(1)Where, in the year 1956-57 or any subsequent year of assessment, an individual—
(a)is (or would but for an insufficiency of profits or gains be) chargeable to tax in respect of relevant earnings from any trade, profession, vocation, office or employment carried on or held by him; and
(b)pays a premium or other consideration under an annuity contract for the time being approved by the Commissioners of Inland Revenue as having for its main object the provision for the individual of a life annuity in old age (hereafter in this Part of this Act referred to as " a qualifying premium ");
then relief from tax may be given in respect of the qualifying premium under the next following section, and any annuity payable to the same or another individual shall be treated as earned income of the annuitant to the extent to which it is payable in return for any amount on which relief is so given.
(2)Subject to the next following subsection, the Commissioners shall not approve a contract unless it appears to them to satisfy the conditions that it is made by the individual with a person lawfully carrying on in the United Kingdom the business of granting annuities on human life, and that it does not—
(a)provide for the payment by that person during the life of the individual of any sum except sums payable by way of annuity to the individual; or
(b)provide for the annuity payable to the individual to commence before he attains the age of sixty or after he attains the age of seventy ; or
(c)provide for the payment by that person of any other sums except sums payable by way of annuity to the individual's widow or widower and any sums which, in the event of no annuity becoming payable either to the individual or to a widow or widower, are payable to the individual's personal representatives by way of return of premiums, by way of reasonable interest on premiums or by way of bonuses out of profits; or
(d)provide for the annuity, if any, payable to a widow or widower of the individual to be of a greater annual amount than that paid or payable to the individual; or
(e)provide for the payment of any annuity otherwise than for the life of the annuitant;
and that it does include provision securing that no annuity payable under it shall be capable in whole or in part of surrender, commutation or assignment.
(3)The Commissioners may, if they think fit, and subject to any conditions they think proper to impose, approve a contract otherwise satisfying the foregoing conditions, notwithstanding that the contract provides for one or more of the following matters, that is to say.—
(a)for the payment after the individual's death of an annuity to a dependant not the widow or widower of the individual;
(b)for the payment to the individual of an annuity commencing before he attains the age of sixty, if the annuity is payable on his becoming incapable through infirmity of, mind or body of carrying on his own occupation or any occupation of a similar nature for which he is trained or fitted;
(c)if the individual's occupation is one in which persons customarily retire before attaining the age of sixty, for the annuity to commence before he attains that age (but not before he attains the age of fifty);
(d)for the annuity payable to any person to continue for a term certain (not exceeding ten years), notwithstanding his death within that term, or for the annuity payable to any person to terminate, or be suspended, on marriage (or remarriage) or in other circumstances ;
(e)in the case of an annuity which is to continue for a term certain, for the annuity to be assignable by will, and in the event of any person dying entitled to it, for it to be assignable by his personal representatives in the distribution of the estate so as to give effect to a testamentary disposition, or to the rights of those entitled on intestacy, or to an appropriation of it to a legacy or to a share or interest in the estate.
(4)So much of subsection (1) of this section as provides that an annuity shall be treated, in whole or in part, as earned income of the annuitant shall apply only in relation to the annuitant to whom the annuity is made payable by the terms of the contract.
(5)The foregoing provisions of this section shall apply in relation to a contribution under a trust scheme approved by the Commissioners of Inland Revenue as they apply in relation to a premium under an annuity contract so approved, with the modification that, for the condition as to the person with whom the contract is made, there shall be substituted a condition that the scheme—
(a)is established under the law of any part of, and administered in, the United Kingdom ; and
(b)is established for the benefit of individuals engaged in or connected with a particular occupation (or one or other of a group of occupations), and for the purpose of providing retirement annuities for them, with or without subsidiary benefits for their families or dependants; and
(c)is so established under irrevocable trusts by a body of persons comprising or representing a substantial proportion of the individuals so engaged in the United Kingdom, or of those so engaged in England, Wales, Scotland or Northern Ireland ;
and with the necessary adaptations of other references to the contract or the person with whom it is made; and exemption from income tax shall be allowed in respect of income derived from investments or deposits of any fund maintained for the purpose aforesaid under a scheme for the time being approved under this subsection.
(6)The Commissioners may at any time, by notice in writing given to the persons by and to whom premiums are payable under any contract for the time being approved under this section, or to the trustees or other persons having the management of any scheme so approved, withdraw that approval on such grounds and from such date as may be specified in the notice.
