Office of Public Sector Information
SCHEDULE 10 continued
(1) This section applies if—
(a) contributions are paid under a registered pension scheme by an employer otherwise than in respect of any individual,
(b) in any tax year any of the contributions become held for the purposes of the provision of benefits to or in respect of a member of the pension scheme under any relevant arrangement or arrangements (“the allocated contributions”),
(c) the amount of the allocated contributions exceeds the permitted maximum, and
(d) the member and the employer, or the member and any person connected with the employer at any time during the tax year, are connected persons at any time during the tax year.
(2) An arrangement is a relevant arrangement if it is—
(a) a money purchase arrangement that is not a cash balance arrangement, or
(b) a hybrid arrangement under which the benefits that may be provided to or in respect of the member are, or include, money purchase benefits other than cash balance benefits.
(3) “The permitted maximum” is—
(a) the maximum amount of relief to which the member is entitled under section 188 (relief for contributions) in respect of relievable pension contributions paid during the tax year (see section 190), less
(b) the amount of any contributions paid by employers under any registered pension scheme in respect of the member in the tax year.
(4) But if the member is a also a member of one or more other registered pension schemes, the permitted maximum in relation to each of the registered pension schemes of which he is a member is—
where—
PM is the amount arrived at under subsection (3), and
N is the number of registered pension schemes of which he is a member.
(5) The pension scheme is to be treated as making an unauthorised payment to the member (or to the member’s personal representatives).
(6) The amount of the unauthorised payment is the amount by which the amount of the allocated contributions exceeds the permitted maximum.
(7) Section 839 of ICTA (connected persons) applies for the purposes of this section.
(1) This section applies where, at any time during any pension input period in respect of a relevant arrangement relating to a member of an occupational pension scheme that is a registered pension scheme, the member and—
(a) a sponsoring employer, or
(b) a person connected with a sponsoring employer.
are connected persons.
(2) If—
(a) the pension input amount for the pension input period in respect of the relevant arrangement, exceeds
(b) the notional unconnected person input amount for the pension input period in respect of the relevant arrangement,
the pension scheme is to be treated as making an unauthorised payment to the member (or to the member’s personal representatives) of an amount equal to the excess.
(3) A relevant arrangement is an arrangement under the pension scheme that is—
(a) a defined benefits arrangement,
(b) a cash balance arrangement, or
(c) a hybrid arrangement under which the benefits that may be provided to or in respect of the member are, or include, defined benefits or cash balance benefits.
(4) The pension input amount for a pension input period in respect of the relevant arrangement is to be determined in accordance with—
(a) sections 230 to 232 if the relevant arrangement is a cash balance arrangement,
(b) sections 234 to 236 if it is a defined benefits arrangement, and
(c) section 237 if it is a hybrid arrangement,
treating references in those sections to the individual as to the member and treating section 237 as if the references to input amount B were omitted.
(5) The notional unconnected person input amount for the pension input period in respect of the relevant arrangement is what the pension input amount, as so determined, would have been if the member were connected with—
(a) a sponsoring employer, or
(b) a person connected with a sponsoring employer,
at no time during the pension input period.
(6) Section 839 of ICTA (connected persons) applies for the purposes of this section.”
39 After section 196 insert—
(1) The Board of Inland Revenue may make regulations for restricting the extent to which contributions paid by an employer under a registered pension scheme in respect of an individual are subject to relief in circumstances in which subsection (2) or (3) applies (or both do).
(2) This subsection applies where any of the benefits which will or may be payable to or in respect of the individual under the registered pension scheme will be payable only if relevant benefits expected to be so paid under an employer-financed retirement benefits scheme are not so paid.
(3) This subsection applies where, because relevant benefits are or may be payable to or in respect of the individual under an employer-financed retirement benefits scheme, the aggregate of the amount of any sums and the market value of any assets—
(a) held for the purposes of, or
(b) representing accrued rights under,
the registered pension scheme which may be transferred by way of a recognised transfer in respect of the individual will or may be less than it otherwise would be.
