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Income Tax (Earnings and Pensions) Bill


Income Tax (Earnings and Pensions) Bill
Part 5 — Employment income: deductions allowed from earnings
Chapter 6 — Deductions from seafarers’ earnings

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     (4)    For this purpose a person is only regarded as being absent from the United

Kingdom on any day if absent at the end of the day.

 379   Calculating the deduction

     (1)    The deduction under section 378

           (a)           is allowed from the amount of the earnings from the employment

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attributable to the eligible period, and

           (b)           is equal to that amount.

     (2)    Earnings from the employment for a period of leave immediately after the

eligible period are to be regarded as earnings attributable to the eligible period

if or to the extent that they are earnings for the tax year in which the eligible

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period ends.

     (3)    This section is subject to section 380 (limit on deduction where UK duties etc.

make amount unreasonable).

 380   Limit on deduction where UK duties etc. make amount unreasonable

     (1)    If—

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           (a)           section 378 (deduction from seafarers’ earnings: eligibility) applies to

earnings for a tax year, and

           (b)           in the tax year the employee performs some of the duties of the

employment as a seafarer or of any associated employments in the

United Kingdom,

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            the amount of earnings in respect of which the deduction under this Chapter is

allowed is subject to the following limitation.

     (2)    The amount is restricted to the proportion of the aggregate earnings for that

year from the employment as a seafarer and all associated employments that is

reasonable having regard to—

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           (a)           the nature of and time devoted to the duties performed outside and in

the United Kingdom, and

           (b)           all other relevant circumstances.

     (3)    In this section “associated employments” means employments with the same

employer or with associated employers.

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     (4)    The same rules for determining whether employers are associated apply for

the purposes of this section as apply for section 24(4) (limit on chargeable

overseas earnings where duties of associated employment performed in UK)

(see section 24(5)).

 381   Taking account of other deductions

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For the purposes of sections 379 and 380, the amount of the earnings from an

employment for a tax year is the amount remaining after any deductions

under—

           (a)           section 232 (giving effect to mileage allowance relief),

           (b)           Chapter 2, 3, 4 or 5 of this Part,

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           (c)           section 592(7) of ICTA (contributions to exempt approved schemes),

           (d)           section 594(1) of ICTA (contributions to exempt statutory schemes),

and

 

 

Income Tax (Earnings and Pensions) Bill
Part 5 — Employment income: deductions allowed from earnings
Chapter 6 — Deductions from seafarers’ earnings

    193

 

           (e)           section 262 of CAA 2001 (capital allowances to be given effect by

treating them as deductions from earnings).

 382   Duties on board ship

     (1)    Duties which a person performs on a ship engaged—

           (a)           on a voyage beginning or ending outside the United Kingdom (but

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excluding any part of it beginning and ending in the United Kingdom),

or

           (b)           on a part beginning or ending outside the United Kingdom of any other

voyage,

            are treated as performed outside the United Kingdom for the purposes of this

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Chapter.

     (2)    Duties which a person performs on a vessel engaged on a voyage not

extending to a port outside the United Kingdom are treated for the purposes of

this Chapter as performed in the United Kingdom.

     (3)    For the purposes of subsection (1) the areas designated under section 1(7) of the

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Continental Shelf Act 1964 (c. 29) are treated as part of the United Kingdom.

     (4)    Subsection (1) applies despite anything to the contrary in section 40 (duties on

board vessel or aircraft).

 383   Place of performance of incidental duties

     (1)    For the purposes of section 378(1)(b) (deduction from seafarers’ earnings:

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eligibility), duties of an employment as a seafarer which are performed outside

the United Kingdom are treated as performed in the United Kingdom if

conditions A and B are met.

     (2)    Condition A is that in the tax year in which the duties are performed the

employment is in substance one whose duties fall to be performed in the

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United Kingdom.

     (3)    Condition B is that the performance of the duties performed outside the United

Kingdom is merely incidental to the performance of duties in the United

Kingdom.

