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Income Tax (Earnings and Pensions) Act 2003

Type Public General Act

Publication 2003-03-06

Last updated 2026-03-15

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

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(iv) any amount which is treated as earnings under Chapter 12 of Part 3 (amounts treated as earnings),

(v) any amount which counts as employment income by virtue of Part 7 (income relating to securities and securities options), and

(vi) any employment-related securities that constitute earnings under Chapter 1 of Part 3 (earnings), and

(b) any amount which the employee has given up the right to receive but which would have fallen within paragraph (a) had the employee not done so.

(8) In subsection (7) “employment-related securities” has the same meaning as it has in Chapter 1 of Part 7 (see section 421B).

(9) The Treasury may by regulations amend this section for the purpose of altering the meaning of “basic pay”.

(10) A statutory instrument containing regulations under subsection (9) may not be made unless a draft of it has been laid before, and approved by a resolution of, the House of Commons.

(11) Where the purpose, or one of the purposes, of any arrangements is the avoidance of tax by causing the post-employment notice pay calculated under subsection (1) to be less than it would otherwise be, the post-employment notice pay is to be treated as the amount which the post-employment notice pay would have been but for the arrangements.

(12) In subsection (11) “arrangements” includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions.

402E

(1) Subsections (2) and (4) to (6) have effect for the purposes of section 402D (and subsection (4) has effect also for the purposes of this section).

(2) The “trigger date” is—

(a) if the termination is not a notice case, the last day of the employment, and

(b) if the termination is a notice case, the day the notice is given.

(3) For the purposes of this section, the termination is a “notice case” if the employer or employee gives notice to the other to terminate the employment, and here it does not matter—

(a) whether the notice is more or less than, or the same as, the minimum notice, or

(b) if the employment ends before the notice expires.

(4) The “minimum notice” is the minimum notice required to be given by the employer to terminate the employee's employment by notice in accordance with the law and contractual terms effective—

(a) where the termination is not a notice case—

(i) immediately before the employment ends, or

(ii) where the employment ends by agreement entered into after the start of the employment, immediately before the agreement is entered into, and

(b) where the termination is a notice case, immediately before the notice is given.

(5) The “post-employment notice period” is the period—

(a) beginning at the end of the last day of the employment, and

(b) ending with the earliest lawful termination date.

(But see subsection (8) for provision about limited-term contracts.)

(6) If the earliest lawful termination date is, or precedes, the last day of the employment, the number of days in the post-employment notice period is nil.

(7) “The earliest lawful termination date” is the last day of the period which—

(a) is equal in length to the minimum notice, and

(b) begins at the end of the trigger date.

(8) In the case of a contract of employment which is a limited-term contract and which does not include provision for termination by notice by the employer, the post-employment notice period is the period—

(a) beginning at the end of the last day of the employment, and

(b) ending with the day of the occurrence of the limiting event.

(9) If, in a case to which subsection (8) applies, on the last day of the employment the day of the occurrence of the limiting event is not ascertained or ascertainable (because, for example, the limiting event is the performance of a task), then subsection (8) has effect as if for paragraph (b) there were substituted—

(b) ending with the day on which notice would have expired if the employer had, on the last day of the employment, given to the employee the minimum notice required to terminate the contract under section 86 of the Employment Rights Act 1996 (assuming that that section applies to the employment).

(10) In this section “limited-term contract” and “limiting event” have the same meaning as in the Employment Rights Act 1996 (see section 235(2A) and (2B)).

404B

(1) The Treasury may by regulations amend the listed provisions by substituting, for the amount for the time being mentioned in those provisions, a different amount.

(2) The listed provisions are—

subsections (1), (4) and (5) of section 403, and

subsections (1), (4) and (5) of section 404 and its heading.

(3) Regulations under this section may include transitional provision.

(4) A statutory instrument containing regulations under this section which reduce the mentioned amount may not be made unless a draft of it has been laid before, and approved by a resolution of, the House of Commons.

Value of relevant step to count as employment income

Taxable pension income

Special cases

Taxable benefits: foreign benefits

PAYE regulations

Meaning of “payment”

Tax tables

Priority rule for dividends etc. of UK resident companies etc.

Connected persons

Consequential amendments

Notice of scheme to be given to HMRC

Annual returns

Notices and returns to be given electronically etc

Notice of scheme to be given to HMRC

Annual returns

Former employee entitled to deduction in calculating net income

Taxable pension income

Extension of charge in cases where child not living with claimant

PAYE regulations

Priority rule for dividends etc. of UK resident companies etc.

Notice of scheme to be given to HMRC

Annual returns

Notice of scheme to be given to HMRC

297D

(1) No liability to income tax arises in respect of payments of accommodation allowances to, or in respect of, a member of the armed forces of the Crown.

(2) An “accommodation allowance” is an allowance—

(a) payable out of the public revenue,

(b) for, or towards, costs of accommodation, and

(3) The provision that may be made by regulations under subsection (2)(c) includes provision framed by reference to a scheme (by whatever name called), or document, as it has effect from time to time.

(4) Regulations under this section may make—

(a) different provision for different cases, and

(b) different provision for different areas.

(5) Regulations under this section that do not increase any person's liability to income tax may have effect in relation to times before they are made.

414B

(1) This section applies to a payment or other benefit if—

(a) the payment or other benefit is within section 401(1)(a), and

(b) the employee or former employee is UK resident for the tax year in which the employment terminates.

(2) This Chapter does not apply if the service of the employee or former employee in the employment in respect of which the payment or other benefit is received included foreign seafaring service comprising—

(a) three-quarters or more of the whole period of service ending with the date of the termination in question, or

(b) if the period of service ending with that date exceeded 10 years, the whole of the last 10 years, or

(c) if the period of service ending with that date exceeded 20 years, one-half or more of that period, including any 10 of the last 20 years.

(3) In subsection (2) “foreign seafaring service” means service to which subsection (4), (5) or (7) applies.

(4) This subsection applies to service in or after the tax year 2003-04 such that a deduction equal to the whole amount of the earnings from the employment was or would have been allowable under Chapter 6 of Part 5 (deductions from seafarers' earnings).

(5) This subsection applies to service before the tax year 2003-04 and after the tax year 1973-74 such that a deduction equal to the whole amount of the emoluments from the employment was or would have been allowable under a seafarers' earnings deduction provision.

(6) In subsection (5) “seafarers' earnings deduction provision” means—

(a) paragraph 1 of Schedule 2 to FA 1974 so far as relating to employment as a seafarer,

(b) paragraph 1 of Schedule 7 to FA 1977 so far as relating to employment as a seafarer,

(d) section 193(1) of ICTA so far as relating to employment as a seafarer.

(7) This subsection applies to service before the tax year 1974-75 in an employment as a seafarer such that tax was not chargeable in respect of the emoluments of the employment—

(a) in the tax year 1956-57 or later, under Case I of Schedule E, or

(b) in earlier tax years, under Schedule E,

or it would not have been so chargeable had there been any such emoluments.

(8) In this section “employment as a seafarer” is to be read in accordance with section 384.

414C

(1) This section applies if—

(a) the payment or other benefit is within section 401(1)(a),

(b) the employee or former employee is UK resident for the tax year in which the employment terminates,

(c) the service of the employee or former employee in the employment in respect of which the payment or other benefit is received includes foreign service, and

(d) section 414B(2) does not except the payment or other benefit from the application of this Chapter.