(4) The reference in subsection (1) to contributions paid by an employer being subject to relief is to—
(a) their being deductible in computing the amount of the profits of the employer for the purposes of Part 2 of ITTOIA 2005 (trading income) or Case I or II of Schedule D,
(b) their being expenses of management of the employer for the purposes of section 75 of ICTA (expenses of management: companies with investment business), or
(c) their being brought into account at Step 1 in section 76(7) of ICTA (expenses of insurance companies) in respect of the employer,
(depending on which is appropriate in relation to the employer).
(5) In this section—
“employer-financed retirement benefits scheme”, and
“relevant benefits”,
have the same meaning as in Chapter 2 of Part 6 of ITEPA 2003 (see sections 393A and 393B of that Act).”
40 After section 246 insert—
(1) An employer’s expenses of providing relevant benefits to or in respect of a present or former employee (“the employee”) under an employer-financed retirement benefits scheme (whether or not by the making of contributions under the scheme) are not subject to relief if subsection (2) applies.
(2) This subsection applies where—
(a) the provision of the relevant benefits results in a reduction in the benefits payable to or in respect of the employee under a registered pension scheme, or
(b) a reduction in the benefits payable to or in respect of the employee under a registered pension scheme results in the provision of the relevant benefits.
(3) But if the extent to which contributions paid by the employer under the registered pension scheme in respect of the employee are subject to relief has been restricted in accordance with regulations under section 196A, the employer’s expenses of providing the relevant benefits are not prevented from being subject to relief to the extent that is just and reasonable.
(4) The references in this section to expenses of an employer being subject to relief are to—
(a) their being deductible in computing the amount of the profits of the employer for the purposes of Part 2 of ITTOIA 2005 (trading income) or Case I or II of Schedule D,
(b) their being expenses of management of the employer for the purposes of section 75 of ICTA (expenses of management: companies with investment business), or
(c) their being brought into account at Step 1 in section 76(7) of ICTA (expenses of insurance companies) in respect of the employer,
(depending on which is appropriate in relation to the employer).
(5) In this section—
“employer-financed retirement benefits scheme”, and
“relevant benefits”,
have the same meaning as in Chapter 2 of Part 6 of ITEPA 2003 (see sections 393A and 393B of that Act).”
41 In section 215 (amount of lifetime allowance charge), omit—
(a) in subsection (9), paragraph (b) (tax covered by scheme funded payment if rights not reduced so as fully to reflect amount of payment of tax) and the word “and” before it, and
(b) subsection (10) (whether rights reduced so as fully to reflect amount of payment of tax).
42 In the table in section 216(1) (benefit crystallisation events and amounts crystallised), in the entry relating to benefit crystallisation event 6 (entitlement to relevant lump sum), in the second column (amount crystallised), after “sum” insert “paid to the individual”.
43 (1) Schedule 32 (benefit crystallisation events: supplementary) is amended as follows.
(2) In paragraph 9 (benefit crystallisation event 2: meaning of “P”) is amended as follows.
(3) In sub-paragraph (2) (amount to be net of tax under section 215 paid by scheme administrator)—
(a) for “will or may be” substitute “is”, and
(b) omit “which will be payable”.
(4) After that sub-paragraph insert—
“(3) And if the reduction is such that, in accordance with normal actuarial practice, it would be taken fully to reflect the amount of the tax, the tax is not to be treated as tax paid by the scheme administrator for the purposes of section 215(9).”
(5) In paragraph 13 (benefit crystallisation event 3: meaning of “XP”), after sub-paragraph (3) (inserted by paragraph 8(6)) insert—
“(4) If the rate at which the pension is payable is reduced so as to reflect the amount of any tax under section 215 to be paid by the scheme administrator, that reduction is to be left out of account in determining the rate at which the pension is payable for the purposes of sub-paragraph (1)(a).
(5) And if the reduction is such that, in accordance with normal actuarial practice, it would be taken fully to reflect the amount of the tax, the tax is not to be treated as tax paid by the scheme administrator for the purposes of section 215(9).”
(6) Paragraph 14 (benefit crystallisation event 5: meaning of “DP” and “DSLS”) is amended as follows.
(7) After sub-paragraph (1) insert—
“(1A) If the rate at which the scheme pension would be payable would be reduced so as to reflect the amount of any tax under section 215 to be paid by the scheme administrator, that reduction is to be left out of account in determining the rate at which the pension would be payable for the purposes of sub-paragraph (1).