(7)For the purposes of this Part of this Act, a married woman's relevant earnings shall not be treated as her husband's relevant earnings, notwithstanding that her income chargeable to tax is treated as his income.
(8)Subject to the last foregoing subsection, "relevant earnings " in relation to any individual means for the purposes of this Part of this Act any income of his chargeable to tax for the year of assessment in question, being either—
(a)income arising in respect of remuneration from an office or employment of profit held by him other than a pensionable office or employment; or
(b)income from any property which is attached to or forms part of the emoluments of any such office or employment of profit held by him ; or
(c)income which is chargeable under Schedule B or Schedule D and is immediately derived by him from the carrying on or exercise by him of his trade, profession or vocation either as an individual or, in the case of a partnership, as a partner personally acting therein; or
(d)income treated as earned income by virtue of paragraph (d) (which relates to patent rights) of subsection (2) of section five hundred and twenty-five of the Income Tax Act, 1952;
but does not include any remuneration as director of an investment company (as defined in section two hundred and fifty-seven of the Income Tax Act, 1952) of which he is a controlling director (as defined in subsection (1) of section three hundred and ninety of that Act).
(9)For the purposes of this Part of this Act, an office or employment is a pensionable office or employment if, and only if, service in it is service to which a sponsored superannuation scheme relates (not being a scheme under which the benefits provided in respect of that service are limited to a lump sum payable on the termination of the service through death or disability before the age of seventy or some lower age); but references to a pensionable office or employment apply whether or not the duties are performed wholly or partly in the United Kingdom or the holder is chargeable to tax in respect of it.
Service in an office or employment shall not for the purposes of this definition be treated as service to which a sponsored superannuation scheme relates by reason only of the fact that the holder of the office or employment might (though he does not) participate in the scheme by exercising or refraining from exercising an option open to him by virtue of that service.
(10)In the last foregoing subsection " a sponsored superannuation scheme " means a scheme or arrangement relating to service in particular offices or employments and having for its object or one of its objects to make provision in respect of persons serving therein against future retirement or partial retirement, against future termination of service through death or disability, or against similar matters, being a scheme or arrangement under which any part of the cost of the provision so made is or has been borne otherwise than by those persons by reason of their service (whether it is the cost or part of the cost of the benefits provided, or of paying premiums or other sums in order to provide those benefits, or of administering or instituting the scheme or arrangement) ; but for this purpose a person shall be treated as bearing by reason of his service the cost of any payment made or agreed to be made in respect of his service, if that payment or the agreement to make it is treated under the Income Tax Acts as increasing his income, or would be so treated if he were chargeable to tax under Case I of Schedule E in respect of his emoluments from that service.
(11)Nothing in sections four and six of the Policies of Assurance Act, 1867 (which put on assurance companies certain obligations in relation to notices of assignment of policies of life assurance), shall be taken to apply to any contract approved under this section.
(1)Where relief is to be given under this section in respect of any qualifying premium paid by an individual, the amount of that premium shall be deducted from or set off against his relevant earnings for the year of assessment in which the premium is paid:
Provided that the amount which may be deducted or set off in any year of assessment (whether in respect of one or more qualifying premiums) shall not be more than the sum of seven hundred and fifty pounds, nor more than one-tenth of his net relevant earnings for that year, and, where the condition in paragraph (a) of subsection (1) of the last foregoing section is satisfied as respects part only of that year, then for the said sum of seven hundred and fifty pounds there shall be substituted the sum which bears to it the same proportion as that part bears to the whole year (but so that in the case of individuals holding a pensionable office or employment, and of individuals born in or before the year nineteen hundred and fifteen, this proviso shall have effect subject to the provisions of the Third Schedule to this Act).
(2)If in any year of assessment a reduction or a greater reduction would be made under this section in the relevant earnings of an individual but for an insufficiency of net relevant earnings, the amount of the reduction which would be made but for that insufficiency, less the amount of any reduction which is made in that year, shall be carried forward to the next following year, and shall be treated for the purposes of relief under this section as the amount of a qualifying premium paid in that following year, and so on for succeeding years (if necessary).
