Income and Corporation Taxes Act 1988

592 Exempt approved schemes. U.K.

M1 (1) This section has effect as respects—

(a) any approved scheme which is shown to the satisfaction of the Board to be established under irrevocable trusts; or

(b) any other approved scheme as respects which the Board, having regard to any special circumstances, direct that this section shall apply;

and any scheme which is for the time being within paragraph (a) or (b) above is in this Chapter referred to as an “exempt approved scheme”.

(2) Exemption from income tax shall, on a claim being made in that behalf, be allowed in respect of income derived from investments or deposits if, or to such extent as the Board are satisfied that, it is income from investments or deposits held for the purposes of the scheme.

(3) Exemption from income tax shall, on a claim being made in that behalf, be allowed in respect of underwriting commissions if, or to such extent as the Board are satisfied that, the underwriting commissions are applied for the purposes of the schemes and would, but for this subsection, be chargeable to tax under Case VI of Schedule D.

[F1 (4) Where the employer makes contributions to the pension scheme in respect of any individual, then—

(a) for the purposes of Case I or II of Schedule D the contributions—

(i) are to be treated as not being payments of a capital nature, to the extent that they otherwise would be,

(ii) are allowed as a deduction in computing the amount of the profits for the period of account in which they are paid:

(b) for the purposes of section 75 (expenses of management: companies with investment business) the contributions —

(i) are to be treated as being expenses of management to the extent that they otherwise would not be; and

(ii) are referable to the accounting period in which they are paid;

(c) for the purposes of section 76 (expenses of insurance companies), the contributions—

(i) are to be brought into account at Step 1 in subsection (7) of that section, to the extent that they otherwise would not be; and

(ii) are referable to the accounting period in which they are paid.]

(5) The amount of an employer’s contributions which may—

[F2 (a) be deducted under paragraph (a) of subsection (4) above,

(b) be deductible under paragraph (b) of that subsection, or

(c) be included at Step 1 in section 76(7),]

shall not exceed the amount contributed by him under the scheme in respect of employees in a trade or undertaking in respect of the profits of which the employer is assessable to tax (that is to say, to United Kingdom income tax or corporation tax).

[F3 (6) A sum not paid by ordinary way of annual contribution shall for the purposes of subsection (4) above be treated, as the Board may direct, either—

(a) as an expense deductible for the chargeable period in which the sum is paid,

(b) as expenses of management deductible under section 75 for that chargeable period, or

(c) for the purposes of section 76, as expenses payable referable to that chargeable period,

or as an expense to be spread over such period of years as the Board think proper.]

[F4 (6A) Where any sum is paid to the trustees of the scheme in or towards the discharge of any liability of an employer under section 58B of the M2 Social Security Pensions Act 1975 or section 144 of the Pension Schemes Act 1993 (deficiencies in the assets of a scheme) or under Article 68B of the M3 Social Security Pensions (Northern Ireland) Order 1975 or section 140 of the Pension Schemes (Northern Ireland) Act 1993 (which contain corresponding provision for Northern Ireland), the payment of that sum—

(a) shall be treated for the purposes of this section as an employer’s contribution under the scheme; and

(b) notwithstanding (where it is the case) that the employer’s trade, profession, vocation or business is permanently discontinued before the making of the payment, shall be allowed, in accordance with subsection (4) above, to be deducted as such a contribution to the same extent as it would have been allowed but for the discontinuance and as if it had been made on the last day on which the trade, profession, vocation or business was carried on.]

[F5 (7) Any contribution paid under the scheme shall be allowed to be deducted from employment income for the year of assessment in which the contribution is paid.

A deduction under this subsection may only be made once in respect of the same contribution.]

(8) [F6 Subject to subsection (8A) below,] the amount allowed to be deducted by virtue of subsection (7) above in respect of contributions paid by an employee in a year of assessment (whether under a single scheme or under two or more schemes) shall not exceed 15 per cent., or such higher percentage as the Board may in a particular case prescribe, of his remuneration for that year.

[F7 (8A) Where an employee’s remuneration for a year of assessment includes remuneration in respect of more than one employment, the amount allowed to be deducted by virtue of subsection (7) above in respect of contributions paid by the employee in that year by virtue of any employment (whether under a single scheme or under two or more schemes) shall not exceed 15 per cent, or such higher percentage as the Board may in a particular case prescribe, of his remuneration for the year in respect of that employment.

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

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

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

(8E) For any subsequent year of assessment the figure is the figure found for that year, for the purposes of section 590C, by virtue of section 590C(4) [F8 to (5A)].]

(9) Relief shall not be given under section 266 or 273 in respect of any payment in respect of which an allowance can be made under subsection (7) above.

(10) Subsection (2) of section 468 and subsection (3) of section 469 shall not apply to any authorised unit trust which is also an exempt approved scheme if the employer is not a contributor to the exempt approved scheme and that scheme provides benefits additional to those provided by another exempt approved scheme to which he is a contributor.

(11) Nothing in this section shall be construed as affording relief in respect of any sums to be brought into account under section 438.

(12) This section has effect only as respects income arising or contributions paid at a time when the scheme is an exempt approved scheme.

Textual Amendments

F1 S. 592(4) substituted (31.12.2004 with effect in accordance with art. 1 of the amending S.I.) by The Finance Act 2004, Sections 38 to 45 and Schedule 6 (Consequential Amendment of Enactments No. 2) Order 2004 (S.I. 2004/3269), art. 2(2)

F2 S. 592(5)(a)-(c) substituted for words in s. 592(5) (28.9.2004 with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), Sch. para. 30(3)

F3 S. 592(6) substituted (28.9.2004 with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), Sch. para. 30(4)

F4 S. 592(6A) inserted (with effect as mentioned in s. 112 of the amending Act) by Finance Act 1993 (c. 34), s. 112(6)

F5 S. 592(7) 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. 72 (with Sch. 7)

F6 1989 s.75and Sch.6 paras.5(2), (3)and 18(4)for 1989-90and subsequent years.

F7 1989 s.75and Sch.6 paras.5(4)and 18(4)for 1989-90and subsequent years. Subss.(8B)to (8E)do not have effect as regards such remuneration as may be prescribed by regulations—for which see Part III Vol.5 (under

“Retirement benefit schemes: tax relief for contributions”).

F8 Words in s. 592(8E) substituted (with effect for the year 1994-95 and subsequent years of assessment) by Finance Act 1993 (c. 34), s. 107(6)(8)

Modifications etc. (not altering text)

C1 See 1990 s.56and Sch.10 para.22—convertible securities relieved of charge if held for purposes of exempt approved schemes.

Marginal Citations

M1 Source-1970(F) s.21(1)-(9); 1971 s.21(5); 1987 (No.2) Sch.3 4, 5

M2 1975 c. 60.

M3 S.I. 1975/1503 (N.I. 15).