(1B) And if the reduction is such that, in accordance with normal actuarial practice, it would be taken fully to reflect the amount of the tax, the tax is not to be treated as tax paid by the scheme administrator for the purposes of section 215(9).”
(8) In sub-paragraph (2) (“DSLS”)—
(a) for “the amount” substitute “so much”, and
(b) after “pension)” insert “as would be paid to the individual”.
44 In paragraph 10(b) of Schedule 32 (benefit crystallisation event 3: “excepted circumstances”), at the beginning of paragraph (b) insert “that”.
45 (1) Section 220 (lifetime allowance enhancement factor in case of pension credits from previously crystallised rights) is amended as follows.
(2) In subsection (4) (pension credit factor), in the definition of APC, after “APC is” insert “the post-commencement pension in payment portion of”.
(3) After that subsection insert—
“(4A) The post-commencement pension in payment portion of the appropriate amount referred to in the definition of APC—
(a) in a case where the appropriate amount is arrived at under section 29(2) or (3)(b) of WRPA 1999 or Article 26(2) or (3)(b) of WRP(NI)O 1999, is so much of that amount as is attributable to rights to a post-commencement pension in payment, and
(b) in a case where the appropriate amount is arrived at under section 29(3)(a) of WRPA 1999 or Article 26(3)(a) of WRP(NI)O 1999, is so much of that amount as is just and reasonable.”
46 In paragraph 4(c) of Schedule 33 (meaning of “relevant migrant member”: requirement that person be entitled to contributions tax relief in foreign country before taking up residence in United Kingdom)—
(a) at the beginning insert “either”, and
(b) after “resident” insert “or meets such other condition as may be prescribed by regulations made by the Board of Inland Revenue”.
47 In section 251(4)(a) (persons to whom scheme administrators can be required to provide information), after “are prescribed” insert “or to the scheme administrators of other registered pension schemes”.
48 After section 255 insert—
(1) The Board of Inland Revenue may give directions requiring specified persons to use electronic means for the making of specified payments required to be made under or by virtue of this Part.
(2) Directions under this section may make provision—
(a) as to conditions that must be complied with in connection with the use of electronic means for the making of any payment,
(b) for treating a payment as not having been made unless conditions imposed by the directions are satisfied, and
(c) for determining the time when a payment in accordance with directions under this section is to be taken to be made.
(3) Directions under this section may also make provision (which may include provision for the application of conclusive or other presumptions) as to the manner of proving for any purpose—
(a) whether any use of electronic means for making a payment is to be taken as having resulted in the payment being made,
(b) the time of the making of any payment for the making of which electronic means have been used, and
(c) any other matter for which provision may be made by directions under this section.
(4) Directions under this section—
(a) may be specific or general, and
(b) may provide that the conditions of any authorisation or requirement imposed by the directions are to be taken to be satisfied only where the Inland Revenue is satisfied as to specified matters.
(5) Directions under this section may—
(a) suspend for any period during which the use of electronic means for the making of payments is impossible or impractical, any requirements imposed by the directions relating to the use of such means,
(b) substitute alternative requirements for the suspended ones, and
(c) make any provision that is necessary in consequence of the imposition of the substituted requirements.
(6) Directions under this section may—
(a) make different provision for different cases,
(b) make such incidental, supplementary, consequential and transitional provision in connection with any provision contained in such directions as the Board of Inland Revenue thinks fit.
(7) In this section—
“the Inland Revenue” includes any person who for the purposes of the electronic means of payment is acting under the authority of the Board of Inland Revenue, and
“specified” means specified in a direction under this section.
(1) A payment made to the Board of Inland Revenue or the Inland Revenue under or by virtue of this Part (otherwise than in cash) is to be treated as not having been made until the earliest date on or before which all the transactions that need to be completed before the whole amount of the payment becomes available to the Board are capable of being completed.
(2) In this section “the Inland Revenue” includes any person who is acting under the authority of the Board of Inland Revenue.”