(3)Where, on the making of an assessment for any year on an individual's relevant earnings or on the profits or gains of a partnership from which he derives relevant earnings, notice of assessment is given after or within six months before the end of the year of assessment, and the individual pays a qualifying premium after the end of that year but within the period beginning with the date of the notice and ending six months after the date on which the assessment becomes final and conclusive, he may within that period elect that for the purposes of relief under this section the premium shall be treated as paid in that year and not in the year in which it is paid, and where he does so elect, any relief given in consequence of the election for the earlier year shall be given by repayment of tax:
Provided that where either—
(a)the amount of that premium, together with any qualifying premiums paid by him in the year to which the assessment relates (or treated as so paid by virtue of any previous election under this subsection), exceeds the maximum amount of the reduction which may be made under this section in his relevant earnings for that year; or
(b)the amount of that premium itself exceeds the increase in that maximum amount which is due to taking into account the income on which the assessment is made;
then the election shall have no effect as respects the excess.
(4)For the purposes of relief under this section, an individual's relevant earnings are those earnings before giving effect to allowances falling to be made under Part X or XI of the Income Tax Act, 1952, other than deductions allowable in computing profits or gains (but after taking into account the amounts on which charges fall to be so made), and references to income in the following provisions of this section (other than references to total income) shall be construed similarly.
(5)Subject to the following provisions of this section, " net relevant earnings" means, in relation to any individual, the amount of his relevant earnings for the year of assessment in question, less the amount of any deductions falling to be made from the relevant earnings in computing for the purposes of tax at the standard rate his total income for that year, being either—
(a)deductions in respect of payments made by him , or
(b)deductions in respect of losses or of allowances under Part X or XI of the Income Tax Act, 1952, being losses or allowances arising from activities profits or gains of which would be included in computing relevant earnings of the individual or of the individual's wife or husband for the year 1956-57 or a later year of assessment.
(6)Where, in any year of assessment for which an individual claims and is allowed relief under this section, there falls to be made in computing the total income of the individual or that of the individual's wife or husband a deduction in respect of any such loss or allowance of the individual as is mentioned in paragraph (b) of the last foregoing subsection, and the deduction or part of it falls to be so made from income other than relevant earnings, the amount of the deduction made from that other income shall be treated as reducing the individual's net relevant earnings for subsequent years of assessment (being deducted as far as may be from those of the immediately following year, whether or not he claims or is entitled to claim relief under this section for that year, and so far as it cannot be so deducted, then from those of the next year, and so on).
(7)Where an individual's income for any year of assessment consists partly of relevant earnings and partly of other income, then as far as may be any deductions which fall to be made in computing his total income, and which may be treated in whole or in part either as made from relevant earnings or as made from other income, shall be treated for the purposes of this section as being made from those relevant earnings in so far as they are deductions in respect of any such loss or allowance as is mentioned in paragraph (b) of subsection (5) of this section, and otherwise as being made from that other income.
(8)An individual's net relevant earnings for any year of assessment are to be computed without regard to any relief which falls to be given for that year under this section either to the individual or to the individual's wife or husband.
(9)An individual's relevant earnings, in the case of partnership profits, shall be taken to be his share of the partnership income, estimated in accordance with the Income Tax Acts, but the amount to be included in respect of those earnings in arriving at his net relevant earnings shall be his share of that income after making therefrom all such deductions (if any) in respect of payments made by the partnership, or in respect of allowances falling to be made to the partnership under Part X or XI of the Income Tax Act, 1952, for the year 1956-57 or a later year of assessment, as would be made in computing the tax payable in respect of that income.
(10)Where relief under this section for any year of assessment is claimed and allowed (whether or not relief then falls to be given for that year), and afterwards there is made any additional assessment, alteration of an assessment, or other adjustment of the claimant's liability to tax, there shall be made also such adjustments, if any, as are consequential thereon in the relief allowed or given under this section for that or any subsequent year of assessment.
(11)Where relief under this section is claimed and allowed for any year of assessment in respect of any payment, relief shall not be given in respect of it under any other provision of the Income Tax Acts for the same or a later year of assessment nor (in the case of a payment under an annuity contract) in respect of any other premium or consideration for an annuity under the same contract; and references in the Income Tax Acts to relief in respect of life assurance premiums shall not be taken to include relief under this section.
(12)The allowances mentioned in paragraph (b) of subsection (5) or in subsection (9) of this section shall not be treated as including amounts carried forward from a year of assessment earlier than the year 1956-57.
(13)Without prejudice to subsection (3) of this section, a person who pays a qualifying premium in the year 1957-58 may elect that it or part of it shall be treated for the purposes of this and the last foregoing section as a qualifying premium paid in the year 1956-57, and shall be treated (subject to subsection (2) of this section) as not paid in the year 1957-58.
(1)Where an assurance company carries on pension annuity business, then—
(a)exemption from income tax shall be allowed in respect of income from investments and deposits of so much of the company's annuity fund as is referable to that business; and
(b)the company shall not be entitled to treat as paid out of profits or gains brought into charge to tax any part so referable of the annuities paid by the company.
