Income Tax (Earnings and Pensions) Act 2003

[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,] [F4 or]

(d) a defined benefits lump sum death benefit [F5 paid in respect of a member who had not reached the age of 75 at the date of the member’s death] , F6 ...

F6 (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

[F8 (1A) In the case of an uncrystallised funds pension lump sum paid under a registered pension scheme when the member has not reached the age of 75—

(a) no liability to income tax arises on 25% of the sum, and

(b) section 579A applies in relation to the other 75% of the sum as it applies to any pension under a registered pension scheme.

(1B) In the case of an uncrystallised funds pension lump sum paid under a registered pension scheme when the member has reached the age of 75—

(a) if the member's available lifetime allowance when the sum is paid is equal to or greater than the sum—

(i) no liability to income tax arises on 25% of the sum, and

(ii) section 579A applies in relation to the other 75% of the sum as it applies to any pension under a registered pension scheme, and

(b) if the member's available lifetime allowance when the sum is paid is less than the sum—

(i) no liability to income tax arises on the part of the sum that is equal to 25% of the member's available lifetime allowance when the sum is paid, and

(ii) section 579A applies in relation to the rest of the sum as it applies in relation to any pension under a registered pension scheme.

(1C) For the purposes of subsection (1B), the amount of the member's available lifetime allowance when the sum is paid is what it is for the purposes of Part 4 of FA 2004 (see section 219 of FA 2004), but adjusted in accordance with the rules in paragraphs (a) and (b) of paragraph 12(1A) of Schedule 29 to FA 2004.]

(2) But [F9 subsections (1) to (1B) do] 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.

[F10 (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—

[F11 (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,

[F12 (aa) an uncrystallised funds lump sum death benefit F13 ...,]

(b) an annuity protection lump sum death benefit, F14 ...

[F15 (c) a drawdown pension fund lump sum death benefit,][F16 or

(d) a flexi-access drawdown 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.

[F17 (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”, F18 ...

• [F19 “uncrystallised funds pension lump sum”],

• “short service refund lump sum”, [F20 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”,

• [F21 “drawdown pension fund lump sum death benefit”,]

• [F22 “flexi-access drawdown fund lump sum death benefit”,]

• “pension protection lump sum death benefit”, [F23 and]

• F24 ...

• “uncrystallised funds lump sum death benefit”, F25 ...

• F25 ...

• 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 Word in s. 636A(1) inserted (with application in accordance with Sch. 2 para. 20 of the amending Act) by Taxation of Pensions Act 2014 (c. 30), Sch. 2 para. 19(3)(a)(i)

F5 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)

F6 S. 636A(1)(e) and word omitted (with application in accordance with Sch. 2 para. 20 of the amending Act) by virtue of Taxation of Pensions Act 2014 (c. 30), Sch. 2 para. 19(3)(a)(ii)

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(1A)-(1C) inserted (17.12.2014) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 62(2)

F9 Words in s. 636A(2) substituted (17.12.2014) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 62(3)

F10 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)

F11 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)

F12 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)

F13 Words in s. 636A(4)(aa) omitted (with application in accordance with Sch. 2 para. 20 of the amending Act) by virtue of Taxation of Pensions Act 2014 (c. 30), Sch. 2 para. 19(3)(b)

F14 Word in s. 636A(4)(b) omitted (17.12.2014) by virtue of Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 31(a)

F15 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)

F16 S. 636A(4)(d) and word inserted (17.12.2014) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 31(a)

F17 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))

F18 Word in s. 636A(6) omitted (19.3.2014) by virtue of Finance Act 2014 (c. 26), Sch. 5 paras. 5(3)(b), 15

F19 Words in s. 636A(6) inserted (17.12.2014) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 62(4)

F20 Words in s. 636A(6) inserted (19.3.2014) by Finance Act 2014 (c. 26), Sch. 5 paras. 5(3)(b), 15

F21 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)

F22 Words in s. 636A(7) inserted (17.12.2014) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 31(b)

F23 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)

F24 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)

F25 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

C5 S. 636A(1B) modified by S.I. 2006/207, reg. 18 (as inserted (with effect in accordance with Sch. 1 para. 96(16)(a) of the amending Act) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 96(15) (with Sch. 1 para. 96(16)(b)))

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 [F26 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

F26 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)

C6 S. 636B modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 37

C7 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)

C8 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)

C9 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).]