Finance Act 2011

Serious ill-health lump sum charge

40 In Part 4 of FA 2004 (pension schemes etc), after section 205 insert—

“205A Serious ill-health lump sum charge

(1) A charge to income tax, to be known as the serious ill-health lump sum charge, arises where a serious ill-health lump sum is paid by a registered pension scheme to a member who has reached the age of 75.

(2) The person liable to the serious ill-health lump sum charge is the scheme administrator.

(3) The scheme administrator is liable to the serious ill-health lump sum charge whether or not—

(a) the scheme administrator, and

(b) the person to whom the serious ill-health lump sum is paid,

are resident, ordinarily resident or domiciled in the United Kingdom.

(4) The rate of the charge is 55% in respect of the lump sum.

(5) The Treasury may by order increase or decrease the rate for the time being specified in subsection (4).

(6) Tax under this section is to be charged on the amount of the lump sum paid or, if the rules of the pension scheme permit the scheme administrator to deduct the tax before payment, on the amount of the lump sum before deduction of tax.

(7) A serious ill-health lump sum paid to a member who has reached the age of 75 is not to be treated as income for any purpose of the Tax Acts.”