(2) The taxable person may claim relief in the form of a proportionate reduction of the amount that would otherwise—

(a) be treated as earnings by section 402B(1), or

(b) count as employment income as a result of section 403.

(3) The proportion is that which the length of the foreign seafaring service bears to the whole length of service in the employment before the date of the termination in question.

(4) A person's entitlement to relief under this section is limited as mentioned in subsection (5) if the person is entitled—

(a) to deduct, retain or satisfy income tax out of a payment which the person is liable to make, or

(b) to charge any income tax against another person.

(5) The relief must not reduce the amount of income tax for which the person is liable below the amount the person is entitled so to deduct, retain, satisfy or charge.

(6) In this section “foreign seafaring service” has the same meaning as in section 414B(2).

Application: close companies

554AA

(1) Chapter 2 applies if—

(a) there is an arrangement (“the relevant arrangement”) to which an individual (“A”) is a party or which otherwise (wholly or partly) covers or relates to A,

(b) it is reasonable to suppose that, in essence—

(i) the relevant arrangement, or

(ii) the relevant arrangement so far as it covers or relates to A,

is (wholly or partly) a means of providing, or is otherwise concerned (wholly or partly) with the provision of, A-linked payments or benefits or loans,

(d) it is reasonable to suppose that, in essence—

(i) the relevant transaction is entered into (wholly or partly) in pursuance of the relevant arrangement, or

(ii) there is some other connection (direct or indirect) between the relevant transaction and the relevant arrangement,

(e) at the time B enters into the relevant transaction, or at any earlier time in the 3 years ending with the date of the transaction, A is a director or an employee of B,

(f) at the time B enters into the relevant transaction, or at any earlier time in the 3 years ending with the date of the transaction, A has a material interest in B (see section 554AE),

(g) a relevant step is taken by a relevant third person,

(h) it is reasonable to suppose—

(i) that the sum of money or asset which is the subject of the relevant step represents (directly or indirectly), or has arisen or derives from, the sum of money or asset which is the subject of the relevant transaction, or

(ii) that the sum of money or asset which is the subject of the relevant transaction represents (directly or indirectly), or has arisen or derives from, the sum of money or asset which is the subject of the relevant step, and

(i) there is a time in the relevant period when the main purpose, or one of the main purposes, of operating, implementing, maintaining or terminating the relevant arrangement so far as it covers or relates to—

(i) the relevant transaction, and the relevant step so far as related to the relevant transaction, or

(ii) the relevant step, and the relevant transaction so far as related to the relevant step,

is the avoidance of? income tax, national insurance contributions, corporation tax or a charge to tax under section 455 of CTA 2010.

(2) In this section “close company” includes a company that would be a close company but for section 442(a) of CTA 2010 (exclusion of companies not resident in the United Kingdom).

(3) For the purposes of subsection (1)(b), a payment or benefit or loan is “A-linked” if—

(a) it is being provided to A, or a person chosen by A or within a class of persons chosen by A,

(b) it is being provided to a person on A's behalf, or at A's direction or request, or

(c) it is being provided to a person linked with A and it is reasonable to suppose that the main reason, or one of the main reasons, for it being provided is that the person is linked with A.

(4) For the purposes of subsection (1)(i), the “relevant period” consists of the time of the relevant transaction, the time of the relevant step, the times around each of those two times, and any other times between those two times.

(5) Subsections (6) and (7) apply where—

(a) a payment to a person other than A, or to A as a trustee, is of earnings from—

(i) A's employment with B, or

(ii) A's office as a director of B, and

(b) the earnings are, in whole or part, charged to tax under the employment income Parts otherwise than by virtue of this Part,

and for this purpose it does not matter whether all or some only or none of the tax is paid (but see sections 554Z5 and 554Z11B).

(6) For the purposes of subsection (7), an arrangement is a “redirected-earnings arrangement” if it (wholly or partly) covers or relates to redirected earnings; and for the purposes of this subsection and subsection (7) “redirected earnings” means—

(a) the payment mentioned in subsection (5)(a), or

(b) any sum or other property which (directly or indirectly)—

(i) represents, or

(ii) is derived from,

that payment.

(7) The circumstances mentioned in subsection (5)—

(a) do not prevent a redirected-earnings arrangement being within subsection (1)(a),

(b) do not prevent payments or benefits or loans being A-linked for the purposes of subsection (1)(b) where there is use of redirected earnings for the provision of the whole, or part, of the payments or benefits or loans, and

(8) In this section and in section 554AB “relevant third person” means—

(a) A acting as a trustee,

(b) B acting as a trustee, or

(9) See also sections 554AD to 554AF (further interpretation and supplementary provision).

554AB

(1) For the purposes of section 554AA(1), B enters into a relevant transaction if—

(a) B enters into a transaction within subsection (2), and

(b) the transaction is not an excluded transaction (see section 554AC).

(2) B enters into a transaction within this subsection if B—

(a) pays a sum of money to a relevant third person (see section 554AA(8)),

(b) acquires a right to a payment of a sum of money, or to a transfer of assets, where there is a connection (direct or indirect) between the acquisition of the right and—

(i) a payment made, by way of a loan or otherwise, to a relevant third person, or

(ii) a transfer of assets to a relevant third person,

(i) a loan made to a relevant third person, or

(ii) an acquired right of the kind mentioned in paragraph (b),

(d) transfers an asset to a relevant third person,

(e) takes a step by virtue of which a third person acquires an asset within subsection (4),

(f) makes available a sum of money or asset for use, or makes it available under an arrangement which permits its use—

(i) as security for a loan made or to be made to a relevant third person, or

(ii) otherwise as security for the meeting of any liability, or the performance of any undertaking, which a relevant third person has or will have, or

(g) grants to a relevant third person a lease of any premises the effective duration of which is likely to exceed 21 years.

(3) For the purposes of subsection (2) “loan” includes—

(a) any form of credit, and

(b) a payment that is purported to be made by way of a loan.

(4) The following assets are within this subsection—

(a) securities,

(b) interests in securities, and

as defined in section 420 for the purposes of Chapters 1 to 5 of Part 7; and in subsection (2)(e) “acquires” is to be read in accordance with section 421B(2)(a).

(5) For the purposes of subsection (2)(f)—

(a) references to making a sum of money or asset available are references to making it available in any way, however informal,

(b) it does not matter if the relevant third person has no legal right to have the sum of money or asset used as mentioned, and

(6) Subsections (7) and (8) apply, for the purposes of subsection (2)(g), for the purpose of determining the likely effective duration of a lease of any premises granted to a relevant third person (“the original lease”).

(7) If there are circumstances which make it likely that the original lease will be extended for any period, the effective duration of the original lease is to be determined on the assumption that the original lease will be so extended.

(8) Further, if—

(a) the relevant third person, A or a person linked with A is, or is likely to become, entitled to a later lease, or the grant of a later lease, of the same premises, or

(b) it is otherwise likely that the relevant third person, A or a person linked with A will be granted a later lease of the same premises,

the original lease is to be treated as continuing until the end of the later lease (and subsection (7) also applies for the purpose of determining the duration of the later lease).

(9) In this section “lease” and “premises” have the same meaning as they have in Chapter 4 of Part 3 of ITTOIA 2005.