(2)Subsection (4) of section four hundred and twenty-five of the Income Tax Act, 1952, shall cease to have effect in so far as it provides for a deduction for profits on annuity business in determining the relief to be given to an assurance company in respect of expenses of management; and, except in the case of an assurance company charged to tax in accordance with the provisions applicable to Case I of Schedule D in respect of the profits of its ordinary life assurance business, profits arising to an assurance company from pension annuity business, or from general annuity business, shall be treated as annual profits or gains within Schedule D, and be chargeable under Case VI of that Schedule, and for that purpose—
(a)the business of each such class shall be treated separately; and
(b)subject to the foregoing paragraph, the profits therefrom shall be computed as they would have been computed for the purpose of the said subsection (4) (and without regard to the provisions of subsection (2) of section one hundred and thirty-five of the Income Tax Act, 1952, as to the period to be taken in computing profits for the purpose of the said Case VI).
(3)Where income from the investments of the foreign life assurance fund of an assurance company having its head office in the United Kingdom has been relieved from tax under section four hundred and twenty-nine of the Income Tax Act, 1952 (which provides for treating such income in certain respects in the same way as income of a non-resident), a corresponding reduction shall be made in any amount on which the company is chargeable to tax by virtue of the last foregoing subsection in like manner as a corresponding reduction is made under subsection (5) of the said section four hundred and twenty-nine in the relief granted to the company in respect of the expenses of management.
(4)Where an assurance company not having its head office in the United Kingdom carries on life assurance business through any branch or agency in the United Kingdom, then any charge to tax under subsection (2) of this section for any year of assessment on the profits arising to the company from pension annuity business, or from general annuity business.—
(a)shall extend only to a part of those profits bearing to the total amount thereof the same proportion as, under section four hundred and thirty of the Income Tax Act, 1952 (which relates to the taxation of the income from investments of the company's life assurance fund, excluding the annuity fund), the part of that income charged to tax under Case III of Schedule D bears in that year to the total amount of that income; and
(b)shall not be treated as a charge to tax in respect of life assurance business for the purposes of subsection (4) of that section.
(5)The exemption from tax conferred by subsection (1) of this section shall not exclude any sums from being taken into account as receipts in computing profits or gains or losses for any purpose of the Income Tax Acts; and an assurance company shall not, by virtue of subsection (2) of this section, be entitled to any relief under section three hundred and forty-six of the Income Tax Act, 1952, in respect of losses on its pension annuity business or on its general annuity business.
(6)For the purposes of this section "general annuity business" means any annuity business which is not pension annuity business, and any division to be made between the two classes of business shall be made on the principle of referring to pension annuity business any premiums falling within the next following subsection, together with the part resulting therefrom of the company's annuity fund and liability for annuities, and of dealing with other incomings and outgoings accordingly:
Provided that a division as at the beginning of the year 1956-57 or any earlier time may be made by apportionment according to the company's liability at that time on contracts then falling within paragraph (b) of the next following subsection and on other annuity contracts.
(7)The premiums to be referred to pension annuity business are those payable under contracts falling (at the time when the premium is payable) within one or other of the following descriptions, that is to say—
(a)any contract with an individual who is, or would but for an insufficiency of profits or gains be, chargeable to tax in respect of relevant earnings (as defined in section twenty-two of this Act) from a trade, profession, vocation, office or employment carried on or held by him, being a contract approved by the Commissioners of Inland Revenue under that section; and
(b)any contract with the trustees or other persons having the management of a superannuation fund within the meaning of section three hundred and seventy-nine of the Income Tax Act, 1952, or of a scheme approved under section twenty-two of this Act, being a contract which—
(i)was entered into for the purposes only of that fund or scheme or, in the case of a fund part only of which is approved under the said section three hundred and seventy-nine, then for the purposes only of that part of that fund; and
(ii)(in the case of a contract entered into or varied after the coming into force of this section) is so framed that the liabilities undertaken by the assurance company under the contract correspond with liabilities against which the contract is intended to secure the fund (or the relevant part of it) or scheme.
(8)This section shall be construed in accordance with section four hundred and thirty-seven of the Income Tax Act, 1952; and for the purposes of this section " annuity business " means the business of granting annuities on human life and " premium " includes any consideration for an annuity.