     (4)    Section 39 (duties in UK merely incidental to duties outside UK) does not affect

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the question—

           (a)           where any duties are performed, or

           (b)           whether a person is absent from the United Kingdom,

            for the purposes of section 378(1) to (3).

 384   Meaning of employment “as a seafarer”

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     (1)    In this Chapter employment “as a seafarer” means an employment (other than

Crown employment) consisting of the performance of duties on a ship or of

such duties and others incidental to them.

     (2)    In this section “Crown employment” means employment under the Crown—

           (a)           which is of a public nature, and

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           (b)           the earnings from which are payable out of the public revenue of the

United Kingdom or of Northern Ireland.

 

 

Income Tax (Earnings and Pensions) Bill
Part 6 — Employment income: income which is not earnings or share-related
Chapter 1 — Payments to non-approved pension schemes

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 385   Meaning of “ship”

In this Chapter “ship” does not include—

           (a)           any offshore installation within the meaning of the Mineral Workings

(Offshore Installations) Act 1971 (c.61), or

           (b)           what would be such an installation if the references in that Act to

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controlled waters were to any waters.

Part 6

Employment income: income which is not earnings or share-related

Chapter 1

Payments to non-approved pension schemes

10

 386   Charge on payments to non-approved retirement benefits schemes

     (1)    A sum paid by an employer—

           (a)           in accordance with a non-approved retirement benefits scheme, and

           (b)           with a view to the provision of relevant benefits for or in respect of an

employee of the employer,

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            counts as employment income of the employee for the relevant tax year.

     (2)    The “relevant tax year” is the tax year in which the sum is paid.

     (3)    Subsection (1) does not apply if or to the extent that the sum is chargeable to

income tax as the employee’s income apart from this section.

     (4)    But if, apart from this section, the payment of the sum would be a payment to

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which Chapter 3 of this Part (payments and benefits on termination of

employment etc.) would apply, subsection (1) applies to the sum (and

accordingly that Chapter does not apply to it).

     (5)    In this Chapter—

           (a)           “employee”               includes a person who is to be or has been an employee,

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           (b)           section 5(1) (application to offices) does not apply, but “employee”, in

relation to a company, includes any officer or director of the company

and any other person taking part in the management of the affairs of the

company,

           (c)           “employer” and “employment” have meanings corresponding to the

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meaning of “employee” given by paragraphs (a) and (b),

           (d)           “director” has the meaning given by section 612(1) of ICTA, and

           (e)           “relevant benefits” has the meaning given by that section, and section

612(2) of ICTA applies to references in this Chapter to the provision of

relevant benefits as it applies to such references in Chapter 1 of Part 14

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of ICTA.

     (6)    For the purposes of this Chapter benefits are provided in respect of an

employee if they are provided for the employee’s spouse, widow or widower,

children, dependants or personal representatives.

     (7)    Any liability to tax arising by virtue of this section is subject to the reliefs given

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under—

           (a)           section 392 (relief where no benefits are paid or payable), and

 

 

Income Tax (Earnings and Pensions) Bill
Part 6 — Employment income: income which is not earnings or share-related
Chapter 1 — Payments to non-approved pension schemes

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           (b)           section 266A of ICTA (life assurance premiums paid by employer).

 387   Meaning of “non-approved retirement benefits scheme”

     (1)    In this Chapter “retirement benefits scheme” has the meaning given by section

611 of ICTA.

     (2)    For the purposes of this Chapter, a retirement benefits scheme is “non-

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approved” unless it is—

           (a)           an approved scheme,

           (b)           a relevant statutory scheme, or

           (c)           a scheme set up by a government outside the United Kingdom for the

benefit of its employees or primarily for their benefit.

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     (3)    In this section—

                    “approved scheme” has the meaning given by section 612(1) of ICTA, and

                    “relevant statutory scheme” has the meaning given by section 611A of

ICTA.

 388   Apportionment of payments in respect of more than one employee

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     (1)    If a sum within section 386 is paid for or in respect of two or more employees,

part of it is treated as paid in respect of each of them.

