PART XIVU.K. PENSION SCHEMES, SOCIAL SECURITY BENEFITS, LIFE ANNUITIES ETC.

CHAPTER IIU.K. OTHER PENSION FUNDS AND SOCIAL SECURITY BENEFITS AND CONTRIBUTIONS

615 Exemption from tax in respect of certain pensions.U.K.

(1)F1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)F1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)M1Where an annuity is paid from a superannuation fund to which this subsection applies to a person who is not resident in the United Kingdom, income tax shall not be deducted from any payment of the annuity or accounted for under [F2Chapter 6 of Part 15 of ITA 2007 (deduction from annual payments and patent royalties)] by the trustees or other persons having the control of the fund.

(4)F1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)F1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6)M2Subsection (3) above applies to any superannuation fund which—

(a)is bona fide established under irrevocable trusts in connection with some trade or undertaking carried on wholly or partly outside the United Kingdom;

(b)has for its sole purpose [F3(subject to any enactment or Northern Ireland legislation requiring or allowing provision for the value of any rights to be transferred between schemes or between members of the same scheme)] the provision of superannuation benefits in respect of persons’ employment in the trade or undertaking wholly outside the United Kingdom; F4. . .

(c)is recognised by the employer and employed persons in the trade or undertaking; [F5and]

[F6(d)meets the benefit accrual condition (see subsection (6A));]

and for the purposes of this subsection duties performed in the United Kingdom the performance of which is merely incidental to the performance of other duties outside the United Kingdom shall be treated as performed outside the United Kingdom .

[F7(6A)The benefit accrual condition is—

(a)that, in the case of any money purchase arrangement relating to a member of the fund that is not a cash balance arrangement, no contributions are made under the arrangement on or after 6 April 2017;

(b)that, in the case of any cash balance arrangement relating to a member of the fund, there is no increase on or after 6 April 2017 in the value of any person's rights under the arrangement;

(c)that, in the case of any defined benefits arrangement relating to a member of the fund, there is no increase on or after 6 April 2017 in the value of any person's rights under the arrangement; and

(d)that, in the case of any arrangement relating to a member of the fund that is neither a money purchase arrangement nor a defined benefits arrangement—

(i)no contributions are made under the arrangement on or after 6 April 2017, and

(ii)there is no increase on or after 6 April 2017 in the value of any person's rights under the arrangement.

(6B)For the purposes of subsection (6A)(b)—

(a)whether there is an increase in the value of a person's rights is to be determined by reference to whether there is an increase in the amount that would, on the valuation assumptions, be available for the provision of benefits under the arrangement to or in respect of the person (and, if there is, the amount of the increase), but

(b)in the case of rights that accrued to a person before 6 April 2017, ignore increases in the value of the rights if in no tax year do they exceed the relevant percentage.

(6C)For the purposes of subsection (6A)(c)—

(a)whether there is an increase in the value of a person's rights is to be determined by reference to whether there is an increase in the benefits amount as defined by paragraph 14(7) of Schedule 18 to the Finance Act 2011, but

(b)in the case of rights that accrued to a person before 6 April 2017, ignore increases in the value of the rights if in no tax year do they exceed the relevant percentage.

(6D)For the purposes of subsection (6A)(d)(ii), regulations made by the Commissioners for Her Majesty's Revenue and Customs may make provision—

(a)for determining whether there is an increase in the value of a person's rights,

(b)for determining the amount of any increase, and

(c)for ignoring the whole or part of any increase;

and regulations under this subsection may make provision having effect in relation to times before the regulations are made.

(6E)In this section, “relevant percentage”, in relation to a tax year, means—

(a)where, on 20 March 2017, the rules of the fund include provision for the value of the rights of a person to increase during the tax year at an annual rate specified in those rules, that rate, or

(b)in any other case, the percentage by which the consumer prices index for September in the previous tax year is higher than it was for the September in the tax year before that (or, if greater, 0%).

(6F)The Commissioners for Her Majesty's Revenue and Customs may by regulations make provision—

(a)so as to change, or modify the effect of, the benefit accrual condition;

(b)as to the matters to be taken into account in determining whether the benefit accrual condition is met;

(c)for a superannuation fund to be treated to any extent as meeting or not meeting the benefit accrual condition.

(6G)Provision under subsection (6D) or (6F) may be made by amending this section.]

