Policy paper

Statement of Practice 9 (1991)

Published 31 July 1991

© Crown copyright 1991

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1. When an assessment to tax becomes final and conclusive more than 6 years after the end of the year to which it relates, Income and Corporation Taxes Act (ICTA) 1988 sections 625(3), 642(4) provide special rules for taking account of any unused personal pension or retirement annuity relief arising from the assessment. In particular the taxpayer may pay contributions to utilise that relief and elect that the relief shall be allowed for the year of assessment in which the contributions are paid. These must be in addition to the normal maximum for that year under either ICTA 1988 section 619(2) (for retirement annuities) or ICTA 1988 section 640 (for personal pensions). Both the payment of the contributions and the making of the election must take place within 6 months of the assessment becoming final.

2. Where incorrect returns and accounts are found to have been submitted, offers in settlement of liability to tax, interest and penalties are often accepted by the Commissioners for HM Revenue and Customs without assessment of all the tax. In such an investigation settlement the absence of assessments means that the conditions for obtaining unused relief under either ICTA 1988 section 625(3) or 642(4) are not satisfied.

3. Nevertheless, where a settlement is reached in circumstances where assessments:

  • which would have given rise to unused relief are not made
  • have been made and appealed against but not formally determined, and the tax for the years of assessment concerned is included in the settlement

claims under ICTA 1988 sections 625(3) or 642(4) will be accepted if:

  • (a) the settlement includes tax on relevant earnings for a year of assessment which ended more than 6 years before the date of the letter accepting the offer and which, if assessed, would give rise to unused relief and
  • (b) within 6 months of the date of the letter accepting the offer the taxpayer both:
    • (i) pays a qualifying contribution or premium to cover all or part of the unused relief
    • (ii) makes a formal election under either ICTA 1988 section 625(3)(b) or section 642(4)(b).

4. It should be noted that unused relief carried forward can only be utilised by the payment of contributions or premiums in excess of the maximum applying under whichever is applicable of ICTA 1988 section 619 or 640. It is only this excess that must be paid within the 6 months period referred to in paragraph 3(b). Contributions or premiums up to the normal limits for the year of assessment may be paid within the normal time span for ICTA 1988 sections 619, 639 and 641.

Note: this statement superseded Statement of Practice 9 (1980) which dealt only with retirement annuity relief.

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