Income Tax (Earnings and Pensions) Act 2003 (c. 1)

Part 9 U.K. Pension income

[F1 CHAPTER 15A U.K. LUMP SUMS UNDER REGISTERED PENSION SCHEMES

Textual Amendments

F1 Pt. 9 Ch. 15A inserted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 31 para. 11 (with Sch. 36)

636A Exemption for certain lump sums under registered pension schemes U.K.

(1) No liability to income tax arises on a lump sum paid under a registered pension scheme if the lump sum is—

(a) a pension commencement lump sum,

(b) a serious ill-health lump sum [F2 paid to a member who has not reached the age of 75],

(c) a refund of excess contributions lump sum,

[F3 (ca) a transitional 2013/14 lump sum,]

(d) a defined benefits lump sum death benefit [F4 paid in respect of a member who had not reached the age of 75 at the date of the member’s death] , [F5 or]

(e) an uncrystallised funds lump sum death benefit, [F6 paid in respect of such a member] F7 ...

F7 (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) But subsection (1) does not limit the operation of sections 214 to 226 of FA 2004 (lifetime allowance charge).

(3) A short service refund lump sum under a registered pension scheme is subject to income tax in accordance with section 205 of FA 2004 (charge to tax on scheme administrator in respect of such a lump sum) but not otherwise.

[F8 (3A) A serious ill-health lump sum which is paid under a registered pension scheme to a member who has reached the age of 75 is subject to income tax in accordance with section 205A of FA 2004 (charge to tax on scheme administrator in respect of such a lump sum) but not otherwise.]

(4) A lump sum under a registered pension scheme which is—

[F9 (za) a defined benefits lump sum death benefit paid in respect of a member who had reached the age of 75 at the date of the member’s death,]

(a) a pension protection lump sum death benefit,

[F10 (aa) an uncrystallised funds lump sum death benefit paid in respect of a member who had reached the age of 75 at the date of the member’s death,]

(b) an annuity protection lump sum death benefit, or

[F11 (c) a drawdown pension fund lump sum death benefit,]

is subject to income tax in accordance with section 206 of FA 2004 (charge to tax on scheme administrator in respect of such lump sum death benefits) but not otherwise.

[F12 (4A) In the case of a registered pension scheme which is a split scheme for the purposes of the Registered Pensions Schemes (Splitting of Schemes) Regulations 2006, subsections (3) and (4) shall have effect as if the references to the scheme administrator were to the sub-scheme administrator (within the meaning of those Regulations).]

(5) A lifetime allowance excess lump sum is chargeable to income tax in accordance with sections 214 to 226 of FA 2004 (lifetime allowance charge) but not otherwise.

(6) In this section—

• “lifetime allowance excess lump sum”,

• “pension commencement lump sum”,

• “refund of excess contributions lump sum”,

• “serious ill-health lump sum”, F13 ...

• “short service refund lump sum”, [F14 and

• “ transitional 2013/14 lump sum”]

• have the same meaning as in section 166 of FA 2004 (see Part 1 of Schedule 29 to that Act).

(7) In this section—

• “annuity protection lump sum death benefit”,

• “defined benefits lump sum death benefit”,

• [F15 “drawdown pension fund lump sum death benefit”,]

• “pension protection lump sum death benefit”, [F16 and]

• F17 ...

• “uncrystallised funds lump sum death benefit”, F18 ...

• F18 ...

• have the same meaning as in section 168 of FA 2004 (see Part 2 of Schedule 29 to that Act).

Textual Amendments

F2 Words in s. 636A(1)(b) inserted (with effect in accordance with Sch. 16 paras. 85, 102 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 42(2)(a)

F3 S. 636A(1)(ca) inserted (19.3.2014) by Finance Act 2014 (c. 26), Sch. 5 paras. 5(3)(a), 15

F4 Words in s. 636A(1)(d) inserted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 42(2)(b)

F5 Word in s. 636A(1)(d) inserted (with effect in accordance with Sch. 19 para. 29(3) of the amending Act) by Finance Act 2007 (c. 11), Sch. 19 para. 28(2)(a)

F6 Words in s. 636A(1)(e) inserted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 42(2)(c)