554AC

(1) In section 554AB “excluded transaction” means—

(a) a distribution made by B,

(b) a transaction that—

(i) is entered into by B in the ordinary course of B's business, and

(ii) is on terms that would have been made between persons not connected with each other dealing at arm's length, or

(c) a transaction entered into in order to facilitate the disposal, on terms that would have been made between persons not connected with each other dealing at arm's length, of shares in B.

(2) But the distribution or transaction is not an “excluded transaction” if the avoidance of tax is the main purpose, or one of the main purposes, of (as the case may be)—

(a) making the distribution, or

(b) the transaction.

(3) Part 23 of CTA 2010 has effect for determining the meaning of “distribution” in this section as if—

(a) section 1000(1) of CTA 2010 included a paragraph specifying any distribution made in a winding up of the company, and

(b) sections 1030 to 1030B of that Act were omitted.

554AD

(1) For the purposes of section 554AA(1)(e) “director” means—

(a) in relation to a company whose affairs are managed by a board of directors or similar body, a member of that body,

(b) in relation to a company whose affairs are managed by a single director or similar person, that director or person, and

and includes any person in accordance with whose directions or instructions the directors of the company (as defined in this subsection) are accustomed to act.

(2) For the purposes of subsection (1) a person is not to be regarded as a person in accordance with whose directions or instructions the directors of the company are accustomed to act merely because the directors act on advice given by that person in a professional capacity.

(3) For the purposes of section 5 as it applies to this Part, a person who is a director within the meaning of subsection (1) is to be treated (where it would not otherwise be the case) as holding an office.

554AE

(1) Section 68 (meaning of “material interest” in a company) applies for the purposes of section 554AA and, subject to subsection (2), does so as it applies for the purposes of the benefits code.

(2) In section 68 as it applies for the purposes of section 554AA—

(a) each of the following is to be treated as “an associate” of A—

(i) a person (“the promoter”) who, for the purposes of Part 5 of FA 2014, is carrying on business as a promoter in relation to the relevant arrangement, and

(ii) where the promoter is a company, any company which is an associated company of the promoter;

(b) “participator”—

(i) in relation to a close company, means a person who is a participator in relation to the company for the purposes of section 455 of CTA 2010 (see sections 454 and 455(5) of that Act), and

(ii) in relation to a company which would be a close company if it were a UK resident company, means a person who would be such a participator if the company were a close company.

(3) In subsection (2)(a)(ii) “associated company” has the same meaning as it has for the purposes of Part 10 of CTA 2010 (see section 449 of that Act).

554AF

(1) Section 554AA(1) is subject to subsection (2) and sections 554E to 554Y.

(2) Chapter 2 does not apply by reason of section 554AA(1) in relation to a relevant step taken on or after A's death if—

(a) the relevant step is within section 554B, or

(b) the relevant step is within section 554C by virtue of subsection (1)(ab) of that section.

(3) In section 554AA(1)(a) and (b) references to A include references to a person linked with A.

(4) For the purposes of section 554AA(1)(b) it does not matter if the relevant arrangement does not include details of the steps which will or may be taken in connection with providing, in essence, payments or benefits or loans as mentioned (for example, details of any sums of money or assets which will or may be involved or details of how or when or by whom or in whose favour any step will or may be taken).

(5) For the purposes of section 554AA(1)(b) and (d) in particular, all relevant circumstances are to be taken into account in order to get to the essence of the matter.

554Z2A

(1) Section 554Z2(1) does not apply in the case of a relevant step if—

(a) this Chapter applies in the case of the relevant step only by reason of section 554AA (close companies),

(b) the relevant step is a step within section 554B, 554C or 554D,

(i) section 455 of CTA 2010 by virtue of section 459 of that Act (loans treated as made to participator), or

(ii) section 415 of ITTOIA 2005 (release of loan to participator in a close company), and

(d) in a case within paragraph (c)(i), either the payment condition or the consent condition is met in relation to the charge under section 455 of CTA 2010.

(2) The payment condition is met in relation to a charge to tax under section 455 of CTA 2010 if—

(a) the net section 455 charge is paid in full on or before the due date, or

(b) the net section 455 charge is nil.

(3) The “net section 455 charge” means the amount of the charge to tax under section 455 of CTA 2010 less the amount of section 458 relief from that charge.

(4) In subsection (3) “section 458 relief” means relief given under section 458 of that Act—

(a) in respect of a repayment made, or a release or writing-off occurring, on or before the due date, and

(b) on a claim made on or before the due date.

(5) The consent condition is met in relation to a charge to tax under section 455 of CTA 2010 if—

(a) the charge to tax is reported, in a company tax return of B's, as required under Schedule 18 to FA 1998 (company tax returns etc),

(b) the payment condition is not met in relation to that charge, and

(c) an officer of Revenue and Customs considers that section 554Z2(1) should not apply in the case of the relevant step concerned.

(6) In this section, references to the “due date” in relation to a charge to tax under section 455 of CTA 2010 are references to the day on which the tax is due and payable (see section 455(3) of CTA 2010).

Voluntary office-holders

299A

(1) No liability to income tax arises in respect of a payment made by a relevant authority to a person if—

(a) the person holds a voluntary office with the authority,

(b) the person carries out duties of the office in a period in which he or she is also employed, and

(c) the payment is made solely to compensate the person for lost employment income for the period (and accordingly does not exceed the amount of that income).

(2) For the purposes of subsection (1) a person holds a voluntary office if, at the time the payment referred to in that subsection is made, the person—

(a) is not entitled to any payment or benefit in connection with carrying out the duties of the office,

(b) has not received any such payment or benefit, and

(3) For the purposes of subsection (2)(a), (b) and (c) disregard—

(a) a payment (whether an advance payment or a reimbursement) in respect of reasonable expenses incurred in carrying out the duties of the office, and

(b) a payment to which subsection (1) or section 16A of ITTOIA 2005 applies.

(4) In subsection (1)(c) “lost employment income” means the difference between—

(a) the amount of employment income, after deduction of tax and national insurance contributions, that the person would have received from the employment for the period if he or she had not carried out the duties of the office, and

(b) the amount of employment income, after deduction of tax and national insurance contributions, that the person did receive from the employment for the period.

(5) In subsection (1) “relevant authority” means any of the following—

237A

(1) No liability to income tax arises in respect of the provision, at or near an employee's workplace, of facilities for charging a battery of a vehicle used by the employee (including a vehicle used by the employee as a passenger).

(2) Subsection (1) applies only if the facilities are made available generally to the employer's employees at that workplace.

(3) In this section—

“facilities”—includes electricity, butdoes not include workplace parking,

“taxable”, in relation to a car or van, has the meaning given by section 239(6),

“vehicle” means a vehicle—to which Chapter 2 applies (see section 235), andwhich is neither a taxable car nor a taxable van, and

“workplace parking” has the meaning given by section 237(3).

Extension of charge in cases where child not living with claimant

PAYE regulations

Extension of charge in cases where child not living with claimant

Meaning of “payment”

Employee of non-UK employer

Connected persons

Employment intermediaries to keep, preserve and provide information etc

Assessment of penalties

Notice of scheme to be given to HMRC

PAYE regulations

Workers' services provided through intermediaries: recovery of PAYE

Priority rule for dividends etc. of UK resident companies etc.

Connected persons

Meaning of “control”

Notice of scheme to be given to HMRC

Notices and returns to be given electronically etc

Notice of scheme to be given to HMRC

Persons leaving local authority care

254A

(1) No liability to income tax arises in respect of a care leaver's apprenticeship bursary payment.

