House of Lords portcullis
House of Lords
Session 2002 - 03
Internet Publications
Other Bills before Parliament

Income Tax (Earnings and Pensions) Bill


Income Tax (Earnings and Pensions) Bill
Part 8 — Former employees: deductions for liabilities

    277

 

 559   Liabilities related to the former employment

For the purposes of this Part each of the following kinds of liability is related

to the former employment—

            

            A. Liability imposed upon the former employee because he did an act, or failed

5

to do an act—

                  (a)                    in his capacity as holder of the former employment, or

                  (b)                    in any other capacity in which he acted in the performance of

the duties of the former employment.

            

10

            B. Liability imposed upon the former employee in connection with any

proceedings relating to, or arising from, a claim that he is subject to a liability

because he did an act, or failed to do an act—

                  (a)                    in his capacity as holder of the former employment, or

                  (b)                    in any other capacity in which he acted in the performance of

15

the duties of the former employment.

 560   Meaning of “qualifying insurance contract”

     (1)    In section 558 “qualifying insurance contract” means a contract of insurance

which meets conditions A, B, C and D.

     (2)    Condition A is that, so far as the risks insured against are concerned, the

20

contract only relates to one or more of the following—

           (a)           the indemnification of a former employee against a liability related to

the former employment,

           (b)           the indemnification of a person against vicarious liability in respect of

a liability related to another person’s employment,

25

           (c)           the payment of costs or expenses incurred—

                  (i)                 in connection with a claim that a person is subject to a liability

to which the insurance relates, or

                  (ii)                in connection with any proceedings relating to or arising out of

a claim that a person is subject to a liability to which the

30

insurance relates,

           (d)           the indemnification of an employer against loss from a payment made

by the employer to a former employee in respect of—

                  (i)                 a liability related to the former employment, or

                  (ii)                any costs or expenses incurred as mentioned in paragraph (c).

35

     (3)    Condition B is that—

           (a)           the period of insurance under the contract does not exceed 2 years or, if

it does, it does so only because of one or more renewals, each for a

period of 2 years or less, and

           (b)           the insured is not required to renew the contract for any period.

40

     (4)    Condition C is—

           (a)           that the insured is not entitled under the contract to receive any

payment or other benefit in addition to—

                  (i)                 cover for the risks insured against, and

                  (ii)                any right to renew the contract, or

45

 

 

Income Tax (Earnings and Pensions) Bill
Part 8 — Former employees: deductions for liabilities

    278

 

           (b)           if the insured is so entitled, that the part of the premium reasonably

attributable to the entitlement is not a significant part of the whole

premium.

     (5)    Condition D is that the contract is not connected with another contract.

 561   Connected contracts

5

     (1)    An insurance contract is connected with another contract for the purposes of

section 560 if conditions E and F are met—

           (a)           at the time when both contracts are first in force, or

           (b)           at any time after that time.

     (2)    Condition E is that one of the contracts was entered into—

10

           (a)           by reference to the other, or

           (b)           with a view to enabling or facilitating entry into the other on particular

terms.

     (3)    Condition F is that the terms on which one of the contracts was entered into are

significantly different from what they would have been if—

15

           (a)           it had not been entered into in anticipation of the other being entered

into, or

           (b)           the other had not also been entered into.

     (4)    If—

           (a)           there is only one such significant difference in terms, and

20

           (b)           the contracts meet conditions A, B and C specified in section 560,

            the difference may be disregarded in the following cases.

     (5)    The first case is where the difference is a reduction in premiums under the

contract that is reasonably attributable only to the contract—

           (a)           containing a right to renew, or

25

           (b)           being entered into by way of renewal.

     (6)    The second case is where—

           (a)           two or more contracts have been entered into as part of a single

transaction, and

           (b)           the difference is reductions in their premiums that are reasonably

30

attributable only to the premium under each of them having been fixed

by reference to the appropriate proportion of the combined premium.

     (7)    In subsection (6) “the combined premium” means the amount that would have

been the total premium under a single contract relating to all the risks covered

by the contracts.

35

 562   Meaning of “former employee” and “employment”

     (1)    In this Part “former employee” means an individual who has ceased to hold an

employment.

     (2)    In this Part “employment” includes in particular—

           (a)           any employment under a contract of service,

40

           (b)           any employment under a contract of apprenticeship, and

           (c)           any employment in the service of the Crown.

            “Employee” and “employer” have corresponding meanings.