(7)[F8M3For the purposes of this section—

  • “arrangement”, in relation to a member of a superannuation fund, means an arrangement relating to the member under the fund;

  • a money purchase arrangement relating to a member of a superannuation fund is a “cash balance arrangement” at any time if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are cash balance benefits;

  • an arrangement relating to a member of a superannuation fund is a “defined benefits arrangement” at any time if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are defined benefits;

  • an arrangement relating to a member of a superannuation fund is a “money purchase arrangement” at any time if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are money purchase benefits;

  • “cash balance benefits”, “defined benefits” and “money purchase benefits” have the meaning given by section 152 of the Finance Act 2004, but for this purpose reading references in that section to a pension scheme as references to a superannuation fund;

  • “member”, in relation to a superannuation fund, has the meaning given by section 151 of the Finance Act 2004, but for this purpose reading references in that section to a pension scheme as references to a superannuation fund;]

  • “pension” includes a gratuity or any sum payable on or in respect of death or, in the case of a pension falling within subsection (2)(g) above, ill-health, and a return of contributions with or without interest thereon or any other addition thereto;

  • “overseas territory” means any territory or country outside the United Kingdom;

  • “the Pensions (Increase) Acts” means the M4Pensions (Increase) Act 1971 and any Act passed after that Act for purposes corresponding to the purposes of that Act;

  • “United Kingdom trust territory” means a territory administered by the government of the United Kingdom under the trusteeship system of the United Nations;

  • [F9“the valuation assumptions” has the meaning given by section 277 of the Finance Act 2004.]

(8)F1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F10(9)For the purposes of this section, a person shall be taken to be employed in the public service of an overseas territory at any time when—

(a)he is employed in any capacity under the government of that territory, or under any municipal or other local authority in it,

(b)he is employed, in circumstances not falling within paragraph (a) above, by a body corporate established for any public purpose in that territory by an enactment of a legislature empowered to make laws for that territory, or

(c)he is the holder of a public office in that territory in circumstances not falling within either paragraph (a) or (b).

(10)For the purposes of subsection (9), references to the government of an overseas territory include references to a government constituted for two or more overseas territories, and to any authority established for the purpose of providing or administering services which are common to, or relate to matters of common interest to, two or more such territories.]

[F11(11)Where the conditions in subsection (6)(a) to (c) are met in the case of a superannuation fund (“the actual fund”)—

(a)any disqualifying contributions made under an arrangement relating to a member of the actual fund are treated for the purposes of the Income Tax Acts as instead made under an arrangement relating to the member under a separate superannuation fund (“the shadow fund” for the actual fund),

(b)any disqualifying increase in the value of a person's rights under an arrangement relating to a member of the actual fund is treated for the purposes of the Income Tax Acts as instead being an increase under an arrangement relating to the member under the shadow fund for the actual fund, and

(c)any reference in this or any other Act (including the reference in subsection (3) and any reference enacted after the coming into force of this subsection) to a fund, or superannuation fund, to which subsection (3) applies does not include so much of the actual fund as—

(i)represents any contribution treated as made under, or any increase in the value of any rights treated as an increase under, the shadow fund of the actual fund or the shadow fund of any other superannuation fund, or

(ii)arises, or (directly or indirectly) derives, from anything within sub-paragraph (i) or this sub-paragraph.

(12)For the purposes of subsection (11) a contribution, or an increase in the value of any rights, is “disqualifying” if it would (ignoring that subsection) cause the benefit accrual condition not to be met in the case of the actual fund.

(13)For the purposes of the provisions of this section relating to the benefit accrual condition, where there is a recognised transfer—

(a)any transfer of sums or assets to the recipient fund by the recognised transfer is to be categorised as not being “a contribution” to the recipient fund, and

(b)any increase in the value of rights under the recipient fund that occurs at the time of the recognised transfer is to be treated as not being an increase in that value if the increase is solely a result of the transfer effected by the recognised transfer.

(14)For the purposes of subsection (13), where there is a transfer such that sums or assets held for the purposes of, or representing accrued rights under, an arrangement relating to a member of a superannuation fund (“the transferor fund”) are transferred so as to become held for the purposes of, or to represent rights under, an arrangement relating to that person as a member of another superannuation fund, the transfer is a “recognised transfer” if—

(a)the conditions in subsection (6)(a) to (c) are met in the case of each of the funds, and

(b)none of the sums and assets transferred—

(i)represents any contribution treated as made under, or any increase in the value of any rights treated as an increase under, the shadow fund of the transferor fund or the shadow fund of any other superannuation fund, or

(ii)arises, or (directly or indirectly) derives, from anything within sub-paragraph (i) or this sub-paragraph.]

Textual Amendments

F1S. 615(1)(2)(4)(5)(8) 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. 85, Sch. 8 Pt. 1 (with Sch. 7)

F2Words in s. 615(3) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 140 (with Sch. 2)

F3Words in s. 615(6)(b) inserted (27.7.1999) by Finance Act 1999 (c. 16), Sch. 10 para. 11

F4Word in s. 615(6)(b) omitted (6.4.2017) by virtue of Finance Act 2017 (c. 10), Sch. 3 para. 3(2)(a)(6)

Marginal Citations

M1Source-1970 s.218(3)

M2Source-1970 s.218(4)

M3Source-1970 s.214(5), 215(3), 216(4), 217(4)