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Income Tax (Earnings and Pensions) Bill


Income Tax (Earnings and Pensions) Bill
Part 9 — Pension income
Chapter 13 — Return of surplus employee additional voluntary contributions

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 625   Person liable for tax

If section 623 applies, the person liable for any tax charged under this Part is

the employee mentioned in condition C in section 623(4) to whom or for whose

benefit the payment is made.

 626   Income tax treated as paid

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     (1)    An employee who is liable for the tax charged on a payment to which section

623 applies is treated as having paid income tax at the basic rate on the amount

chargeable.

     (2)    The income tax treated as paid under subsection (1) is not repayable.

 627   Meaning of “grossing up”

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     (1)    In section 624 “grossing up” by reference to the basic rate means calculating the

amount (“the gross amount”) which after deduction of income tax at the basic

rate would equal the amount to be grossed up (“the net amount”).

     (2)    The gross amount is the sum of the net amount and the tax deducted.

 628   Interpretation

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     (1)    In this Chapter—

                    “employee”—

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

                  (b)                 in relation to a company, includes any officer or director of the

company and any other person taking part in the management

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of the affairs of the company;

                    “exempt approved scheme” has the meaning given in section 592(1) of

ICTA;

                    “relevant statutory scheme” has the meaning given in section 611A(1) of

ICTA.

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     (2)    For the purposes of the definition of “employee” in subsection (1), “director”,

in relation to a company, includes—

           (a)           in the case of a company the affairs of which are managed by a board

of directors or similar body, a member of that board or body,

           (b)           in the case of a company the affairs of which are managed by a single

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director or similar person, that person,

           (c)           in the case of a company the affairs of which are managed by the

members themselves, a member of that company;

            and includes a person who is to be or has been a director.

     (3)    If section 623 applies to a payment made out of funds which are or have been

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held for the purposes of a relevant statutory scheme established under a public

general Act, any reference in this Chapter to an employee includes references

to a person who holds an office, to a person who is to hold an office and to a

person who has ceased to hold an office.

            This is without prejudice to subsection (1).

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     (4)    For the purposes of subsection (3), “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 14 — Pre-1973 pensions paid under the Overseas Pensions Act 1973

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Chapter 14

Pre-1973 pensions paid under the Overseas Pensions Act 1973

 629   Pre-1973 pensions paid under the Overseas Pensions Act 1973

     (1)    This section applies to a pension if—

           (a)           it is paid under section 1 of OPA 1973 (whether or not paid out of a fund

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established under a scheme made under that section),

           (b)           it is a pre-1973 pension, and

           (c)           it is paid to—

                  (i)                 the original pensioner, or

                  (ii)                the widow or widower of the original pensioner.

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     (2)    But this section does not apply to a part of a pension which is paid because the

Pensions (Increase) Act 1971 (c. 56) applies to it (and accordingly section 569

applies to that part of the pension).

     (3)    Chapter 18 of this Part provides an exemption where a pension to which this

section applies is paid to a person who is not resident in the United Kingdom

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(see sections 647 and 651).

 630   Interpretation

     (1)    For the purposes of this Chapter a person is the “original pensioner” in relation

to a pension if—

           (a)           the pension is payable by virtue of the person’s service, and

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           (b)           the person retired from that service before 6th April 1973.

     (2)    For the purposes of this Chapter a pension is a “pre-1973 pension” if,

immediately before 6th April 1973—

           (a)           the pension was payable to—

                  (i)                 the original pensioner, or

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                  (ii)                the widow or widower of the original pensioner, and

           (b)           that person was resident in the United Kingdom.

 631   Taxable pension income

     (1)    If section 629 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

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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 sections 65 and 68 (calculation of the amount of

the income on which tax is to be charged in the tax year).

 632   Person liable for tax

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If section 629 applies, the person liable for any tax charged under this Part is

the person receiving or entitled to the pension.