(2) A care leaver's apprenticeship bursary payment is a payment—

(a) payable out of the public revenue,

(b) to a care leaver (see subsection (3)),

(d) in respect of which any conditions specified in regulations made by the Treasury are met.

(3) A person is a care leaver if they are a person—

(a) who is, or was, a child looked after—

(i) by a local authority in England within the meaning of section 22 of the Children Act 1989 (general duty of local authority in relation to children looked after by them);

(ii) by a local authority in Wales within the meaning of the Social Services and Well-being (Wales) Act 2014 (anaw 4) (see section 74 of that Act (child or young person looked after by a local authority));

(iii) by a local authority in Scotland within the meaning of Chapter 1 of Part 2 of the Children (Scotland) Act 1995 (see section 17(6) of that Act (duty of local authority to child looked after by them));

(iv) by an authority in Northern Ireland within the meaning of the Children (Northern Ireland) Order 1995 (S.I. 1995/755 (N.I. 2)) (see Article 25 of that Order (children looked after by an authority: interpretation)), and

(b) in respect of whom any other conditions specified in regulations made by the Treasury are met.

(4) “Apprentice” has the meaning specified in regulations made by the Treasury.

(5) Regulations under this section—

(a) may make provision framed by reference to a scheme (however described or named), or document, as it has effect from time to time,

(b) may make different provision for different purposes,

(d) may make retrospective provision.

299B

(1) No liability to income tax arises in respect of a payment to a person who holds a voluntary office if the payment is in respect of reasonable expenses incurred in carrying out the duties of that office.

(2) It does not matter whether—

(a) the payment is an advance payment or a reimbursement;

(b) the person who makes the payment is the person with whom the office is held.

(3) Subsections (2) and (3) of section 299A apply for the purposes of subsection (1) of this section as they apply for the purposes of subsection (1) of that section.

688AA

(1) PAYE Regulations may make provision for, or in connection with, the recovery of a deemed employer PAYE debt from a relevant person.

(2) “A deemed employer PAYE debt” means an amount—

(a) that a person (“the deemed employer”) is liable to pay under PAYE regulations in consequence of being treated under section 61N(3) as having made a deemed direct payment to a worker (other than by virtue of section 61WA), and

(b) that an officer of Revenue and Customs considers there is no realistic prospect of recovering from the deemed employer within a reasonable period.

(3) “Relevant person”, in relation to a deemed employer PAYE debt, means a person who is not the deemed employer and who—

(a) is the highest person in the chain identified under section 61N(1) in determining that the deemed employer is to be treated as having made the deemed direct payment, or

(b) is the second highest person in that chain and is a qualifying person (within the meaning given by section 61N(8)) at the time the deemed employer is treated as having made that deemed direct payment.

Payments by intermediary

Priority rule for dividends etc. of UK resident companies etc.

Connected persons

Priority rule for dividends etc. of UK resident companies etc.

Notices and returns to be given electronically etc

Notice of scheme to be given to HMRC

When a person qualifies as small for a tax year

60A

(1) For the purposes of this Chapter, a company qualifies as small for a tax year if one of the following conditions is met (but this is subject to section 60C).

(2) The first condition is that the company's first financial year is not relevant to the tax year.

(3) The second condition is that the small companies regime applies to the company for its last financial year that is relevant to the tax year.

(4) For the purposes of this section, a financial year of a company is “relevant to” a tax year if the period for filing the company's accounts and reports for the financial year ends before the beginning of the tax year.

(5) Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act.

60B

(1) This section applies when determining for the purposes of section 60A(3) whether the small companies regime applies to a company for a financial year in a case where—

(a) at the end of the financial year the company is jointly controlled by two or more other persons, and

(b) one or more of those other persons are undertakings (“the joint venturer undertakings”).

(2) If the company is a parent company, the joint venturer undertakings are to be treated as members of the group headed by the company.

(3) If the company is not a parent company, the company and the joint venturer undertakings are to be treated as constituting a group of which the company is the parent company.

(4) In this section the expression “jointly controlled” is to be read in accordance with those provisions of international accounting standards which relate to joint ventures.

(5) Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act.

60C

(1) A company does not qualify as small for a tax year by reason of the condition in section 60A(3) being met if—

(a) the company is a member of a group at the end of its last financial year that is relevant to the tax year,

(b) the company is not the parent undertaking of that group at the end of that financial year, and

(c) the undertaking that is the parent undertaking of that group at that time does not qualify as small in relation to its last financial year that is relevant to the tax year.

(2) Where the parent undertaking mentioned in subsection (1)(c) is not a company, sections 382 and 383 of the Companies Act 2006 have effect for determining whether the parent undertaking qualifies as small in relation to its last financial year that is relevant to the tax year as if references in those sections to a company and a parent company included references to an undertaking and a parent undertaking.

(3) For the purposes of subsections (1)(c) and (2) a financial year of an undertaking that is not a company is “relevant to” a tax year if it ends at least 9 months before the beginning of the tax year.

(4) For the purposes of this section, a financial year of a company is “relevant to” a tax year if the period for filing the company's accounts and reports for the financial year ends before the beginning of the tax year.

(5) Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act.

60D

(1) Sections 60A to 60C apply in relation to a relevant undertaking as they apply in relation to a company, subject to any necessary modifications.

(2) In this section “relevant undertaking” means an undertaking in respect of which regulations have effect under—

(a) section 15(a) of the Limited Liability Partnerships Act 2000,

(b) section 1043 of the Companies Act 2006 (unregistered companies), or

(3) Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act.

60E

(1) An undertaking that is not a company or a relevant undertaking qualifies as small for a tax year if one of the following conditions is met.

(2) The first condition is that the undertaking's first financial year is not relevant to the tax year.

(3) The second condition is that the undertaking's turnover for its last financial year that is relevant to the tax year is not more than the amount for the time being specified in the second column of item 1 of the Table in section 382(3) of the Companies Act 2006.

(4) For the purposes of this section a financial year of an undertaking is “relevant to” a tax year if it ends at least 9 months before the beginning of the tax year.

(5) In this section—

“relevant undertaking” has the meaning given by section 60D, and

“turnover”, in relation to an undertaking, means the amounts derived from the provision of goods or services after the deduction of trade discounts, value added tax and any other taxes based on the amounts so derived.

(6) Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act.

60F

(1) For the purposes of this Chapter, a person who is not a company, relevant undertaking or other undertaking qualifies as small for a tax year if the person's turnover for the last calendar year before the tax year is not more than the amount for the time being specified in the second column of item 1 of the Table in section 382(3) of the Companies Act 2006.

(2) In this section—

“company” and “undertaking” have the same meaning as in the Companies Act 2006,

“relevant undertaking” has the meaning given by section 60D, and

“turnover”, in relation to a person, means the amounts derived from the provision of goods or services after the deduction of trade discounts, value added tax and any other taxes based on the amounts so derived.

60G

(1) This section applies where—

(a) it is necessary for the purposes of determining whether a person qualifies as small for a tax year (“the tax year concerned”) to first determine the person's turnover for a financial year or calendar year (“the assessment year”), and

(b) at the end of the assessment year the person is connected with one or more other persons (“the connected persons”).