 

 

Income Tax (Earnings and Pensions) Bill
Part 8 — Former employees: deductions for liabilities

    279

 

 563   Other interpretation

In this Part each of the following expressions, when used in relation to a former

employee, has the meaning given—

                      “former employment” means the employment which the former

employee has ceased to hold;

5

                      “former employer” means—

                  (a)                 the person under whom the former employee held the former

employment,

                  (b)                 a person for the time being carrying on the whole or any part of

the business or other undertaking for the purposes of which the

10

former employee held the former employment,

                  (c)                 a person who is for the time being subject to any of the liabilities

with respect to that business or other undertaking of the person

mentioned in paragraph (a), and

                  (d)                 a person who is connected with a person falling within

15

paragraph (a), (b) or (c);

                      “post-employment earnings” means so much of any amount received

after the former employee has ceased to hold the former employment

as constitutes general earnings for the purposes of the employment

income Parts;

20

                      “relevant retirement benefit” means a benefit—

                  (a)                 which is received by the former employee under a retirements

benefits scheme of which he is a member in respect of the

former employment, and

                  (b)                 which, under Chapter 2 of Part 6 (benefits from non-approved

25

pension schemes), counts as employment income of the former

employee.

 564   Application of this Part to office-holders

     (1)    The provisions of this Part are expressed to apply to former employees but they

apply equally to former office-holders.

30

     (2)    In those provisions as they apply to a former office-holder—

           (a)           references to holding a former employment are to holding the office;

           (b)           “former employment” means the office held;

           (c)           “former employer” means the person under whom the person held the

office.

35

     (3)    In this Part “office” includes in particular any position which has an existence

independent of the person who holds it and may be filled by successive

holders.

 

 

Income Tax (Earnings and Pensions) Bill
Part 9 — Pension income
Chapter 2 — Tax on pension income

    280

 

Part 9

Pension income

Chapter 1

Introduction

 565   Structure of this Part

5

The structure of Part 9 is as follows—

                      Chapter 2—

                  (a)                 imposes the charge to tax on pension income, and

                  (b)                 provides for deductions to be made from the amount of income

chargeable;

10

                      Chapters 3 to 15 set out the types of income which are charged to tax

under this Part and, for each type of income, identify—

                  (a)                 the amount of income chargeable to tax for a tax year, and

                  (b)                 the person liable to pay any tax charged;

                      Chapters 16 to 18 deal with exemptions from the charge to tax (whether

15

under this Part or any other provision).

Chapter 2

Tax on pension income

 566   Nature of charge to tax on pension income and relevant definitions

     (1)    The charge to tax on pension income under this Part is a charge to tax on that

20

income excluding any exempt income.

     (2)    “Pension income” means the pensions, annuities and income of other types to

which the provisions listed in subsection (4) apply.

            This definition applies for the purposes of the Tax Acts.

     (3)    “Exempt income” means pension income on which no liability to income tax

25

arises as a result of any provision of Chapters 16 to 18 of this Part.

            This definition applies for the purposes of this Part.

     (4)    These are the provisions referred to in subsection (2)—

 

Provision

Income

Chapter (of

 
   

this Part)

 

30

 

Section 569

United Kingdom pensions

Chapter 3

 
 

Section 573

Foreign pensions

Chapter 4

 
 

Section 577

United Kingdom social security pensions

Chapter 5

 
 

Section 580

Pensions or annuities from approved retirement

Chapter 6

 
  

benefits schemes

  

35

 

 

Income Tax (Earnings and Pensions) Bill
Part 9 — Pension income
Chapter 2 — Tax on pension income

    281

 
 

Provision

Income

Chapter (of

 
   

this Part)

 
 

Section 583

Unauthorised payments from—

Chapter 6

 
  

     (a)    approved retirement benefits schemes, or

  
  

     (b)    former approved superannuation funds (see

  

5

  

section 593)

  
 

Section 590

Annuities paid under former approved

Chapter 7

 
  

superannuation funds

  
 

Section 595

Annuities from approved personal pension schemes

Chapter 8

 
 

Section 598

Income withdrawals under approved personal

Chapter 8

 

10

  

pension arrangements

  
 

Section 601

Unauthorised personal pension payments

Chapter 8

 
 

Section 605

Annuities under retirement annuity contracts

Chapter 9

 
 

Section 609

Annuities for the benefit of dependants

Chapter 10

 
 

Section 610

Annuities under sponsored superannuation schemes

Chapter 10

 

15

 

Section 611

Annuities in recognition of another’s services

Chapter 10

 
 

Section 615

Certain overseas government pensions paid in the

Chapter 11

 
  

United Kingdom

  
 

Section 619

The House of Commons Members’ Fund

Chapter 12

 
 

Section 623

Return of surplus employee additional voluntary

Chapter 13

 

20

  

contributions

  
 

Section 629

Pre-1973 pensions paid under OPA 1973

Chapter 14

 
 

Section 633

Voluntary annual payments

Chapter 15

 
 

 567   Amount charged to tax

     (1)    The amount of pension income which is charged to tax under this Part for a

25

particular tax year is as follows.