 

 

Income Tax (Earnings and Pensions) Bill
Part 9 — Pension income
Chapter 15 — Voluntary annual payments

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Chapter 15

Voluntary annual payments

 633   Voluntary annual payments

     (1)    This section applies to an annual payment which—

           (a)           is paid voluntarily, or

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           (b)           is capable of being discontinued,

            if conditions A and B are met.

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

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

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

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

office-holder.

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

           (a)           the person—

                  (i)                 who employed the former employee, or

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

           (b)           the successors of that person.

     (4)    But this section applies to a payment which is paid by or on a behalf of a person

who is outside the United Kingdom only if it is paid to a person resident in the

United Kingdom.

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

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

successive holders.

 634   Taxable pension income: UK voluntary annual payments

     (1)    The taxable pension income for payments to which section 633 applies is

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determined in accordance with this section if the payments are made by or on

behalf of a person who is in the United Kingdom.

     (2)    The taxable pension income for a tax year is the full amount of the payments

accruing in that year irrespective of when any amount is actually paid.

 635   Taxable pension income: foreign voluntary annual payments

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     (1)    The taxable pension income for payments to which section 633 applies is

determined in accordance with this section if the payments are made by or on

behalf of a person who is outside the United Kingdom.

     (2)    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 Case V of Schedule D for

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that year (see in particular the provisions of ICTA listed in subsection (3)).

     (3)    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);

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

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

 

 

Income Tax (Earnings and Pensions) Bill
Part 9 — Pension income
Chapter 16 — Exemption for certain lump sums

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 636   Person liable for tax

If section 633 applies, the person liable for any tax charged under this Part is

the person receiving or entitled to the payment.

Chapter 16

Exemption for certain lump sums

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 637   Exemption for lump sums provided under certain pension schemes etc.

     (1)    No liability to income tax arises on a lump sum provided under—

           (a)           approved personal pension arrangements,

           (b)           a tax-exempt pension scheme, or

           (c)           a retirement annuity contract.

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     (2)    But subsection (1)(b) applies to a lump sum paid in compensation for loss of

office or employment, or for loss or diminution of earnings, only if—

           (a)           the payment is properly regarded as earned by past services, or

           (b)           the loss of office or employment, or the loss or diminution of earnings,

is due to ill-health.

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     (3)    Subsection (1)(b) does not apply to a lump sum to which section 583 (approved

retirement benefit schemes: unauthorised payments) or section 623 (return of

surplus AVCs) applies.

            This includes cases where section 583 applies by virtue of section 593.

     (4)    Subsection (1)(c) applies to a lump sum only if it is provided in consequence of

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a right which meets the conditions in paragraphs (a) and (b) of section 620(3)

of ICTA.

     (5)    In this section—

                    “approved personal pension arrangements” has the same meaning as in

Chapter 4 of Part 14 of ICTA (see section 630(1) of ICTA);

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                    “earnings” means earnings or amounts treated as earnings which

constitute employment income (see section 7(2)(a) or (b));

                    “office” includes in particular any position which has an existence

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

holders;

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                    “retirement annuity contract” has the same meaning as in Chapter 9 of this

Part (see section 606).

     (6)    In this section “tax-exempt pension scheme” means—

           (a)           a retirement benefits scheme which is—

                  (i)                 an approved scheme,

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                  (ii)                a relevant statutory scheme, or

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

for the benefit, or primarily for the benefit, of its employees,

           (b)           any such scheme or fund as was described in section 221(1) and (2) of

ICTA 1970 (schemes to which payments could be made without charge

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to tax under section 220 of that Act).

     (7)    For the purposes of subsection (6)—

 

 

Income Tax (Earnings and Pensions) Bill
Part 9 — Pension income
Chapter 17 — Exemptions: any taxpayer

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                    “relevant statutory scheme” has the meaning given in section 611A(1) of

ICTA;

                    “retirement benefits scheme” has the meaning given in section 611 of

ICTA;

                    “approved”, in relation to a retirement benefits scheme, means that the

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scheme is approved by the Board of Inland Revenue for the purposes

of—

                  (a)                 Chapter 2 of Part 2 of FA 1970, or

                  (b)                 Chapter 1 of Part 14 of ICTA.