(2) For the purposes of determining whether the person qualifies as small for the tax year concerned the person's turnover for the assessment year is to be taken to be the sum of—

(a) the person's turnover for the assessment year, and

(b) the relevant turnover of each of the connected persons.

(3) In subsection (2)(b) “the relevant turnover” of a connected person means—

(a) in a case where the connected person is a company, relevant undertaking or other undertaking, its turnover for its last financial year that is relevant to the tax year concerned, and

(b) in a case where the connected person is not a company, relevant undertaking or other undertaking, the turnover of the connected person for the last calendar year ending before the tax year concerned.

(4) For the purposes of subsection (3)(a)—

(a) a financial year of a company or relevant undertaking is relevant to the tax year concerned if the period for filing accounts and reports for the financial year ends before the beginning of the tax year concerned, and

(b) a financial year of any other undertaking is relevant to the tax year concerned if it ends more than 9 months before the beginning of the tax year concerned.

(5) In a case where—

(a) the person mentioned in subsection (1)(a) is a company or relevant undertaking, and

(b) at the end of the assessment period the person is a member of a group,

the person is to be treated for the purposes of this section as not being connected with any person that is a member of that group.

(6) In this section—

“turnover”, in relation to a person, means the amounts derived from the provision of goods or services after the deduction of trade discounts, value added tax and any other taxes based on the amounts so derived, and

“relevant undertaking” has the meaning given by section 60D.

(7) For provision determining whether one person is connected with another, see section 718 (connected persons).

(8) Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act.

60H

(1) This section applies if, in the case of an engagement that meets conditions (a) to (b) in section 49(1), the client receives from the client's agent or the worker a request to state whether in the client's opinion the client qualifies as small for a tax year specified in the request.

(2) The client must provide to the person who made the request a statement as to whether in the client's opinion the client qualifies as small for the tax year specified in the request.

(3) If the client fails to provide the statement by the time mentioned in subsection (4) the duty to do so is enforceable by an injunction or, in Scotland, by an order for specific performance under section 45 of the Court of Session Act 1988.

(4) The time is whichever is the later of—

(a) the end of the period of 45 days beginning with the date the client receives the request, and

(b) the beginning of the period of 45 days ending with the start of the tax year specified in the request.

(5) In this section “the client's agent” means a person with whom the client entered into a contract as part of the arrangements mentioned in paragraph (b) of section 49(1).

When a person has a UK connection

60I

(1) For the purposes of this Chapter, a person has a UK connection for a tax year if (and only if) immediately before the beginning of that tax year the person—

(a) is resident in the United Kingdom, or

(b) has a permanent establishment in the United Kingdom.

(2) In this section “permanent establishment”—

(a) in relation to a company, is to be read (by virtue of section 1007A of ITA 2007) in accordance with Chapter 2 of Part 24 of CTA 2010, and

(b) in relation to any other person, is to be read in accordance with that Chapter but as if references in that Chapter to a company were references to that person.

Interpretation

61NA

(1) For the purposes of section 61N “status determination statement” means a statement by the client that—

(a) states that the client has concluded that the condition in section 61M(1)(d) is met in the case of the engagement and explains the reasons for that conclusion, or

(b) states (albeit incorrectly) that the client has concluded that the condition in section 61M(1)(d) is not met in the case of the engagement and explains the reasons for that conclusion.

(2) But a statement is not a status determination statement if the client fails to take reasonable care in coming to the conclusion mentioned in it.

(3) For further provisions concerning status determination statements, see section 61T (client-led status disagreement process) and section 61TA (duty for client to withdraw status determination statement if it ceases to be medium or large).

61TA

(1) This section applies if in the case of an engagement to which this Chapter applies—

(a) the client is not a public authority,

(b) the client gives a status determination statement to the worker, the client's agent or both, and

(c) the client does not (but for this section) qualify as medium or large for a tax year beginning after the status determination statement is given.

(2) Before the beginning of the tax year the client must give a statement to the relevant person, or (as the case may be) to both of the relevant persons, stating—

(a) that the client does not qualify as medium or large for the tax year, and

(b) that the status determination statement is withdrawn with effect from the beginning of the tax year.

(3) If the client fails to comply with that duty the following rules apply in relation to the engagement for the tax year—

(a) the client is to be treated as medium or large for the tax year, and

(b) section 61N(3) and (4) have effect as if for any reference to the fee-payer there were substituted a reference to the client.

(4) For the purposes of subsection (2)—

(a) the worker is a relevant person if the status determination statement was given to the worker, and

(b) the deemed employer is a relevant person if the status determination statement was given to the client's agent.

(5) In this section—

“client's agent” means a person with whom the client entered into a contract as part of the arrangements mentioned in section 61M(1)(c);

“the deemed employer” means the person who, assuming one of conditions A to C in section 61N were met, would be treated as making a deemed direct payment to the worker under section 61N(3) on the making of a chain payment;

“status determination statement” has the meaning given by section 61NA.

61WA

(1) This section applies if in any case at least one relevant person in a chain participates in a relevant avoidance arrangement.

(2) An arrangement is a “relevant avoidance arrangement” if its main purpose, or one of its main purposes, is to secure a tax advantage by securing that at least one of the conditions mentioned in section 61O or 61P is not met in relation to an intermediary.

(3) Section 61N(3) has effect as if the reference to the fee-payer were a reference to the participating person, but—

(a) section 61N(4) continues to have effect as if the reference to the fee-payer were a reference to the deemed employer, and

(b) Step 1 of section 61Q(1) continues to have effect as referring to the chain payment made by the deemed employer.

(4) The participating person is—

(a) in a case where only one relevant person participates in the arrangement, that person;

(b) in any other case the highest relevant person in the chain who participated in the arrangement and from whom HMRC considers there is a realistic prospect of recovering, within a reasonable period, the amount of tax that would have been paid (or not repaid) in the absence of the arrangement.

(5) Subsection (3) has effect even though that may involve a participating person being treated as both employer and employee in relation to the deemed employment under section 61N(3).

(6) In this section—

“arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

“deemed employer” means a person who would, but for this section, be treated by section 61N(3) as making a payment to the worker;

“relevant person” means—the worker;a person who is resident in the United Kingdom or who has a place of business in the United Kingdom;

“tax” means income tax (and “tax advantage” is to be construed accordingly”);

“tax advantage” includes—avoidance or reduction of a charge to tax or an assessment to tax,repayment or increased repayment of tax,avoidance of a possible assessment to tax, anddeferral of a payment of tax or advancement of a repayment of tax.

Tax tables

Internationally mobile employees

Consequential amendments

Annual returns

Assessment of penalties

Annual returns

136A

(1) This section applies to a car first registered on or after IP completion day if it is so registered on the basis of a qualifying emissions certificate.

(2) The car’s CO₂ emissions figure is the figure specified in the qualifying emissions certificate unless more than one figure is specified, in which case the car’s CO₂ emissions figure is the figure specified as the CO₂ emissions (combined) figure.

(3) For the purpose of determining the car’s CO₂ emissions figure ignore any values specified in the qualifying emissions certificate that are not WLTP (worldwide harmonised light vehicles test procedures) values.

(4) Subsection (2) is subject to—

(a) section 137A (bi-fuel cars registered after IP completion day), and

(b) section 138 (automatic car for a disabled employee).

137A

(1) This section applies to a car first registered on or after IP completion day if it is so registered on the basis of a qualifying emissions certificate which specifies separate CO₂ emissions figures in terms of grams per kilometre driven for different fuels.