49 (1) After section 273 insert—
(1) The Board of Inland Revenue may make regulations in relation to cases where an insurance company makes a payment of—
(a) a pension protection lump sum death benefit,
(b) an annuity protection lump sum death benefit, or
(c) an unsecured pension fund lump sum death benefit,
which (by virtue of section 161(3) and (4)) is treated for the purposes of Chapter 3 as made by a registered pension scheme.
(2) The regulations may provide that the insurance company—
(a) is to be treated as the scheme administrator for the purposes of the operation of section 206 in relation to the lump sum death benefit, and
(b) is responsible for the discharge of all obligations imposed on the scheme administrator by or under this Part so far as related to the liability imposed by that section to pay tax in respect of it.
(3) Where an insurance company is liable to pay any tax or interest, or is responsible for the discharge of any other obligation, by virtue of regulations under this section, no other person is liable to pay that tax, or responsible for the discharge of that obligation, under sections 270 to 273.”
(2) In section 274(3)(b) (liabilities and other obligations under certain sections not affected by pension scheme being terminated or ceasing to be registered), insert at the end “or regulations under section 273A”.
50 Before section 275 insert—
(1) The Board of Inland Revenue may make regulations for and in connection with treating registered pension schemes to which this section applies as if they were a number of separate registered pension schemes for such of the purposes of this Part and of provision made under it as are prescribed by the regulations.
(2) This section applies to pension schemes prescribed, or of a description prescribed, by the regulations.
(3) The provision that may be made by the regulations may, in particular, include—
(a) provision as to who is to be treated as the scheme administrator in relation to each of the separate pension schemes, and
(b) any such other modifications of the provision made by and under this Part as appears appropriate in consequence of, or otherwise in connection with, provision made under subsection (1) (including provision so made by virtue of paragraph (a) of this subsection).
(4) The regulations may make different provision for different cases.”
51 In paragraph 3(2) of Schedule 36 (power to modify rules of existing schemes: modifications to have effect until earlier of time when rules amended and end of tax year 2008-09), for the words after “the pension scheme” substitute “which state that the modifications no longer apply in relation to it take effect, or
(b) the end of the tax year 2010-11 or such later time as the Board of Inland Revenue may by regulations prescribe.”
52 (1) Schedule 36 (transitional provisions) is amended as follows.
(2) Paragraph 9 (valuation of uncrystallised rights under pension schemes within paragraph 1(1)(a) to (d)) is amended as follows.
(3) In sub-paragraph (2) (alternative values)—
(a) omit “the lower of”, and
(b) for “and” at the end of paragraph (a) substitute “or (if lower)”.
(4) In sub-paragraph (4) (the maximum permitted pension), after “means” insert—
“(a) in the case of an arrangement under a pension scheme which immediately before 6th April 2006 was within section 611(1)(a) of ICTA, the maximum annual pension that could be paid to the individual under the pension scheme on 5th April 2006, and
(b) in any other case,”.
(5) In sub-paragraph (5) (assumptions)—
(a) in paragraph (a), at the beginning insert “in the case of any arrangement, that” and for “2006, that” substitute “2006”,
(b) after that paragraph insert—
“(aa) in the case of an arrangement within sub-paragraph (4)(a), that the valuation assumptions apply (see section 277),”, and
(c) in paragraph (b), at the beginning insert “in the case of any other arrangement, that” and for “scheme, that” substitute “scheme”.
(6) Paragraph 26 (lump sum protection: limit on value of uncrystallised rights under pension schemes within paragraph 1(1)(a) to (d)) is amended as follows.
(7) In sub-paragraph (2) (alternative values)—
(a) omit “the lower of”, and
(b) for “and” at the end of paragraph (a) substitute “or (if lower)”.
(8) In sub-paragraph (3) (the maximum permitted lump sum), after “means” insert—
“(a) in the case of an arrangement under a pension scheme which immediately before 6th April 2006 was within section 611(1)(a) of ICTA, the maximum lump sum that could be paid to the individual under the pension scheme on 5th April 2006, and
(b) in any other case,”.
(9) In sub-paragraph (4) (assumptions)—
(a) in paragraph (a), at the beginning insert “in the case of any arrangement, that” and for “2006, that” substitute “2006”,
(b) after that paragraph insert—
“(aa) in the case of an arrangement within sub-paragraph (3)(a), that the valuation assumptions apply (see section 277),”, and
(c) in paragraph (b), at the beginning insert “in the case of any other arrangement, that” and for “scheme, that” substitute “scheme”.