Chapter 17

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Exemptions: any taxpayer

 638   Awards for bravery

     (1)    No liability to income tax arises on a pension or annuity if it is paid to the

holder of an award for bravery in respect of the award.

     (2)    In this section “award for bravery” means—

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                    the Victoria Cross,

                    the George Cross,

                    the Albert Medal,

                    the Edward Medal,

                    the Military Cross,

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                    the Distinguished Flying Cross,

                    the Distinguished Conduct Medal,

                    the Conspicuous Gallantry Medal,

                    the Distinguished Service Medal,

                    the Military Medal,

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                    the Distinguished Flying Medal.

 639   Pensions in respect of death due to military or war service

No liability to income tax arises on these pensions and allowances—

           (a)           a pension or allowance payable by or on behalf of the Department of

Work and Pensions under so much of any Order in Council, Royal

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Warrant, order or scheme as relates to death due to—

                  (i)                 service in the armed forces of the Crown,

                  (ii)                wartime service in the merchant navy, or

                  (iii)               war injuries;

           (b)           a pension or allowance—

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                  (i)                 payable by the Ministry of Defence in respect of death due to

peacetime service in the armed forces of the Crown before 3

September 1939, and

                  (ii)                payable at rates, and subject to conditions, similar to those of a

pension within paragraph (a);

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           (c)           a pension or allowance—

                  (i)                 payable under the law of a country other than the United

Kingdom, and

 

 

Income Tax (Earnings and Pensions) Bill
Part 9 — Pension income
Chapter 17 — Exemptions: any taxpayer

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                  (ii)                of a character substantially similar to a pension within

paragraph (a) or (b).

 640   Exemption under section 639 where income withheld

     (1)    This section applies if—

           (a)           an individual is entitled to both of the following—

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                  (i)                 a pension or allowance mentioned in section 639 (“pension A”),

and

                  (ii)                any other pension or allowance (“pension B”), and

           (b)           the whole or a part of pension A is withheld because of the individual’s

entitlement to pension B.

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     (2)    In such a case, an amount of pension B equal to the withheld amount of

pension A is treated for the purposes of section 639 as part of pension A.

 641   Wounds and disability pensions

     (1)    No liability to income tax arises on—

           (a)           a wounds pension granted to a member of the armed forces of the

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Crown;

           (b)           retired pay of a disabled officer granted on account of medical unfitness

attributable to or aggravated by service in the armed forces of the

Crown;

           (c)           a disablement or disability pension granted to a member of the armed

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forces of the Crown, other than a commissioned officer, on account of

medical unfitness attributable to or aggravated by service in the armed

forces of the Crown;

           (d)           a disablement pension granted to a person who has been employed in

the nursing services of any of the armed forces of the Crown on account

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of medical unfitness attributable to or aggravated by service in the

armed forces of the Crown;

           (e)           an injury or disablement pension payable under any scheme made

under—

                  (i)                 the Injuries in War (Compensation) Act 1914 (c. 30), or

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                  (ii)                the Injuries in War (Compensation) Act 1914 (Session 2)

(5 & 6 Geo. 5 c. 18);

           (f)           an injury or disablement pension payable under any War Risks

Compensation Scheme for the Mercantile marine;

           (g)           a pension—

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                  (i)                 granted to a person on account of disablement, and

                  (ii)                payable under any scheme made under section 3, 4 or 5 of the

Pensions (Navy, Army, Air Force and Mercantile Marine) Act

1939 (c. 83).

     (2)    But if the Secretary of State certifies that a pension or retired pay of a kind listed

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in subsection (1) is only partly attributable to disablement or disability, that

subsection applies only to the part attributable to disablement or disability.

 

 

 
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Revised 17 February 2003