(9)The following transitional provisions shall have effect for the purposes of subsection (2) of this section:—
(a)where tax for the year 1956-57 falls to be charged on the amount of the profits for the preceding year, that amount shall be computed (except as regards the liability as at the beginning of that preceding year in respect of annuities) as if subsection (1) of this section had had effect for the year 1955-56;
(b)where in arriving at the amount on which tax falls to be charged for the year 1956-57 or any subsequent year of assessment, it is necessary to divide and apportion profits or gains or losses for a period for which accounts have been made up and which falls partly before and partly after the beginning of the year 1956-57, the manner of making the apportionment under section one hundred and fifty-five of the Income Tax Act, 1952, shall be modified as may be just having regard to subsection (1) of this section;
(c)losses for years of assessment earlier than 1956-57 shall be computed by reference to the annuity business as a whole, and by apportioning any losses which arose on that business (and in respect of which relief has not been given) between the pension annuity business and the general annuity business in such manner as may be appropriate.
(1)Subsection (2) of section four of the Finance (No. 2) Act, 1955 (under which exemptions from tax are in certain circumstances excluded or restricted in relation to dividends on securities recently acquired, but under the proviso to the subsection annual payments payable out of the dividends are nevertheless to be treated as paid out of profits or gains not brought into charge to tax), shall apply to any exemption from tax under subsection (5) of section twenty-two or subsection (1) of section twenty-four of this Act with the omission of that proviso; but annual payments shall, as far as may be, be treated for the purposes of section one hundred and seventy of the Income Tax Act, 1952, as paid out of profits or gains to which the exemption extends rather than out of profits or gains brought into charge by virtue of this section.
(2)In the case of an assurance company, subsection (1) of section twenty-four of this Act shall not prevent the company from treating as paid out of profits or gains brought into charge by virtue of this section any part of the annuities paid by the company which is referable to pension annuity business, in so far as that part of those annuities exceeds the profits or gains to which the exemption under that subsection extends, but those profits or gains shall be left out of account in determining how far the part not so referable of the annuities paid by the company may be treated as paid out of profits or gains brought into charge to tax.
(1)In determining for the purposes of the exemptions from tax conferred on registered friendly societies and registered trade unions by section four hundred and forty of the Income Tax Act, 1952, whether any such society or union is by Act of Parliament or by its rules precluded from assuring to any person a sum exceeding one hundred and four pounds a year by way of annuity, there shall be disregarded any annuities under contracts approved by the Commissioners of Inland Revenue under section twenty-two of this Act, being annuities payable wholly in return for premiums or other consideration paid by a person who (when the premiums or other consideration are or is payable) is, or would but for an insufficiency of profits or gains be, chargeable to tax in respect of relevant earnings (as defined in the said section twenty-two) from a trade, profession, vocation, office or employment carried on or held by him.
(2)If, in the event of a dissolution of any such society or union, any such annuity as aforesaid ceases to be paid, or any contract for the payment of such an annuity fails in whole or in part, no payment shall be made in respect thereof out of the funds of the society or union to the annuitant or other person entitled to the benefit of the contract, but any sum which, but for this provision, would have been paid to him shall be applied in purchasing for the benefit of the annuitant an annuity (for the like term, and subject to the like conditions against surrender, commutation or assignment) from a person lawfully carrying on in the United Kingdom a business of granting annuities on human life.
(3)In the proviso to paragraph (1) of section eight and in subsection (1) of section forty-one of the Friendly Societies Act, 1896 (which restrict the benefits payable by a registered friendly society or branch by way of annuity), the word " annuity " shall be taken not to include any such annuities as are referred to in subsection (1) of this section; and, subject to the following subsection, where at the time when this section comes into force the rules of any registered friendly society or branch permit the society or branch to assure an annuity of one hundred and four pounds a year, the rules may within six months from that time be amended by resolution of the committee of management so as to permit the society or branch to assure additional amounts under such contracts as are so referred to.
(4)No amendment of the rules of a society or branch which is made by virtue of the last foregoing subsection shall extend to contracts entered into more than a year after the date when the amendment is registered under the Friendly Societies Act, 1896; and no such amendment shall be so registered unless the registrar to whom it is sent for registration is satisfied that the amendment (in addition to complying with the other conditions of this section)—
(a)could not, within the six months beginning with the date when this section comes into force, have been made in the manner authorised by the rules of the society or branch, or not without summoning a special meeting of the society or branch ; and
(b)has been certified by any such actuary as is mentioned in section sixteen of the Friendly Societies Act, 1896, to be free from objection on actuarial grounds.