(2) The car’s CO₂ emissions figure is—

(a) the lowest figure specified, or

(b) if there is more than one figure specified in relation to each fuel, the lowest CO₂ emissions (combined) figure specified.

(3) For the purpose of determining the car’s CO₂ emissions figure ignore any values specified in the qualifying emissions certificate that are not WLTP (worldwide harmonised light vehicles test procedures) values.

(4) Subsection (2) is subject to section 138 (automatic car for a disabled employee).

Sums payable by employers under agreements

Employment intermediaries to keep, preserve and provide information etc

Commencement and transitional provisions and savings

Annual returns

Enquiries

Appeals

Workers' services provided through intermediaries: recovery of PAYE

Introduction

Meaning of “control”

Commencement and transitional provisions and savings

Notice of scheme to be given to HMRC

Assessment of penalties

Appeals

688AB

(1) PAYE regulations may make the following provision.

(2) Provision for an amount to be treated as having been recovered from the payee, and for that amount not to be recoverable from the payer (“the deemed employer”), where—

(a) the deemed employer would otherwise be liable to pay an amount under PAYE regulations in consequence of being treated under section 61N(3) as having made a deemed direct payment to a worker (other than by virtue of section 61WA), and

(b) an amount of income tax or corporation tax has already been paid, or assessed, in respect of income referable to that payment.

(3) Provision for the amount referred to in the opening words of subsection (2)to be the best estimate which can reasonably be made by an officer of Revenue and Customs (whether generally or specifically) of the amount referred to in subsection (2)(b).

(4) Provision preventing a person specified in PAYE regulations from—

(a) making a claim for the repayment of, or relief in respect of, an amount referred to in subsection (2)(b), or

(b) deducting, or setting off, the amount referred to in that subsection from, or against, any tax liability of the person,

in a case where an estimate of that amount is treated as having been recovered from the payee as a result of provision made by virtue of this section.

(5) In this section, “payee” and “payer” have the same meaning as in section 684 (see subsection (7C) of that section).

Introduction

Tax treatment of authorised lump sums

637A

No liability to income tax arises on a pension commencement lump sum paid under a registered pension scheme.

637B

A person to whom a pension commencement excess lump sum is paid under a registered pension scheme is treated as having taxable pension income for the tax year in which the payment is made equal to the amount of the lump sum.

637C

(1) Subject to subsections (2) and (4), no liability to income tax arises on a serious ill-health lump sum paid under a registered pension scheme.

(2) If—

(a) a serious ill-health lump sum is paid under a registered pension scheme to a member who (at the time of the payment) is under 75, and

(b) the lump sum exceeds the permitted maximum,

section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme.

(3) In subsection (2) “the permitted maximum”, in relation to a serious ill-health lump sum paid to a member, means so much of the member’s lump sum and death benefit allowance as is available on the member becoming entitled to the lump sum (see section 637S).

(4) If a serious ill-health lump sum is paid under a registered pension scheme to a member who (at the time of the payment) is 75 or over, section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

637D

(1) Subject to subsection (2), where an uncrystallised funds pension lump sum is paid under a registered pension scheme—

(a) no liability to income tax arises on 25% of the lump sum, and

(b) section 579A (pensions) applies in relation to the remainder of the lump sum as it applies to any pension under a registered pension scheme.

(2) If—

(a) an uncrystallised funds pension lump sum is paid under a registered pension scheme, and

(b) 25% of the lump sum is an amount that exceeds the permitted maximum,

section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme.

(3) In subsection (2) “the permitted maximum”, in relation to an uncrystallised funds pension lump sum paid to a member, means the lower of the following amounts—

(a) so much of the member’s lump sum allowance as is available on the member becoming entitled to the lump sum (see section 637Q);

(b) so much of the member’s lump sum and death benefit allowance as is available on the member becoming entitled to the lump sum (see section 637S).

637E

A short service refund lump paid under a registered pension scheme is subject to income tax in accordance with section 205 of FA 2004 (charge to tax on scheme administrator in respect of such a lump sum) but not otherwise.

637F

No liability to income tax arises on a refund of excess contributions lump sum paid under a registered pension scheme.

637G

(1) Subject to subsection (2), a member of a registered pension scheme to whom—

(a) a trivial commutation lump sum, or

(b) a winding-up lump sum,

is paid under the scheme is treated as having taxable pension income for the tax year in which the payment is made equal to the amount of the lump sum.

(2) If, immediately before the lump sum is paid, the member has uncrystallised rights under any one or more arrangements under the pension scheme, the amount of the taxable pension income —

(a) if all the member’s rights under the pension scheme are uncrystallised rights, is 75% of the lump sum, and

(b) otherwise, is reduced by the tax-free element (if any).

(3) In subsection (2) “the tax-free element” means 25% of the value of any uncrystallised rights extinguished by the lump sum.

(4) In this section “uncrystallised rights” has the same meaning as in section 212 of FA 2004; and the value for the purposes of this section of any uncrystallised rights is to be calculated in accordance with that section.

Tax treatment of authorised lump sum death benefits

637H

(1) Subject to subsections (2) to (6), no liability to income tax arises on a defined benefits lump sum death benefit paid under a registered pension scheme.

(2) If—

(a) a defined benefits lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is paid before the end of the relevant two year period, and

section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme.

(3) If—

(a) a defined benefits lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is not paid before the end of the relevant two year period, and

section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

(4) If—

(a) a defined benefits lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is not paid before the end of the relevant two year period, and

the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

(5) If a defined benefits lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a qualifying person,

section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

(6) If a defined benefits lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a non-qualifying person,

the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

(7) In this section—

“non-qualifying person” has the same meaning as in section 206 of FA 2004;

“the permitted maximum”, in relation to a defined benefits lump sum death benefit paid in respect of a member, means so much of the member’s lump sum and death benefit allowance as is available on the lump sum being paid (see section 637S);

“qualifying person” means a person who is not a non-qualifying person;

“the relevant two year period” means the period of two years beginning with the day on which the scheme administrator of the scheme first knew of the member’s death or (if earlier) the day on which the scheme administrator could first reasonably have been expected to have known of it.

637I

(1) Subject to subsections (2), (3) and (4) no liability to income tax arises on a pension protection lump sum death benefit paid under a registered pension scheme.

(2) If—

(a) a pension protection lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, and

(b) the lump sum exceeds the permitted maximum,

section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme.

(3) If a pension protection lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a qualifying person,

section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

(4) If a pension protection lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a non-qualifying person,

the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

(5) In this section—

“non-qualifying person” has the same meaning as in section 206 of FA 2004;

“the permitted maximum”, in relation to a pension protection lump sum death benefit paid in respect of a member, means so much of the member’s lump sum and death benefit allowance as is available on the lump sum being paid (see section 637S);

“qualifying person” means a person who is not a non-qualifying person.

637J

(1) Subject to subsections (2) to (6), no liability to income tax arises on an uncrystallised funds lump sum death benefit paid under a registered pension scheme.

(2) If—

(a) an uncrystallised funds lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is paid before the end of the relevant two year period, and

section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme.