     (2)    In relation to each pension, annuity or other item of pension income, the

amount charged to tax is the “net taxable pension income” for the tax year.

     (3)    The net taxable pension income for a pension, annuity or other item of pension

income for a tax year is given by the formula—equation: plus[times[char[T],char[P],char[I]],minus[times[char[D],char[P],char[I]]]]

30

            where—

                    TPI means the amount of taxable pension income for that pension,

annuity or item of pension income for that year (see subsection (4)), and

                    DPI means the total amount of any deductions allowed from the pension,

annuity or item of pension income (see subsection (5)).

35

     (4)    For the purposes of this Act—

 

 

Income Tax (Earnings and Pensions) Bill
Part 9 — Pension income
Chapter 3 — United Kingdom pensions: general rules

    282

 

           (a)           the amount of taxable pension income for a pension, annuity or other

item of pension income for a tax year is determined in accordance with

Chapters 3 to 15 of this Part (which contain provisions relating to this

amount for each type of pension income); and

           (b)           in determining the amount of taxable pension income for a pension,

5

annuity or other item of pension income, any exempt income is to be

excluded.

     (5)    The deductions allowed from a pension, annuity or other item of pension

income are those under—

                    section 617 (10% deduction from an overseas government pension to

10

which section 615 applies);

                    Part 12 (payroll giving).

 568   Person liable for tax

For the provision identifying which person is liable for any tax charged under

this Part on a pension, annuity or other item of pension income, see Chapters 3

15

to 15.

Chapter 3

United Kingdom pensions: general rules

 569   United Kingdom pensions

     (1)    This section applies to any pension paid by or on behalf of a person who is in

20

the United Kingdom.

     (2)    But this section does not apply to a pension if any provision of Chapters 5 to 14

of this Part applies to it.

     (3)    For pensions paid by or on behalf of a person who is outside the United

Kingdom, see Chapter 4 of this Part.

25

 570   “Pension”: interpretation

In this Chapter “pension” includes a pension which is paid voluntarily or is

capable of being discontinued.

 571   Taxable pension income

If section 569 applies, the taxable pension income for a tax year is the full

30

amount of the pension accruing in that year irrespective of when any amount

is actually paid.

 572   Person liable for tax

If section 569 applies, the person liable for any tax charged under this Part is

the person receiving or entitled to the pension.

35

 

 

Income Tax (Earnings and Pensions) Bill
Part 9 — Pension income
Chapter 4 — Foreign pensions: general rules

    283

 

Chapter 4

Foreign pensions: general rules

 573   Foreign pensions

     (1)    This section applies to any pension paid by or on behalf of a person who is

outside the United Kingdom to a person who is resident in the United

5

Kingdom.

     (2)    But this section does not apply to a pension if any provision of Chapters 5 to 14

of this Part applies to it.

     (3)    For pensions paid by or on behalf of a person who is in the United Kingdom,

see Chapter 3 of this Part.

10

 574   “Pension”: interpretation

     (1)    For the purposes of this Chapter “pension” includes a pension which is paid

voluntarily, or is capable of being discontinued, if conditions A and B are met.

     (2)    Condition A is that the pension is paid to—

           (a)           a former employee or a former office-holder,

15

           (b)           the widow or widower of a former employee or a former office-holder,

or

           (c)           any child, relative or dependant of a former employee or a former

office-holder.

     (3)    Condition B is that the pension is paid by or on behalf of—

20

           (a)           the person—

                  (i)                 who employed the former employee, or

                  (ii)                under whom the former office-holder held the office, or

           (b)           the successors of that person.

     (4)    In this section “office” includes in particular any position which has an

25

existence independent of the person who holds it and may be filled by

successive holders.

 575   Taxable pension income

     (1)    If section 573 applies, the taxable pension income for a tax year is the amount

on which tax would be chargeable if the pension were charged to tax under

30

Case V of Schedule D for that year (see in particular the provisions of ICTA

listed in subsection (2)).

     (2)    Those provisions of ICTA are—

           (a)           sections 65 and 68 (calculation of the amount of the income on which

tax is to be charged in the tax year);

35

           (b)           section 584 (relief for unremittable overseas income);

           (c)           section 585 (relief on delayed remittances).

 576   Person liable for tax

If section 573 applies, the person liable for any tax charged under this Part is

the person receiving or entitled to the pension.

40

 

 

 
previous section contents continue
 
House of Lords home page Houses of Parliament home page House of Commons home page search page enquiries

© Parliamentary copyright 2003
Revised 17 February 2003