Part 2Income tax, corporation tax and capital gains tax

Chapter 1Personal taxation

Social security pension lump sums

7Charge to income tax on lump sum

1

A charge to income tax arises where a person becomes entitled to a social security pension lump sum.

2

For the purposes of the Tax Acts (including subsection (5)) a social security pension lump sum—

a

is to be treated as income, but

b

is not to be taken into account in determining the total income of any person.

3

The person liable to a charge under this section is the person (“P”) entitled to the lump sum, whether or not P is residentF7... or domiciled in the United Kingdom.

4

The charge is imposed on P for the applicable year of assessment (see subsection (6)).

5

A charge under this section is a charge in respect of the amount of the lump sum at the following rate—

a

if P's F1Step 3 income for the applicable year of assessment is nil, 0%;

F3b

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

c

if P's F1Step 3 income for that year of assessment F4is greater than nil but does not exceed the basic rate limit for that year, the basic rate F8or, if P is a Scottish taxpayer, the Scottish basic rate for that year;

d

if P's F1Step 3 income for that year of assessment exceeds the basic rate limit for that year F6but does not exceed the higher rate limit for that year, the higher rate F9or, if P is a Scottish taxpayer, the Scottish higher rate for that year.

F5e

if P's Step 3 income for that year of assessment exceeds the higher rate limit for that year, the additional rate F10or, if P is a Scottish taxpayer, the Scottish additional rate for that year.

6

Section 8 makes provision as to the meaning of “the applicable year of assessment” for the purposes of this section.

7

Section 9 contains further definitions and makes provision as to commencement.

8

Section 10 contains consequential amendments.

F29

For the purposes of this section P's “ Step 3 income ” means P's net income less allowances deducted at Step 3 of the calculation in section 23 of ITA 2007 (calculation of income tax liability).