(3) If—

(a) an uncrystallised funds lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is not paid before the end of the relevant two year period, and

section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

(4) If—

(a) an uncrystallised funds lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is not paid before the end of the relevant two year period, and

the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

(5) If an uncrystallised funds lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a qualifying person,

section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

(6) If an uncrystallised funds lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a non-qualifying person,

the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

(7) In this section—

“non-qualifying person” has the same meaning as in section 206 of FA 2004;

“the permitted maximum”, in relation to an uncrystallised funds lump sum death benefit paid in respect of a member, means so much of the member’s lump sum and death benefit allowance as is available on the lump sum being paid (see section 637S);

“qualifying person” means a person who is not a non-qualifying person;

“the relevant two year period” means the period of two years beginning with the day on which the scheme administrator of the scheme first knew of the member’s death or (if earlier) the day on which the scheme administrator could first reasonably have been expected to have known of it.

637K

(1) Subject to subsections (2), (3) and (4), no liability to income tax arises on an annuity protection lump sum death benefit paid under a registered pension scheme.

(2) If—

(a) an annuity protection lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, and

(b) the lump sum exceeds the permitted maximum,

section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme.

(3) If an annuity protection lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a qualifying person,

section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

(4) If an annuity protection lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a non-qualifying person,

the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

(5) In this section—

“non-qualifying person” has the same meaning as in section 206 of FA 2004;

“the permitted maximum”, in relation to an annuity protection lump sum death benefit paid in respect of a member, means so much of the member’s lump sum and death benefit allowance as is available on the lump sum being paid (see section 637S);

“qualifying person” means a person who is not a non-qualifying person.

637L

(1) Subject to subsections (2) to (6), no liability to income tax arises on a drawdown pension fund lump sum death benefit paid under a registered pension scheme.

(2) If—

(a) a drawdown pension fund lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is paid before the end of the relevant two year period, and

section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme.

(3) If—

(a) a drawdown pension fund lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is not paid before the end of the relevant two year period, and

section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

(4) If—

(a) a drawdown pension fund lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is not paid before the end of the relevant two year period, and

the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

(5) If a drawdown pension fund lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a qualifying person,

section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

(6) If a drawdown pension fund lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a non-qualifying person,

the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

(7) A reference in this section to a “member”, in relation to a drawdown pension fund lump sum death benefit under paragraph 17(2) of Schedule 29 to FA 2004 (lump sum payable on death of dependant of deceased member), is a reference to the dependant on whose death the lump sum is payable.

(8) In this section—

“non-qualifying person” has the same meaning as in section 206 of FA 2004;

“the permitted maximum”, in relation to a drawdown pension fund lump sum death benefit paid in respect of a member, means so much of the member’s lump sum and death benefit allowance as is available on the lump sum being paid (see section 637S);

“qualifying person” means a person who is not a non-qualifying person;

“the relevant two year period” means the period of two years beginning with the day on which the scheme administrator of the scheme first knew of the member’s death or (if earlier) the day on which the scheme administrator could first reasonably have been expected to have known of it.

637M

(1) Subject to subsections (2) to (6), no liability to income tax arises on a flexi-access drawdown lump sum death benefit paid under a registered pension scheme.

(2) If—

(a) a flexi-access drawdown lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is paid before the end of the relevant two year period, and

section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme.

(3) If—

(a) a flexi-access drawdown lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is not paid before the end of the relevant two year period, and

section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

(4) If—

(a) a flexi-access drawdown lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is not paid before the end of the relevant two year period, and

the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

(5) If a flexi-access drawdown lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a qualifying person,

section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

(6) If a flexi-access drawdown lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a non-qualifying person,

the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

(7) A reference in this section to a “member”—

(a) in relation to a flexi-access drawdown lump sum death benefit under paragraph 17A(2) of Schedule 29 to FA 2004 (lump sum payable on death of dependant of deceased member), is a reference to the dependant on whose death the lump sum is payable;

(b) in relation to a flexi-access drawdown lump sum death benefit under paragraph 17A(3) or (4) of Schedule 29 to FA 2004 (lump sum payable on death of nominee or successor of deceased member), is a reference to the nominee or successor on whose death the lump sum is payable.

(8) In this section—

“non-qualifying person” has the same meaning as in section 206 of FA 2004;

“the permitted maximum”, in relation to a flexi-access drawdown lump sum death benefit paid in respect of a member, means so much of the member’s lump sum and death benefit allowance as is available on the lump sum being paid (see section 637S);

“qualifying person” means a person who is not a non-qualifying person;

“the relevant two year period” means the period of two years beginning with the day on which the scheme administrator of the scheme first knew of the member’s death or (if earlier) the day on which the scheme administrator could first reasonably have been expected to have known of it.

637N

A person to whom a trivial commutation lump sum death benefit is paid under a registered pension scheme is treated as having taxable pension income for the tax year in which the payment is made equal to the amount of the lump sum.

Allowances

637P

An individual’s “lump sum allowance” is £268,275.

637Q

(1) This section is about the availability of an individual’s lump sum allowance on the occurrence of a relevant benefit crystallisation event (“the current event”).

(2) In this section—

(a) “relevant benefit crystallisation event”, in relation to an individual, means the individual becoming entitled to a relevant lump sum;

(b) “relevant lump sum” means—

(i) a pension commencement lump sum, or

(ii) an uncrystallised funds pension lump sum.

(3) If no relevant benefit crystallisation event has occurred in relation to the individual before the current event, the whole of the individual’s lump sum allowance is available.

(4) Otherwise, the amount of the individual’s lump sum allowance that is available is—

(a) so much of that allowance as is left after deducting the previously-used amount, or

(b) if none is left after deducting that amount, nil.

(5) For this purpose “the previously-used amount” is the aggregate of the non-taxable amounts in relation to each relevant benefit crystallisation event that has occurred in relation to the individual before the current event.

(6) In subsection (5) “non-taxable amount”, in relation to a relevant benefit crystallisation event, means so much (if any) of the relevant lump sum to which the event relates as is not, by virtue of any provision of this Chapter, taxable pension income .

(7) A reference in this section to a relevant benefit crystallisation event is to a relevant benefit crystallisation event occurring on or after 6 April 2024.

(8) For transitional provision under which the amount of an individual’s lump sum allowance available on the occurrence of a relevant benefit crystallisation event may be reduced as a result of events occurring before 6 April 2024, see paragraph 125 of Schedule 9 to FA 2024.

637R

An individual’s “lump sum and death benefit allowance” is £1,073,100.

637S

(1) This section is about the availability of an individual’s lump sum and death benefit allowance on the occurrence of a relevant benefit crystallisation event (“the current event”).

(2) In this section—

(a) “relevant benefit crystallisation event”, in relation to an individual, means—

(i) the individual becoming entitled to a relevant lump sum, or

(ii) a person being paid a relevant lump sum death benefit in respect of the individual;

(b) “relevant lump sum” means—

(i) a pension commencement lump sum,

(ii) a serious ill-health lump sum, or

(iii) an uncrystallised funds pension lump sum;

(i) a charity lump sum death benefit, or

(ii) a trivial commutation lump sum death benefit.

(3) If no relevant benefit crystallisation event has occurred in relation to the individual before the current event, the whole of the individual’s lump sum and death benefit allowance is available.

(4) Otherwise, the amount of the individual’s lump sum and death benefit allowance that is available is—

(a) so much of that allowance as is left after deducting the previously-used amount, or

(b) if none is left after deducting that amount, nil.

