Employer-financed retirement benefits schemes: definition of 'relevant benefits' and 'excluded benefits'
Section 393B ITEPA 2003
‘Relevant benefits’ are defined as meaning any lump sum, gratuity or other benefit provided
- on retirement (see EIM15042) or on death (see example EIM15310) or
- in anticipation of retirement (see EIM15149), or
- after retirement or death in connection with past service (see EIM15149), or
- on or in anticipation of or in connection with any change in the nature of the employee’s service (see EIM15149) or
- by virtue of a pension sharing order or provision
This includes a non-cash benefit. There is an example of this point at EIM15205.
However, it does not include any of the following:
- pension income charged to tax under Part 9 ITEPA 2003 (see EIM74000)
- benefits chargeable under Schedule 34 FA 2004 (see https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm113000 )
- ‘excluded benefits’.
The following are ‘excluded benefits’
- benefits in respect of ill-health or disablement of an employee during service
- benefits in respect of death by accident of an employee during service (see example EIM15315)
- benefits under a ‘relevant life policy’. Guidance on the meaning of this is available in the Insurance Policyholder Taxation Manual (IPTM)
- benefits excluded by regulation (see below).
The regulations providing for benefits to be excluded benefits are:
- The Armed Forces and Reserve Forces (Compensation Schemes) (Excluded Benefits for Tax Purposes) Regulations 2006 S.I. 2006 No.132 exclude all benefits paid from the Armed Forces Compensation Scheme from 6 April 2006 onwards.
- The Employer-Financed Retirement Benefits (Excluded Benefits for Tax Purposes) Regulations 2006 S.I. 2006 No.210 exclude lump sum death benefits paid on the non-accidental death of an employee during service where those benefits are provided under scheme rules which were in place before 6 April 2006.
- The Employer-Financed Retirement Benefits Schemes (Excluded Benefits for Tax Purposes) Regulations 2007 S.I. 2007 No.3537 exclude a number of benefits which were not chargeable to tax when provided by the employer where provision continues after the employment has ceased. The exclusion has retrospective effect from 6 April 2006 and applies to the following benefits:
- Living accommodation and related benefits (see EIM15022 re accommodation, EIM15023 re accommodation related benefits and EIM15024 benefits for employees family)
- Non-cash benefits received before 6 April 1998 (see EIM15025)
- Welfare counselling (see EIM15026)
- Recreational benefits (see EIM15027)
- Annual parties and similar functions (see EIM15028)
- Writing of wills etc (see EIM15029)
- Equipment for disabled employees (see EIM15030)
- The Employer-Financed Retirement Benefits Schemes (Excluded Benefits for Tax Purposes) (Amendment) Regulations 2009 S.I. 2009 No.2886 amend the regulations (at 3) above, to provide a further exclusion from 6 April 2006, covering:
the provision of annual health screening and medical check-ups provided by an employer to former employees. This exemption applies if:
- the former employee would have been exempt from tax under s.320B ITEPA had those benefits been provided in the course of their employment, and
- the former employee was provided with one or other of those benefits at least once during the period of their employment.
- The Employer-Financed Retirement Benefits Schemes (Excluded Benefits for Tax Purposes) (Amendment) Regulations 2011 S.I. 2011 No.2281 further amend the regulations (at 3) above, to provide some exclusions concerning benefits paid specifically to or in respect of armed forces personnel (see EIM15031).
These exclusions are retrospective - to cover the actual times when payments arising from the commitments in the 2008 Service Command Paper and later Armed Forces Covenant began to be made.