F7 S. 636A(1)(f) and word repealed (with effect in accordance with Sch. 19 para. 29(3) of the amending Act) by Finance Act 2007 (c. 11), Sch. 19 para. 28(2)(b), Sch. 27 Pt. 3(1)

F8 S. 636A(3A) inserted (with effect in accordance with Sch. 16 paras. 85, 102 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 42(3)

F9 S. 636A(4)(za) inserted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 42(4)(a)

F10 S. 636A(4)(aa) inserted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 42(4)(b)

F11 S. 636A(4)(c) substituted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 42(4)(c)

F12 S. 636A(4A) inserted by 2004 c. 12, Sch. 31 para. 11 (as amended (6.4.2006) by The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 (S.I. 2006/569), regs. 1(1), 5(1)(2))

F13 Word in s. 636A(6) omitted (19.3.2014) by virtue of Finance Act 2014 (c. 26), Sch. 5 paras. 5(3)(b), 15

F14 Words in s. 636A(6) inserted (19.3.2014) by Finance Act 2014 (c. 26), Sch. 5 paras. 5(3)(b), 15

F15 Words in s. 636A(7) inserted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 42(5)(a)

F16 Word in s. 636A(7) inserted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 42(5)(b)

F17 Words in s. 636A(7) repealed (with effect in accordance with Sch. 19 para. 29(3) of the amending Act) by Finance Act 2007 (c. 11), Sch. 19 para. 28(3), Sch. 27 Pt. 3(1)

F18 Words in s. 636A(7) omitted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 16 para. 42(5)(c)

Modifications etc. (not altering text)

C1 S. 636A(1) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 6, 7(1)(2)

C2 S. 636A(7) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 6, 7(1)(3)

C3 S. 636A applied by S.I. 2009/1171, reg. 3A(2)(6) (as inserted (19.3.2014) by Finance Act 2014 (c. 26), Sch. 5 paras. 6, 15)

C4 S. 636A(1)(2) applied (1.5.2010) by The Financial Assistance Scheme (Tax) Regulations 2010 (S.I. 2010/1187), regs. 1(1), 4

636B Trivial commutation and winding-up lump sums U.K.

(1) This section applies if—

(a) a trivial commutation lump sum, or

(b) a winding-up lump sum,

is paid to a member of a registered pension scheme under the pension scheme.

(2) The member is to be treated as having taxable pension income for the tax year in which the payment is made equal to the amount of the lump sum.

(3) But if, immediately before the lump sum is paid, the member [F19 has uncrystallised rights (within the meaning of section 212 of FA 2004) under any one or more arrangements under the pension scheme, the amount of the taxable pension income—

(a) if all his rights under the pension scheme are uncrystallised rights, is 75% of the lump sum, and

(b) otherwise, is reduced by 25% of the value of the uncrystallised rights calculated in accordance with that section.]

(4) In this section—

• “trivial commutation lump sum”, and

• “winding-up lump sum”,

• have the same meaning as in section 166 of FA 2004 (see Part 1 of Schedule 29 to that Act).

Textual Amendments

F19 Words in s. 636B(3) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 59, 64(1)

Modifications etc. (not altering text)

C5 S. 636B modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 37

C6 S. 636B applied (with modifications) (6.4.2006) by Finance Act 2004 (c. 12), Sch. 36 para. 35(4) (with s. 283(5), Sch. 36)

C7 S. 636B applied (with modifications) by S.I. 2009/1171, reg. 3A(4)(5) (as inserted (19.3.2014) by Finance Act 2014 (c. 26), Sch. 5 paras. 6, 15)

C8 S. 636B applied (with modifications) by 2004 c. 12, Sch. 29 para. 11A(5)(6) (as inserted (19.3.2014) by Finance Act 2014 (c. 26), Sch. 5 paras. 5(2), 15)

636C Trivial commutation and winding-up lump sum death benefits U.K.

(1) This section applies if—

(a) a trivial commutation lump sum death benefit, or

(b) a winding-up lump sum death benefit,

is paid to a person under a registered pension scheme.

(2) The person is to be treated as having taxable pension income for the tax year in which the payment is made equal to the amount of the lump sum.

(3) In this section—

• “trivial commutation lump sum death benefit”, and

• “winding-up lump sum death benefit”,

• have the same meaning as in section 168 of FA 2004 (see Part 2 of Schedule 29 to that Act).]