(5) For this purpose “the previously-used amount” is the aggregate of the non-taxable amounts in relation to each relevant benefit crystallisation event that has occurred in relation to the individual before the current event.

(6) In subsection (5) “non-taxable amount”, in relation to a relevant benefit crystallisation event, means so much (if any) of the relevant lump sum, or relevant lump sum death benefit, to which the event relates as is not, by virtue of any provision of this Chapter, taxable pension income .

(7) Where more than one relevant benefit crystallisation event within subsection (2)(a)(i) occurs in relation to an individual on the same day, it is for the individual to decide the order in which they are to be treated as occurring for the purposes of this section.

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) A reference in this section to a relevant benefit crystallisation event is to a relevant benefit crystallisation event occurring on or after 6 April 2024.

(10) For transitional provision under which the amount of an individual’s lump sum and death benefit allowance available on the occurrence of a relevant benefit crystallisation event may be reduced as a result of events occurring before 6 April 2024, see paragraph 126 of Schedule 9 to FA 2024.

(11) For further transitional provision that may affect the operation of this section, see paragraph 20 of Schedule 36 to FA 2004 (pensions in payment before commencement of Part 4 of FA 2004).

Managed service companies: recovery from other persons

Introduction

Connected persons

Consequential amendments

Notices and returns to be given electronically etc

Assessment of penalties

Appeals

637T

(1) This section applies where two or more relevant benefit crystallisation events within section 637S(2)(a)(ii) occur in relation to an individual.

(2) The relevant benefit crystallisation events are to be treated for the purposes of section 637S as occurring simultaneously—

(a) immediately before the individual’s death, and

(b) immediately after any pension commencement lump sum to which the individual becomes entitled immediately before death by virtue of section 166(2) of FA 2004 (lump sum rule).

(3) In the application of section 637S for the purpose of determining how much of the individual’s lump sum and death benefit allowance is available on the occurrence of any of the relevant benefit crystallisation events mentioned in subsection (1)—

(a) the reference in subsection (3) of that section to the whole of the individual’s lump sum and death benefit allowance is to the relevant proportion of that allowance, and

(b) the reference in subsection (4) of that section to so much of the individual’s lump sum and death benefit allowance as is left after deducting the previously-used amount is to the relevant proportion of so much of that allowance as is left after deducting that amount.

(4) In subsection (3), “the relevant proportion” means—

$$AB$where—A is the amount of the lump sum death benefit the payment of which constitutes the relevant benefit crystallisation event in question;B is the aggregate of the amounts of each lump sum death benefit the payment of which constitutes a relevant benefit crystallisation event mentioned in subsection (1).$

Priority rule for dividends etc. of UK resident companies etc.

Consequential amendments

Chapter 5C — Relief for new residents on foreign employment income

Foreign employment election

41M

(1) This Chapter applies if an individual is a qualifying new resident for a tax year (the “qualifying year”).

(2) An individual is a qualifying new resident for a tax year for the purposes of this Chapter if the individual is a qualifying new resident for the tax year for the purposes of Chapter 5 of Part 8 of ITTOIA 2005 (see section 845B of that Act).

(3) The individual may make an election for the qualifying year under this section (“a foreign employment election”).

(4) Section 41P makes provision about a claim for relief—

(a) which an individual can make for the qualifying year or any subsequent tax year, where the individual has made a foreign employment election, and

(b) which entitles the individual to relief in that year calculated by reference to employment income that is in respect of the qualifying year.

(5) Sections 41Q (amount of relief available) and 41R (limit on relief) set out how to determine the amount of relief to which the individual is entitled.

(6) See also—

(a) sections 845C to 845E of ITTOIA 2005, which set out some income tax consequences of a foreign employment election, and

(b) section 1K of TCGA 1992, which provides for the loss of the individual’s annual exempt amount for capital gains tax where a foreign employment election is made.

(7) A foreign employment election must be made in a return.

(8) A foreign employment election for the qualifying year must be made before the end of the period of 12 months beginning with 31 January after the end of the qualifying year.

(9) A foreign employment election may not be made as a consequential claim (within the meaning of section 43C(5) of TMA 1970) if the circumstances which give rise to the consequential claim result from a loss of tax brought about carelessly or deliberately by the individual or a person acting on the individual’s behalf.

(10) For the purposes of this Chapter—

(a) “return” means a return under section 8 of TMA 1970 (personal return),

(b) references to a claim or election being included in a return include a claim or election being so included as a result of an amendment of the return, and

(c) subsections (5) to (7) of section 118 of TMA 1970 (loss of tax brought about carelessly or deliberately) apply as they apply for the purposes of that Act.

Key definitions

41N

(1) This section sets out some definitions that apply for the purposes of this Chapter.

(2) “Qualifying employment income” means—

(a) qualifying general earnings,

(b) qualifying third party income, and

(3) “Qualifying foreign employment income” means—

(a) qualifying foreign general earnings,

(b) qualifying foreign third party income, and

(4) Section 41T defines what it means—

(a) for general earnings to be “qualifying general earnings”, and

(b) for qualifying general earnings to be “qualifying foreign general earnings”.

(5) Section 41U defines what it means—

(a) for third party income to be “qualifying third party income”, and

(b) for qualifying third party income to be “qualifying foreign third party income”.

(6) Section 41V defines what it means—

(a) for securities income to be “qualifying securities income”, and

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Income Tax (Earnings and Pensions) Act 2003

402E

404B

Charge on cancellation payments in respect of partnership share agreement

Value of relevant step to count as employment income

Taxable pension income

Special cases

Taxable benefits: foreign benefits

PAYE regulations

Meaning of “payment”

Tax tables

Priority rule for dividends etc. of UK resident companies etc.

Connected persons

Consequential amendments

Notice of scheme to be given to HMRC

Annual returns

Notices and returns to be given electronically etc

Notice of scheme to be given to HMRC

Annual returns

Former employee entitled to deduction in calculating net income

Taxable pension income

Extension of charge in cases where child not living with claimant

PAYE regulations

PAYE regulations

PAYE regulations

Employment-related securities etc: internationally mobile employees

Priority rule for dividends etc. of UK resident companies etc.

Priority rule for dividends etc. of UK resident companies etc.

Notice of scheme to be given to HMRC

Annual returns

Notice of scheme to be given to HMRC

297D

414B

414C

Application: close companies

554AA

554AB

554AC

554AD

554AE

554AF

554Z2A

Voluntary office-holders

299A

237A

Charge on cancellation payments in respect of partnership share agreement

Extension of charge in cases where child not living with claimant

PAYE regulations

Extension of charge in cases where child not living with claimant

Meaning of “payment”

Employee of non-UK employer

Connected persons

Employment intermediaries to keep, preserve and provide information etc

Assessment of penalties

Notice of scheme to be given to HMRC

PAYE regulations

Workers' services provided through intermediaries: recovery of PAYE

Priority rule for dividends etc. of UK resident companies etc.

Connected persons

Meaning of “control”

Notice of scheme to be given to HMRC

Notices and returns to be given electronically etc

Notice of scheme to be given to HMRC

Persons leaving local authority care

254A

299B

688AA

Payments by intermediary

Priority rule for dividends etc. of UK resident companies etc.

Connected persons

Priority rule for dividends etc. of UK resident companies etc.

Notices and returns to be given electronically etc

Notice of scheme to be given to HMRC

When a person qualifies as small for a tax year

60A

60B

60C

60D

60E

60F