     (2)    The amount treated as paid in respect of each employee is—equation: cross[char[A],over[char[B],char[C]]]

            where—

                    A is the sum paid,

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                    B is the amount which would have had to be paid to secure the benefits to

be provided in respect of the employee in question, and

                    C is the total amount which would have had to be paid to secure the

benefits to be provided in respect of all the employees if separate

payments had been made in the case of each of them.

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 389   Exception: employments where earnings charged on remittance

     (1)    Section 386 does not apply if in the tax year in which the sum is paid the

earnings from the employment are earnings charged on remittance (or would

be if there were any earnings).

     (2)    In subsection (1) “earnings charged on remittance” means earnings which are

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taxable earnings under—

           (a)           section 22 (chargeable overseas earnings for year when employee

resident and ordinarily resident, but not domiciled, in UK), or

           (b)           section 26 (foreign earnings for year when employee resident, but not

ordinarily resident, in UK).

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 390   Exception: non-domiciled employees with foreign employers

Section 386 does not apply if—

           (a)           the employee is not domiciled in the United Kingdom in the tax year in

which the sum is paid,

 

 

Income Tax (Earnings and Pensions) Bill
Part 6 — Employment income: income which is not earnings or share-related
Chapter 1 — Payments to non-approved pension schemes

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           (b)           the employment is with a foreign employer, and

           (c)           on a claim made by the employee the Board of Inland Revenue are

satisfied that the scheme corresponds to a scheme within section

387(2)(a), (b) or (c).

 391   Exception: seafarers with overseas earnings

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Section 386 does not apply if—

           (a)           the sum is paid in a period that is an eligible period in relation to the

employee’s employment for the purposes of Chapter 6 of Part 5

(deductions from seafarers’ earnings) (see section 378(2)), and

           (b)           a deduction is allowed under section 378 from the employee’s earnings

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that are attributable to that period.

 392   Relief where no benefits are paid or payable

     (1)    An application for relief may be made to the Inland Revenue if—

           (a)           a sum is charged to tax by virtue of section 386 in respect of the

provision of any benefits,

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           (b)           no payment in respect of, or in substitution for, the benefits has been

made, and

           (c)           an event occurs by reason of which no such payment will be made.

     (2)    The application must be made within 6 years from the time when the event

occurs.

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     (3)    The application must be made by the employee or, if the employee has died,

the employee’s personal representatives.

     (4)    If the Inland Revenue are satisfied that the conditions in subsection (1) are met

in relation to the whole sum, they must give relief in respect of tax on it by

repayment or otherwise as appropriate, unless subsection (6) applies.

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     (5)    If the Inland Revenue are satisfied that the conditions in subsection (1) are met

in relation to part of the sum, they may give such relief in respect of tax on it as

is just and reasonable, unless subsection (6) applies.

     (6)    This subsection applies if—

           (a)           the reason why no payment has been made in respect of, or in

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substitution for, the benefits, or

           (b)           the event by reason of which there will be no such payment,

            is a reduction or cancellation of the employee’s rights in respect of the benefits,

or part of the benefits, as a consequence of a pension sharing order or

provision.

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     (7)    In subsection (6) “pension sharing order or provision” means any such order

or provision as is mentioned in—

           (a)           section 28(1) of WRPA 1999 (rights under pension sharing

arrangements), or

           (b)           Article 25(1) of WRP(NI)O 1999 (provision for Northern Ireland

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corresponding to section 28(1) of WRPA 1999).

 

 

Income Tax (Earnings and Pensions) Bill
Part 6 — Employment income: income which is not earnings or share-related
Chapter 2 — Benefits from non-approved pension schemes

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Chapter 2

Benefits from non-approved pension schemes

Benefits treated as employment income

 393   Application of this Chapter

     (1)    This Chapter applies to any benefit provided under a non-approved retirement

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benefits scheme.

     (2)    But this Chapter does not apply to a benefit which is charged to tax under Part

9 (pension income).

