) above is not satisfied, the supersession effected by subsection (6) above has effect only as respects years of assessment later than the last of the five years of assessment following the earlier basis year (and subsection (4) above applies accordingly).

(10) It is immaterial for the purposes of this section whether the requisite evidence for a later year of assessment is provided before or after, or at the same time as, the requisite evidence for an earlier year of assessment.

(11) This section is subject to section 646D.]

Textual Amendments

F71 Ss. 646B, 646C inserted (with effect in accordance with Sch. 13 para. 22(2) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 22(1) (with Sch. 13 Pt. 2)

[F71 646C Provisions supplementary to section 646B. U.K.

(1) In this section and section 646B, “requisite evidence” means evidence—

(a) of such a description as may be prescribed;

(b) in such form as may be prescribed; and

(c) satisfying such conditions as may be prescribed.

(2) Regulations may make further provision in connection with requisite evidence.

(3) The provision that may be made by regulations under subsection (2) above includes provision for or in connection with the provision, use, retention, production or inspection of, or of copies of,—

(a) requisite evidence;

(b) books, documents or other records relating to any requisite evidence; or

(c) extracts from requisite evidence or from such books, documents or other records.

(4) Any power to make regulations under this section or section 646B includes power to make different provision for different cases or different purposes.

(5) In this section and section 646B—

• “prescribed” means specified in or determined in accordance with regulations;

• “regulations” means regulations made by the Board.]

Textual Amendments

F71 Ss. 646B, 646C inserted (with effect in accordance with Sch. 13 para. 22(2) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 22(1) (with Sch. 13 Pt. 2)

[F72 646D Higher level contributions after cessation of actual relevant earnings: modification of section 646B. U.K.

(1) This section applies where a member of a personal pension scheme—

(a) has no actual relevant earnings in a year of assessment (the “break year”); but

(b) had actual relevant earnings in the preceding year of assessment (the “cessation year”); and

(c) was entitled to make higher level contributions under arrangements under the scheme in any one or more of the six years of assessment preceding the break year (the “reference years”).

(2) In the application of the presumption in subsection (4) of section 646B for any qualifying post-cessation year, in a case where this section applies, the basis year may be any one of the reference years for which the member provides or has provided the requisite evidence—

(a) notwithstanding anything in subsections (6) to (9) of that section; and

(b) whether or not the qualifying post-cessation year is included among the five years of assessment following the basis year.

(3) If the member provides or has provided the requisite evidence for two or more of the reference years, he may by notice in writing to the scheme administrator nominate that one of those years which is to be the basis year by virtue of subsection (2) above.

(4) In this section “post-cessation year”, in the case of the member concerned, means any of the five years of assessment following the cessation year.

(5) For the purposes of this section any post-cessation year is a “qualifying” post-cessation year unless—

(a) it is a year for which the member has any actual relevant earnings;

(b) it is a year throughout which the member holds an office or employment to which section 645 applies; or

(c) it immediately follows a post-cessation year which is not a qualifying post-cessation year.

(6) Subsection (5) above is without prejudice to the further application of this section in relation to the member if the conditions in subsection (1) above are again fulfilled.

(7) In this section—

• “the basis year” shall be construed in accordance with section 646B;

• “the requisite evidence” has the same meaning as in that section.]

Textual Amendments

F72 S. 646D inserted (with effect in accordance with Sch. 13 para. 23(2) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 23(1) (with Sch. 13 Pt. 2)