53 (1) Schedule 36 (transitional provisions) is amended as follows.
(2) Paragraph 12 (enhanced protection) is amended as follows.
(3) In sub-paragraph (2) (circumstances in which paragraph ceases to apply), after paragraph (a) insert—
“(aa) there is an impermissible transfer into the arrangement or any of the arrangements (see paragraph 17A),”.
(4) In sub-paragraph (3) (effect of enhanced protection), for the words after “an individual” substitute—
“(a) there is no liability to the lifetime allowance charge in respect of the individual, and
(b) the payment of a lifetime allowance excess lump sum to the individual is not permitted by the lump sum rule (see section 166).”
(5) In sub-paragraphs (5) and (6) (no enhanced protection if unsurrendered relevant excess), for “9” substitute “9(3)”.
(6) In sub-paragraph (9)—
(a) in paragraph (a), for “and 14” substitute “, 14 and 17A(1) and (2)”, and
(b) in paragraph (b), for “and 15” substitute “, 15 and 17A(3)”.
(7) In paragraph 13(a) (loss of enhanced protection: relevant benefit accrual in case of money purchase arrangement that is not a cash balance arrangement), after “the arrangement” insert “or, where the arrangement has been a hybrid arrangement, if a relevant contribution was so paid at any time after 5th April 2006,”.
(8) Paragraph 14 (loss of enhanced protection: relevant benefit accrual) is amended as follows.
(9) In sub-paragraph (1)(c) (relevant benefit accrual: relevant contributions consisting in employer’s contribution becoming held for individual), for “by an employer of the individual otherwise than” substitute “otherwise than by or on behalf of the individual or by an employer of the individual”.
(10) In sub-paragraph (2) (contributions which are not relevant contributions)—
(a) for the words from the beginning to “minimum” substitute “Minimum”, and
(b) insert at the end “are not relevant contributions for the purposes of paragraph 13(a)”.
(11) Paragraph 16 (enhanced protection: post-commencement earnings limit for capped individuals) is amended as follows.
(12) In sub-paragraph (1) (individuals to whom paragraph applies), for “whom section 590C of ICTA (earnings cap) had effect in” substitute “whom—
(a) section 590C of ICTA or paragraph 20 of Schedule 6 to FA 1989 (earnings cap) had effect, or
(b) provision similar to section 590C of ICTA had effect by virtue of conditions imposed under section 591 of that Act (discretionary approval),
in”.
(13) In sub-paragraph (5) (appropriate three year period), for “the time when the first relevant event occurs” substitute “the earliest of—
(a) the first relevant event,
(b) the individual leaving the employment to which the arrangement relates, and
(c) the individual’s death.”
(14) After that sub-paragraph insert—
“(5A) Where the appropriate three year period ends otherwise than with the first relevant event, Amount B is what it would be apart from this sub-paragraph increased by whichever is the greatest of—
(a) the percentage by which an amount would be increased if it were increased for the period beginning with the date on which it ends and ending with the date on which the relevant event occurs at an annual rate of 5%,
(b) the percentage by which an amount would be increased if it were increased for that period at an annual percentage rate referred to in regulations made by the Board of Inland Revenue, or
(c) the percentage by which the retail prices index for the month in which the first relevant event occurs is higher than that for the month in which the appropriate period ends.”
(15) In paragraph 17 (enhanced protection: post-commencement earnings limit for other individuals), after sub-paragraph (5) insert—
“(6) Where the appropriate three year period ends otherwise than with the first relevant event, Amount D is what it would be apart from this sub-paragraph increased by whichever is the greatest of—
(a) the percentage by which an amount would be increased if it were increased for the period beginning with the date on which it ends and ending with the date on which the relevant event occurs at an annual rate of 5%,
(b) the percentage by which an amount would be increased if it were increased for that period at an annual percentage rate referred to in regulations made by the Board of Inland Revenue, or
(c) the percentage by which the retail prices index for the month in which the first relevant event occurs is higher than that for the month in which the appropriate period ends.”
(16) After that paragraph insert—
Finance Act 2005