 394   Charge on benefit to which this Chapter applies

     (1)    If a benefit to which this Chapter applies is received by an individual, the

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amount of the benefit counts as employment income of the individual for the

relevant tax year.

     (2)    If a benefit to which this Chapter applies is received by a person who is not an

individual, the administrator of the scheme under which the benefit is

provided is chargeable to tax under Case VI of Schedule D on the amount of

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the benefit for the relevant tax year.

     (3)    In subsections (1) and (2) the “relevant tax year” is the tax year in which the

benefit is received.

     (4)    For the purposes of subsection (2), the rate of tax is 40% or such other rate as

may for the time being be specified by the Treasury by order.

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     (5)    No liability to income tax arises by virtue of any other provision of this Act in

respect of a benefit to which this Chapter applies.

 395   Application of sections 396 and 397: general rules

     (1)    Section 394 is subject to—

           (a)           section 396 (which provides that certain lump sums are not taxed by

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virtue of section 394), and

           (b)           section 397 (which provides for the calculation of the amount taxed by

virtue of section 394 in relation to certain lump sums).

     (2)    Section 396 applies in relation to a lump sum only if the condition in subsection

(4) below is met.

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     (3)    Section 397 applies in relation to a lump sum only if—

           (a)           the condition in subsection (4) below is met, or

           (b)           an employee has paid any sum or sums with a view to the provision of

any relevant benefits under the scheme under which the lump sum is

provided.

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     (4)    The condition mentioned in subsections (2) and (3)(a) is that—

           (a)           an employer has paid any sum or sums with a view to the provision of

any relevant benefits under the scheme under which the lump sum is

provided, and

 

 

Income Tax (Earnings and Pensions) Bill
Part 6 — Employment income: income which is not earnings or share-related
Chapter 2 — Benefits from non-approved pension schemes

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           (b)           an employee has been assessed to tax in respect of the sum or sums so

paid—

                  (i)                 by virtue of section 595(1) of ICTA, or

                  (ii)                by virtue of the sum or sums counting as employment income

of the employee under section 386(1) of this Act.

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     (5)    For the purposes of this section it must be assumed that, unless the contrary is

shown—

           (a)           no sums have been paid with a view to the provision of relevant

benefits, and

           (b)           an employee has not been assessed in respect of a sum or sums as

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mentioned in subsection (4)(b).

 396   Certain lump sums not taxed by virtue of section 394

     (1)    Section 394 does not apply to a lump sum if—

           (a)           all of the income and gains accruing to the scheme under which the

lump sum is provided are brought into charge to tax, and

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           (b)           the lump sum is provided to—

                  (i)                 the employee mentioned in section 395(4)(b),

                  (ii)                a relative of that employee,

                  (iii)               the personal representatives of that employee,

                  (iv)                an ex-spouse of that employee, or

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                  (v)                 any other individual designated by that employee.

     (2)    For the purposes of this section it must be assumed that, unless the contrary is

shown, the income and gains accruing to the scheme are not brought into

charge to tax.

 397   Certain lump sums: calculation of amount taxed by virtue of section 394

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     (1)    In a case where—

           (a)           section 394 applies to a lump sum, and

           (b)           any of the income or gains accruing to the scheme under which the

lump sum is provided is not brought into charge to tax,

            the amount which by virtue of that section counts as employment income, or

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is chargeable to tax under Case VI of Schedule D, is determined in accordance

with this section.

     (2)    That amount is the amount of the lump sum reduced by the deduction

applicable under subsection (3) or (4).

     (3)    Subject to subsection (4), the deduction applicable is the aggregate of—

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           (a)           the sum or sums mentioned in section 395(3)(b) (if any), and

           (b)           the sum or sums mentioned in section 395(4)(b) (if any),

            which in either case were paid by way of contribution to the provision of the

lump sum.

     (4)    The deduction applicable is calculated in accordance with the formula in

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subsection (6) if—

           (a)           the lump sum is provided under the scheme on the disposal of a part of

any asset or the surrender of any part of or share in any rights in any

asset, and

 

 

 
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