Income and Corporation Taxes Act 1988

601 Charge to tax: payments to employers. U.K.

M1 (1) Subsection (2) below applies where a payment is made to an employer out of funds which are or have been held for the purposes of a scheme which is or has at any time been an exempt approved scheme and whether or not the payment is made in pursuance of Schedule 22.

(2) An amount equal to [F1 the relevant percentage of the payment] shall be recoverable by the Board from the employer.

[F2 (2A) The relevant percentage is 35% or such other percentage (whether higher or lower) as may be prescribed.]

(3) Subsection (2) above does not apply to any payment—

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

(b) made before the scheme became an exempt approved scheme; or

(c) of any prescribed description; or

(d) made in pursuance of the winding-up of the scheme where the winding-up commenced on or before 18th March 1986; or

(e) made in pursuance of an application which—

(i) was made to the Board on or before that date and was not withdrawn before the making of the payment, and

(ii) sought the Board’s assurance that the payment would not lead to a withdrawal of approval under section 19(3) of the Finance Act 1970;

(4) Subsection (2) above does not apply where the employer is a charity (within the meaning of section 506).

(5) Where any payment is made or becomes due to an employer out of funds which are or have been held for the purposes of a scheme which is or has at any time been an exempt approved scheme then—

(a) if the scheme relates to a trade, profession or vocation carried on by the employer, the payment shall be treated for the purposes of the Tax Acts as a receipt of that trade, profession or vocation receivable when the payment falls due or on the last day on which the trade, profession or vocation is carried on by the employer, whichever is the earlier;

(b) if the scheme does not relate to such a trade, profession or vocation, the employer shall be charged

[F3 (i) to income tax on the full amount of the payment arising in the year of assessment; or

(ii) to corporation tax on the amount of the payment under Case VI of Schedule D].

This subsection shall not apply to a payment which fell due before the scheme became an exempt approved scheme or to a payment to which subsection (2) above applies or would apply but for subsection (3)(a) or (4) above.

(6) In this section—

(a) references to any payment include references to any transfer of assets or other transfer of money’s worth; and

(b) “prescribed” means prescribed by regulations made by the Treasury.

Textual Amendments

F1 Words in s. 601(2) substituted (with application in accordance with s. 74(4) of the amending Act) by Finance Act 2001 (c. 9), s. 74(2)

F2 S. 601(2A) inserted (with application in accordance with s. 74(4) of the amending Act) by Finance Act 2001 (c. 9), s. 74(3)

F3 S. 601(5)(b)(i)(ii) substituted for words in s. 601(5)(b) (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. 257 (with Sch. 2)

Marginal Citations

M1 Source-1986 Sch.12 1; 1970(F) Sch.5 Part II 4; 1971 Sch.3 12(5)